Russia feels pinch over arms plans
By Roger McDermott
Russia's financial crisis may be clipping the wings of plans to modernize its
armed forces. The impact of the global financial crisis on the timing, scope
and shifting priorities for this modernization remain sensitive issues for the
Kremlin, though some signs of deeper problems are beginning to emerge.
Crisis? What crisis?
Speculation within Russia that the global financial crisis may negatively
impact Moscow's plans to radically reform and modernize its armed forces have
caused concern among the top brass. In late December 2008, for instance, Army
General Nikolay Makarov, chief of the General Staff, publicly denied there
would be
any changes to these plans as a result of the financial crisis. "Current
financial difficulties will not make us abandon plans to continue the military
reform," he said.
Makarov said the Ministry of Defense had carefully calculated the
possibilities, on which Defense Minister Anatoliy Serdyukov was thoroughly
briefed, and found there was no need to appeal to the government for additional
funding.
In fact, modernizing weapons and equipment would not result in "borrowing"
money from other areas of defense spending, according to Makarov; the reform
plans are apparently sacrosanct. Yet his statements on the subject of the
financial crisis are contradictory. He noted that in approving the plan for the
development and supply of hardware and weapons for 2009-11, adjustments were
made based on the country's financial difficulties, including the government
cutting military "expenses" by 15%.
There is clearly a sense in which Serdyukov and Makarov are now "spokesmen" for
the controversial reform program, and their public comments downplaying the
financial crisis are unsurprising. Elsewhere, cracks are appearing to suggest
all is not well.
Major General Anatoliy Kraylyuk, chairman of the military-technical committee
of the Main Directorate for Armaments of the General Staff, said 2009 would be
a critical year in further developing the state armaments program to 2020. Its
main provisions will be outlined later this year, after adjustments are made to
it in line with the presidential decision following the recent Georgia war to
increase defense spending in 2009 by 28%.
However, as these issues are being assessed and delineated by Russia's Defense
Ministry, Kraylyuk has already specified additional areas that will become the
focus of Russia's military-technical research: developing information software,
intelligence assets, information counter-measures and weapons. Nonetheless,
Kraylyuk said this would occur over a 30-year period, indicating that at least
some senior Russian officers recognize that the military modernization program
will take much longer to achieve its ambitious aims.
One illustration of the underestimation of the crisis on such plans is in
Moscow adhering to state targets for constructing housing for servicemen.
Russia's Defense Ministry and the Regional Development Ministry have bought
around 3,000 apartments for active and retired servicemen.
The original plan, however, envisaged purchasing 15,000 at a cost of 33.5
billion roubles (US$1.175 billion). Prior to the financial crisis hitting
Russia - in its early stages Prime Minister Vladimir Putin denied its existence
- large construction companies were not ready to offer sufficient numbers of
apartments, arguing they did not have enough social housing space that met the
required criteria. Since that time, construction has greatly slowed down as the
downturn has begun to bite and these government ministries are now examining
ways to encourage these companies to change their priorities.
Defense industry: Government support
Such signs of fissures are most obvious within Russia's defense industry. On
December 30, 2008, Putin said the government intended to disburse 50 billion
roubles in emergency financial aid to enterprises of the defense-industrial
complex, 70% of which would be invested in the fixed assets of strategic
enterprises within the defense industry. It will initially prioritize companies
within the defense industry that are near bankruptcy and follow up with state
guarantees on bank loans to 100 billion rubles.
The government also intends to provide additional support packages involving
interest rates on loans, allocating subsidies, tax credits and capital
subscription. By way of contrast, Putin announced that 32 billion roubles ha
been earmarked to support aviation companies and 39 billion rubles to help the
automobile industry.
Deputy Prime Minister Sergei Ivanov has offered reassurance that the defense
industry can cope with the set tasks in the rearmament program. He pointed to
increased output in the interests of the armed forces and other security
forces, as well as in terms of commercial and dual-use products. Ivanov also
claimed that in recent years the Russian defense industry had increased by 30%
its production of high-technology equipment in the interests of civilian
branches of industry.
Challenges remain
Despite these offers of placatory sentiment, real challenges are presented by
the current financial crisis Russia that will need to address if its
modernization program is to succeed. Unless the anti-crisis measures taken by
the government in support of lending institutions and the real sector of the
economy are also accompanied by intensifying competitive principles, the risk
is that inefficient manufacturing processes may seriously hamper the
development of the Russian economy following its emergence from the crisis.
Colonel General Vladimir Popovkin, chief of armament of the armed forces and
deputy defense minister, sees the devaluation of the currency compounding the
problems stemming from rising costs for goods needed by the defense industry.
"It is essential to devise a mechanism of compensation for the growth in the
price of raw materials, intermediate products, whereby it is possible for the
Ministry of Defense to purchase the requisite quantity of products, and the
enterprises, to ensure profitable production," he observed.
Emergency aid measures, as currently outlined, will afford the opportunity to
conclude lengthy contracts - for three years and more - as part of the national
arms program. This is designed to ease the pressures on the defense industry by
allowing companies to order and purchase raw materials and other products in
advance and respond flexibly to fluctuations in prices; but it is equally
reasonable to foresee setbacks, delays and an elongation of the entire process.
An additional possible complicating factor relates to the bureaucracy involved
in this effort, as the Russian government is contemplating creating a system of
supervision enabling the Ministry of Finance and the Federal Defense
Procurement Service to inspect and assess the performance of the defense
industry, reporting to central government and making recommendations on
measures to enhance the efficient use of funds. Introducing another layer of
bureaucracy, while potentially paying dividends in the longer term, may further
complicate an already difficult situation as the defense industry struggles to
fulfill the demands of the modernization agenda.
Defining the key areas
Russia's strategic nuclear forces will be prioritized as this process unfolds.
In particular, the Topol-M Inter-continental Ballistic Missile and Bulava Sea
Launched Ballistic Missile will be center-stage in the modernization campaign,
although the latter failed for the fifth time in a test launch in the White Sea
in December 2008.
It is planned that by 2012, Russia will pursue 1,500 research and experimental
design efforts, which will see 487 models of arms and military equipment
presented for state trials. The state trials of almost 600 will be completed by
that time and approximately 400 will be taken into service. More than 70
strategic nuclear missiles, 30 Iskander operational-tactical missile systems,
48 combat aircraft, 60 helicopters, 14 ships of various classes, 300 tanks and
more than 2,000 motor transport facilities are planned to be purchased and
delivered. Russia's Defense Ministry believes this will make it possible to
rearm more than 40 force groupings and units of the armed forces.
Finally, as Russian authorities consider the risk of possible unrest within its
regions resulting from the effects of the financial downturn on its populace,
measures of control have already been passed, raising fears among human-rights
activists concerning the political direction of the regime. On December 31,
2008, President Dmitry Medvedev signed a bill to end jury trials for crimes
such as treason, revolt, sabotage, espionage and terrorism. Interestingly,
planned cuts to the Interior Troops have now been put on hold, reflecting
concerns that such forces may be deployed in cases of social unrest.
The provision of modern arms will rise considerably in the Interior Troops.
Units participating in counter-terrorist operations will be supplied with
equipment in full, of which more than 90% will be modern models. Logistic and
technical support facilities of the Federal Security Service (FSB) and the FSB
Border Service will be augmented appreciably.
The national defense procurement contract for them has in individual areas been
increased from 23% to 37%. Units guarding Russia's borders will be 90% up to
strength with modern equipment, including border aviation and patrol boats.
Russia's real security problems may prove to be internal.
Roger N McDermott is an honorary senior fellow, Department of Politics
and International Relations, University of Kent at Canterbury (UK) specializing
in defense and security issues in Russia, Central Asia and the South Caucasus.
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