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Russia's Reversal of Military Fortune

August 4th 2016

Russian warships Sevastopol Crimea

Russia's military spending will hit a wall in 2016, as the realities of the economic crisis force President Vladimir Putin's government to reconsider how much it can realistically spend on military modernization, possibly delaying procurement goals by as much as five years.

The problems began earlier this year, as the government budget reeled from the impact of plummeting global oil prices, Western sanctions against the Russian economy for Moscow's annexation of Crimea, and the resulting devaluation and inflation of the ruble. The crash came at an unfortunate time for Russia's military. Following the 2008 Russia-Georgia war, the Defense Ministry began looking into serious reform projects to modernize not only the organizational structure but also the equipment base of its largely Soviet-era military.

In 2011, Russia's lower house of parliament, the State Duma, approved a sprawling 22-trillion-ruble (at the time, almost $700 billion) modernization program that would see every weapon in Russia's nuclear missile arsenal replaced or upgraded, and 70 percent of the military overall receive new hardware. The program features a strong focus on new ships-specifically, the Borei- and Yasen-class nuclear-powered submarines, a boomer and an attack sub respectively-as well as new armored vehicles, fighter aircraft, and even a stealth fighter to match the F-22.

Though the first several years of the program saw annual spending bumps, things really kicked into high gear in 2015, when the defense budget was slated to increase over 25 percent to 3.3 trillion rubles. But in January, Deputy Defense Minister Tatyana Shevtsova - who presides over the ministry's finances - said that economic pressures would force a 10 percent cut in defense spending.

However, Shevtsova assured reporters at the time, procurements would not be touched. Yet just two months later, the impact of economic crisis on the ruble's purchasing power at home prompted Deputy Defense Minister Yury Borisov to announce that, while the 2020 program would meet its spending goals, procurement numbers would in fact be readjusted.

All of which will have a direct impact on procurements of the new Armata T-15 main battle tank, and the Sukhoi T-50 (PAK FA) fifth-generation fighter jet-both flagship projects of Russia's current modernization drive. Although President Putin has pledged to procure 2,300 of the Armata tanks, Borisov in March said the Defense Ministry had found that tank manufacturer UralVagonZavod couldn't produce the Armata as cheaply as promised. The price tag isn't publicly known, but has been estimated in the Russian and international media to cost around $7 million a unit.

The Defense Ministry is likewise rethinking its commitments to the Sukhoi T-50 fighter jet, which has a reported price tag of $100 million per unit. Instead of buying 52 of the new fighters, as envisioned in the 2020 program, it has committed to just 12 of them when serial production begins (ostensibly next year). In the meantime, the Ministry says it will continue to buy more of the modernized Su-35 member of the Soviet-designed Flanker series of heavy multi-role fighter jets-but even in this the Defense Ministry appears to be struggling to make the finances work.

This puts the Kremlin's modernization plans at risk. In June, international defense consultancy IHS issued an analytical note saying that Russia would need to begin hiking procurement spending by 10 percent on an annual basis in 2016 in order to meet the targets of the 2020 program. But this did not happen. A draft of Russia's 2016 Federal Budget (available on the State Duma's website) shows that Russian defense spending is only set to increase by 0.8 percent next year, marking the first time since 2011 that military spending has not drastically increased.

Still, defense spending has avoided the massive 10 percent reductions that other sectors of the Russian federal budget-such as education, healthcare, and other social services-will receive in 2016. This means that Russia will be able to afford operating at its current capacity, even if spending remains flat. Russia's current campaign in Syria, for example, will not be financially limited.

Further into the future, however, the outlook is less rosy. As Russia approaches 2020, it will become increasingly clear that it has failed to meet its procurement and modernization targets. Already last Fall, Russian Finance Minister Anton Siluanov was warning that Russia would not be able to afford to continue funding the military at the level envisioned under the 2020 program under current conditions.

The message is clear: as Russia's financial situation becomes increasingly dire, the nation's previously untouchable defense budget will fall under stricter scrutiny and in the end will likely prove unaffordable. At the very least, procurement targets will have to be seriously scaled back, putting a crimp in Mr. Putin's plans for a Russian military revival.
 
Matthew Bodner is space and defense correspondent for The Moscow Times.

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