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Russia's Military Budget

2010
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In 2010, the state defense order will be increased by 1,2%, said Prime Minister Vladimir Putin. Thus the authorities want to support the defense industry and perform scheduled before the state program of armaments. However, Russia's defense industry more profitable to equip the armed forces of other countries than their own, experts say.

"Despite the difficult environment in which we are today, we still found a way to not only maintain but also increase the total amount of state defense order," - said late last week the Prime Minister at a meeting on state defense order. Under the approved 2009 - 2011., the state defense order for execution of long-term contracts in 2010, is planned to allocate 200 billion rubles. The total amount allocated for the purchase of arms and equipment of troops, is 470 billion at the money the authorities plan to acquire strategic missiles, cruise missiles for aircraft X-102, modern ships and submarines, and Su-27SM, Su-30MK2 , Su-35 and Su-34.

According to Putin, in the next year at the same level will finance research on defense subjects, the supply of arms and military equipment. There will be reduced and the cost of supplying the army and navy glove allowances and petrol and lubricants. "We have identified key areas in which concentrate resources on maintaining and developing the strategic nuclear potential of missile-space defense troops equipped with modern strike systems, control systems, reconnaissance and communications, as well as the strengthening of the military infrastructure in the key strategic directions", - stressed Head of Government.

In turn, Deputy Prime Minister Sergei Ivanov, also attended the meeting, noted that to the extent the state defense order would solve several problems simultaneously: to equip the army and navy equipment, to comply with state program of weapons until 2015, and also to support about 1,3 Thousands of enterprises of military-industrial complex (MIC), many of which are city-forming. According to Ivanov, the state defense order is balanced, coordinated with all ministries and in accordance with the plan on Aug. 20 will be sent to the Ministry of Finance for inclusion in the budget.

Defense order volumes increase every year: in 2007, they accounted for 302.7 billion rubles in 2008 - 800 billion at the end of last year, the defense in 2009, was increased from 1.3 trillion. rub. up to 4 trillion. that was partly a consequence of events in South Ossetia and President Dmitry Medvedev plans to refurbish the Armed Forces.

"In 2010, the need to supply the armed forces for more than 30 ballistic missiles, land-and sea-based, 5 Iskander missile systems, about 300 units of modern armored vehicles, 30 helicopters, 28 combat aircraft, 3 nuclear-powered submarines and 1 battleship-class corvettes, 11 spacecraft, "- said President Medvedev.


2009
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02.2009: 27 bln RUR -food, 9 bln RUR - clothing, 58 bln RUR - fuel. Total for Logistics- 120 bln RUR. 12.2008: Russia has set out plans to increase its military procurement over the next three years and commission 70 new strategic nuclear missiles.

A government official said there would also be more short-range missiles, combat planes, helicopters, tanks and naval vessels.

In all, Russia will spend nearly $140bn (?94.5bn) on buying arms.

Russia plans a massive increase in its weapons procurement for three years beginning in 2009, with 300 tanks, 14 warships and almost 50 airplanes on the shopping list, a senior government official said on Monday.

Vladislav Putilin, deputy head of the military-industrial commission, told journalists after a cabinet meeting the government planned to allocate 4 trillion roubles ($141.5 billion)in 2009-11 to bankroll equipment purchases to modernize its army.

Putilin said that over the three-year period Russia's armed forces would receive more than 400 new types of weapons, including 48 aircraft, six spy drones, 60 helicopters, 14 warships, 300 tanks and more than 2,000 auto vehicles.
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2008
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MOSCOW, February 26 2008 (RIA Novosti) - Russia's Defense Ministry will spend around one trillion rubles ($40 bln) of federal budget funds in 2008, 20% more than in 2007, a ministry official said on Tuesday.

"The Defense Ministry will spend a little less than one trillion rubles in 2008, which is about 20% more than last year," Deputy Defense Minister Lyubov Kudelina said.

She also said that in 2008-10, military spending would account for 15.5-16% of aggregate federal budget expenditure.

She said most of the funds would be spent on the maintenance of the armed forces, the procurement and repair of military hardware, scientific and research work, and construction.

The official did not say how much would be spent this year on the procurement of new military hardware, but last year's figure was over 300 billion rubles ($12 billion), 20% higher than in 2006.


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Russia has downsized its Armed Forces to about 1.1 million personnel, but military spending has increased dramatically under President Putin. Defense spending is set to total 1.18 trillion rubles ($45 billion) by 2010.



2007. Russia to boost funding of state defense order

The financing of Russia's state defense order will exceed RUR300bn (approx. USD11.22bn) in 2007, a 29-percent increase on the current year, Russian Deputy Prime Minister and Defense Minister Sergei Ivanov told a military industry commission meeting on Thursday.
“State funding of the state defense order increases stably each year, and the rate of growth is considerable. In 2007, it will be up by 29 percent, or more than RUR300bn (approx. USD11.22bn) in absolute figures, compared to 2006,” the minister stressed.

"By defining the main parameters of the 2007 state defense order, we are in fact commencing the implementation of the new state armament program until 2015," Ivanov noted.

The Defense Minister also said that more than half of the financing allocated for the defense order would go towards facilitating and implementing this program. Because of this, the military industry commission will take additional measures to control efficient spending of resources and ensure an adequate advance in the technological intensity of the armed forces.

“In the conditions of stable budget funding, the task of planning the development of the armament system becomes the priority, along with the management of the entire process of forming, placing and ultimately executing the state defense order,” Ivanov concluded.

It is worth mentioning that Russia is spending more on defense each year, although it still lags behind in this respect from the leaders: the US, Great Britain, France, Germany, and China.

In 2007, the state defense order will grow by 20% to reach 302.7 billion rubles (over $10 billion). Out of this sum, 145 billion rubles (about $5 billion) will be spent on the purchase of new arms and military hardware. This is a 22% increase over this year. Expenses on repairs will be 60 billion rubles ($2.2 billion). They have gone up by 15.7%. R&D will receive[m1] 98 billion rubles ($3.5 billion) - a 20% growth. In addition, 14.6 billion rubles ($500 million) will be spent on re-equipping the internal troops and Interior Ministry bodies.

These figures show that in 2007 the purchases of arms and hardware should surpass arms exports, as in 2006. In other words, the army and navy will start receiving reliable weapons, which can cope with armed conflicts of the 21st century. This fact alone instills with optimism those who serve and those who work for the Russian armed forces.
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Russian Defence Procurement in 2007 © CAST

NDP?2007 marks the threshold of a new practice for the arms-procurement system: from 2008 the national defence procurement will be defined for a three-year period.

The tables below show only known purchases of arms and military equipment for the Russian armed forces, not including purchases for law enforcement and security agencies like the Interior Ministry, the Federal Security Service and others. Published orders for repairs and modernization are also included, but R&D contracts
are not.

Table 1. Strategic Nuclear Forces

Name
Number of units
Notes
Producer
New Purchases

Topol M ICBM
7
4 silo-based and 3 mobile
Votkinskiy factory

Bulava R-30 SLBM
N/A
For testing
Votkinskiy factory

Sineva R-29PMU SLBM
N/A


Probably 10, considering the quantity of Topol—M ordered out of the total of 17 ICBMs purchased this year. Other publications suggest 12
Krasnoyarsk Machine-building Factory

Table 2. Space Forces

Name
Number of units
Cost per unit,
million USD
Notes
Producer

New Purchases

Launch vehicle
4
N/A


At least one launch, that of the Soyuz-2-1B, was observed in August-September 2007

Satellite
4
N/A


Possibly to include one new generation missile attack warning satellite. Launch planned for the second half of 2007

GLONASS-M satellites
5
153.8


In 2007 six satellites, including one prepared in 2006, are planned to be placed in orbit


Reshetnev Scientific-Production Association

Cosmodromes development
-
69.2

Launch pad for the Angara launch vehicle (at Baikonur)


1


N/A


Production began in 2006


Zvezdochka

Voronezh-DM radar station


1


57.7


Second station in a series. Built near Armavir, Krasnodar Region


Long-Range Radio Communications Research Institute (design),
NPP Piramida (producer)

Table 3. Air Forces

Name


Number of units


Notes


Producer

New Purchases

Tu-160 strategic bomber


1


Construction was to finish by the end of 2006


Gorbunov KAPO

Su-34 front-line bomber


6


NDP-2007 allocates $65.3 million, though one unit costs $33 million


Chkalov NAPO

Yak-130 advanced trainer


4


NAZ Sokol

Ka-50 attack helicopter


3


NDP-2007 allocates $57.7 million


AAK Progress

Ka-52 attack helicopter


1


Pilot series


AAK Progress

Mi—28N attack helicopter


5


Pilot series. VK-2500 engine for the first Mi—28N to be supplied by the Ukrainian Motor-Sich


Rostvertol

Ansat light helicopter


2—3


Perhaps for the Syzran aviation school


Kazan Helicopter Plant

Tu-214 passenger aircraft


1


In a VIP version; could be handed over in 2008


Gorbunov KAPO

S-400 SAM system


1 batallion


Almaz-Antey Air Defence Concern


Repairs and Modernization

Tu-160 strategic bomber


2


Repairs expected to be completed by the end of 2007


Gorbunov KAPO

MiG-31B fighter interceptor


N/A


Modernized to MiG-31BM version; equipped with Zaslon-AM air-borne radar and LCDs


NAZ Sokol, MoD RF ARZ No. 514

Su-27 fighter


6–12


Modernization and modification of the Su-27SM; probably equipped wi th Al—31F-M1 engines. Work began in 2006 on 6 planes


Gagarin KnAAPO

Su-24M front-line bomber


12


Modernization and modification of the Su-24M2. MoD concluded a 3-years contract for the modernization of the Su-24M.


Chkalov NAPO

Su-25 attack aircraft


6


Modernization and modification of the Su-25SM


RF MoD Aviation Repair Factory No. 121

Beriev A-50 AWACS


N/A


Increase flight range. Improve radar system to direct aviation to ground targets


Beriev TANTK

Tu-22M3 long-range bomber


1


Gorbunov KAPO

Il—76MD transport plane


1


Remotoring by PS-90A-76 engine. By 2006—2009 12 aircraft should be modernized


VASO, Perm Motor Plant

Mi—24P attack helicopter


N/A


Modernized to Mi—24PN version. Possibly began modernization to 24PM version.


Rostvertol

Table 4. Navy

Project


Name


Cost per unit, million USD


Notes


Producer

New Purchases

Project 955 Borey SSBN


Yuriy Dolgorukiy


N/A


Laid down in 1996, launched April 2007


Sevmash

Aleksandr Nevskiy


N/A


Laid down in 2004

Project 955A Borey SSBN


Vladimir Monomakh


N/A


Laid down in 2006

Project 885 Yasen SSN


Severodvinsk


N/A


Laid down in 1993

Project 971I Irbis SSN


Nerpa


N/A


Begun in 1986. Might be destined for Indian Navy


Amur Shipyard

Project 677 Lada SSK


Sankt-Petersburg


N/A


Undergoing testing; hand-over to Navy in 2007


Admiralty Shipyards

Kronshtadt


N/A


Laid down in 2004

Sevastopol


N/A


Laid down in 2006

Project 20380 corvette


Steregushiy


192.3


Undergoing testing; hand-over to Navy in 2007


Northern Shipyards

Soobraznitel’niy


57.7—69.2


Laid down in 2003

Boykiy


69.2


Laid down in 2005

Stoykiy


69.2


Laid down in 2006

Sovershenniy


69.2


Laid down in 2006


Amur Shipyard

Project 11540 Yastreb frigate


Yaroslav Mudriy


19.2 million to be allocated in 2007


Laid down in 1988


Yantar’ Shipyard

Project 22350 frigate


Admiral Gorshkov


423.1


Laid down in 2006


Northern Shipyards

Proect 18280 intelligence ship


Yuriy Ivanov


N/A


Laid down in 2004

Project 11661K Gepard corvette


Dagestan


N/A


Laid down in 1992. Hand over to Navy in 2007


Zelenodol’sk Yard

Project 11711 landing ship


Ivan Gren


N/A


Laid down in 2004


Yantar’

Project 12441U training ship


Borodino


N/A


Former frigate Novik, laid down in 1997

Project 23100 rescue ship


Igor’ Belousov


N/A


Laid down in 2005


Admiralty Shipyards

Project 20180 search and transport ship


Zvezdochka


N/A


Laid down in 2004


Zvezdochka

Project 21630 Buyan small gunboat


Kaspiysk


9.6


Laid down in 2005 Hand-over to Navy in 2007


Almaz

Makhachkala


9.6


Laid down in 2006

Project 02668 ocean minesweeper


Vice-Admiral Zakharin’


N/A


Fitting-out, launched in 2006


Sredne-Nevskiy Shipyard

Project 21820 Dyugon fast-speed small landing ship


N/A


7.7 (lead ship)


Laid down in 2006


Volga SZ

Project 436 target ship


N/A


N/A


Order received in 2005


Amur Shipyard

Repairs and Modernization

Project 11435 aircraft carrier


Admiral Kuznetsov


N/A


SRZ-35

Project 667BDR SSBN


Ryazan’


N/A


Mid—life repairs and modernization


Zvezdochka

Project 667BDR SSBN


N/A


N/A


Probably two more ships. Mid—life repairs


Zvezda

Project 667BDRM SSBN


Karelia


N/A


Mid—life repairs and modernization, begun in November 2006


Zvezdochka

Novomoskovsk


N/A

Bryansk


N/A


Mid—life repairs and modernization. Work began in 2002

Project 949A SSGN


Irkutsk


N/A


Repairs. Work began in 2001


Zvezda

Project 949A SSN


Probably, Nizhniy Novgorod


N/A


Certification for repairs began in 2005


Nerpa SRZ

Project 971 SSN


Pantera


N/A


Mid—life repairs Sea trials began in early 2007


Sevmash

Kashalot


N/A


Mid—life repairs. Work de facto began in 2005


Amur Shipyards

Project 671RTMK SSN


Daniil Moskovskiy


N/A


Mid—life repairs


Nerpa SRZ

Project 877 SSK


Unknown


N/A


Mid—life repairs and modernization


Amur Shipyards

Kaluga


N/A


Mid—life repairs and modernization since 2002


Zvezdochka

Project 641B SSK


B-380


N/A


Repairs since 1992


Lazarevskoe Admiral’teystvo (Sevastopol’)

Project 11442 nuclear-powered battlecruiser


Admiral Nakhimov


N/A


Deployment of reactor’s critical zone, replacement of anti-ship missile mount, replacement of electronic systems


Sevmash

Project 956 destroyer


Burniy


N/A


Repair. Handed over to Navy in 2007


Zvezda

Rastoropniy


N/A


Mid—life repairs


Northern Shipyard

Project 1155 destroyer


Vice-Admiral Kulakov


N/A


Mid—life repairs and modernization


Northern Shipyard

Admiral Levchenko


N/A


Mid—life repairs

Armament

-


Moskit anti-ship missile


N/A


“Production volumes for the Russian Navy equal exports to China”


AAK Progress

Table 5. Land Forces

Name


Number of Units


Notes


Producer

New Purchases

T-90 main battle tank


31


Cost of one unit in January 2007 was app. $2.23 million


Uralvagonzavod

BMPT tank combat fire support vehicle


A few vehicles


Delivery of pre-production batch


Uralvagonzavod

BMD—4 airborne infantry fighting vehicle


10


Volgograd Tractor Plant

BMP-3 infantry fighting vehicle


N/A


Possibly about 40, if NDP for Kurganmashzavod maintains 2006 levels


Kurganmashzavod

BTR-80 armoured pesonnel carrier


About 100


Arzamas Machine-building Plant

Tipchak unmanned tactical aerial reconnaissance system


N/A


Delivery of pre-production batch


Vega Concern

Iskander-M TMD


3 batallions


There are 4 launch systems for each batallion, with 16 missiles each batallion


Mashinostroenie Design Bureau

KamAZ truck


About 2000





KamAZ

Repairs and Modernization

T-72 main battle tank


155


Modernization; probably the T-72B2 Rogatka configuration


Uralvagonzavod

T-80 main battle tank


31


Modernization


Omsk Transport Machinebuilding Plant

BMD—3 airborne infantry fighting vehicle


N/A


Modernized to BMD—4 configuration with Bakhcha-U fire system


Shchelgovskiy Val Istrument Design Bureau

Table 6. Distribution of NDP-2007 by select regions

Region


Volume of NDP, million USD

Nizhniy Novgorod oblast’


500

Samara oblast’


180

Vladimir oblast’


175–188

Ulyanovsk oblast’


96–138

Primorskiy krai


App. 40 million higher than NDP-2006


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Russia prepares for 'wars of the future' © ISN

By Simon Saradzhyan in Moscow for ISN Security Watch

The Russian military will spend a total of some 5 trillion rubles (US$189 billion) between 2007-2015 to replace 45 percent of its current arsenal with new weaponry systems ranging from submarine-launched ballistic missiles to new aircraft carriers for deep-water missions, in what reflects the country's resurgence as a global player.

According to an official statement, Defense Minister Sergei Ivanov told the federal parliament on 8 February that the new arms and rigorous training should prepare Russia's war machine for the future.

"There are cardinal changes in what is going on in the world and the armed forces need to be prepared for […] wars of the future," according to the minister, who also holds the rank of deputy prime minister and is one of the possible contesters in the 2008 presidential race.

In line with the Defense Ministry's 2007-2015 armament program, the Russian military will spend a total of 300 billion rubles on procurement this year alone, according to Ivanov. Russia's defense budget has been growing steadily thanks to economic growth fuelled by high oil prices and a consumer boom. As a result of the surge in federal budget revenues, the Defense Ministry quadrupled its budget from 214 billion rubles in 2001 to 821 billion this year.

Experts say the Defense Ministry's shopping spree reflects the Kremlin's desire to transform the continuing economic resurgence into geopolitical dividends by beefing up conventional forces while maintaining the strategic nuclear forces' so-called assured destruction capability of in order to flex muscles in the adjacent neighborhoods in the short-to-medium term and across the globe in the longer term.

"The procurement plan demonstrates that Russia at least wants to acquire capability to project military-political influence at least on the regional level [..]," Ruslan Pukhov, director of the Centre for Analysis of Strategies and Technologies (CAST) and member of the Defense Ministry's Public Council, told ISN Security Watch in a Saturday phone interview.

Ivan Safranchuk, director of the Moscow office of the Washington, DC-based World Security Institute, concurred. "This is a sign that Russia wants to expand projection of its influence in the world, " Safranchuk told ISN Security Watch in a Wednesday phone interview.

The experts specifically pointed out that talk of procuring new aircraft carriers was one sign that Russia was seeking to expand its zone of influence. The decision to procure more could be made in 2009, the statement quoted Ivanov as saying. The Russian navy currently has one Soviet-era aircraft carrier and would have to build new ones from scratch since the sole maker of this ship in Soviet times is located in now-independent Ukraine.

As part of the shopping spree, the military will procure a total of 31 ships for the navy in 2007-2015, according to Ivanov. The ministry will also procure new arms for 40 tanks, 97 infantry and 50 airborne battalions in line with the 2007-2017 programs, he said.

As part of the reforms, the military will also stop procuring arms directly and rely on the Federal Agency for Arms Deliveries. Ivanov said this agency would become fully operational in 2008 to procure arms, equipment and other items for all of the so-called power agencies.

In his report, the minister also affirmed the Russian military's right for a preventive conventional strike and ruled out any new personnel cuts in the 1.1-million strong force, but assured that the share of professional soldiers would continue to grow among the rank-and-file.

The minister also reported that Russia may adopt a new military doctrine several years from now, once a new national security document was crafted and reaffirmed plans to replace the existing military district with regional commands.

The new doctrine is needed to formulate a response to expansion of the US presence in Russia's backyard, General Yury Baluyevsky, chief of the General Staff of the Armed Forces said in remarks posted on the Defense Ministry's web site on 9 February

"The US military leadership's course aimed at maintaining its global leadership and expanding its economic, political and military presence in Russia's traditional zones of influence" has become a top threat for Russia's national security, Baluyevsky said.

Among other things, the armament program provides for construction of new "cheaper and more efficient" early radar warning stations on Russian territory, according to Ivanov. He said one such station, already built near St Petersburg, would allow the military to detect incoming missiles on territory spanning from Western Europe to the North Pole.

The stations are designed to fill in holes left in the Russian military's early warning capabilities by the disintegration of the Soviet Union as well as to decrease its dependence on these capabilities from former Soviet republics, according to Ivanov.

"We have plans to continue construction of these stations so that we won't depend on anyone, including our allies," Ivanov said in a reference to Belarus. Belarus has been Russia's closest ally and the two countries even operate a joint air defense system, but relations have been strained by a dispute over prices of Russian energy exports to Belarus.

The Russian strategic triad currently relies on data collected by early warning radars in Baranovichi in Belarus and Mukachevo and Sevastopol in Ukraine, as well as in Gabala, Azerbaijan. The Russian military has lost one such station in Skrunde, Latvia.

Ivanov did not say how many early warning satellites the military plans to procure in line with the program, but he did say that this year alone would see the armed forces acquire four satellites and four launch vehicles from the national defense industry.

To further decrease the dependency on facilities outside Russia, the Russian military will continue to spend 1 billion rubles a year to build a new base for the Black Sea fleet, which currently is based in Ukraine's Crimea in accordance with an agreement that expires in 2017.

The Russian military will also be less dependent on launches of heavy satellites to geostationary orbits from the Baikonur Cosmodrome, which Russia is leasing from Kazakhstan, once launch pads for Soyuz-2 and Angara rockets are built at the Plesetsk springboard in the Arkhangelsk region, according to the arms program.

The program also provides for procurement of at least 50 mobile versions of Topol-Ms as well as dozens of silo-based versions of this intercontinental ballistic missile. The mobile-driven ICBMs are harder to detect, but the Russian military is not so concerned with beefing up the mobile component of the Strategic Missile Forces that it would revive construction of train-driven ICBM systems, which were designed and produced in Ukraine in Soviet times, according to the minister. This year alone will see 17 ICBMs procured, the minister said. In comparison, the military had purchased around 10 ICBMs or fewer per year in recent times.

The next several years also will see the strategic nuclear triad continue operating 50 long-range Tu-160 and Tu-95 bombers and acquire new early radar warning stations on Russian territory, according to Ivanov.

In addition to new Topol-M's ICBMs, the Russian military also is set to procure Bulava submarine-launched ballistic missiles (SLBMs). However, this procurement was delayed after a series of launch test failures in what also puts off commissioning of a new generation of atomic submarines.

The increase in the annual rate of procurement of nuclear missiles is not sufficient to replace the ICBMs that the military needs to decommission in the next five years, but would "would still allow to maintain its strategic military capability at an acceptable level," according to Safranchuk.

The Russian military needs to decommission almost all Soviet-built ICBMs in 2012-2015 due to expiration of their service lives in what would leave the strategic triad with only several hundred warheads on operational delivery systems in all three components of the triad, according to Safranchuk's estimates.

Pukhov of the CAST center agreed: "There is no talk about any kind of pseudo symmetry between the US and Russia in this, but the nuclear forces would still suffice to overcome the missile defense."

However, according to the influential Nezavisimoye Voyennoye Obozreniye (Independent Military Review) weekly, the rate of commissioning of new arms "doesn't correspond with the real threats."

The weekly's 9 February issue agreed that Ivanov's estimate that some 45 percent of the existing arms would have been replaced by 2016, but argued that many of the remaining older systems could break down in what "may possibly lead to lack of armaments."

Russia's new military program comes as the US moves forward with plans to site missile defense systems in Poland and the Czech Republic - intentions that have put Russia on edge and which many believe prompted Moscow's very detailed release of its new defense program.

While Washington claims the planned Polish and Czech installations are intended to defend against missiles fired by Iran or North Korea, Moscow claims that the real intention has more to do with Russia's nuclear arsenal.

Defense Minister Sergei Ivanov once again attacked the US missile defense shield on sidelines on a security conference in Munich on 11 February as well as called abrogation of the 1987 Intermediate-Range Nuclear Forces Treaty between the US and the Soviet Union, which eliminated medium-range missiles. He described the treaty as "a relic of the Cold War."



Russia's 2006 STATE DEFENSE ORDER

Military budget numbers for 2006
The ministry of defense is planning to spend 237 billion rubles on the state defense order.
A simple estimate that takes into account inflation (which is expected to be at the level of 11.5% this year) gives the real growth of about 16%, which is higher than this year projection of 13%.

The share of the budget that is supposed to go to new equipment purchase is also higher - 70% (164 billion), up from 60% in 2005. The remaining 30% will go to R&D and repairs.

It doesn't make much sense to convert the budget numbers into dollars, but for the sake of comparison, the projected 237 billion rubles would be $8.2 billion. The last year 187 billion rubles gave only $6.7 billion. So, in dollar terms the growth is quite high - about 22%.

In August 2005 the Russian government ratified the draft law on the federal budget for 2006 prepared by the Ministry of Finance and passed it to parliament for eventual approval, which culminated with President Putin’s signature, in late December.
Regrettably, in a break with practice of recent years, the appendix setting out spending on the state defence order (GOZ, covering arms procurement, repair, and
R&D) for the MOD, MVD and FSB border troops has been classified. However, the total value of the MOD GOZ has been revealed by defence minister Sergei Ivanov as 236,694 m.r. and the GOZ for the MVD can be found as a residual.7 Of the MOD, according to Ivanov 164 b.r. (almost 70 per cent) is for procurement and repairs, leaving almost 72,700 m.r. for R&D. Otherwise, the items of hidden expenditure follow the general pattern of 2005. It will be seen that the military shares of total budget spending and GDP show a slight increase compared with 2004 using the previous budget classification.
However, defence spending for 2004 and preceding years was probably understated to a modest extent by the exclusion of some spending on education and health, and hidden spending on the Ministry of Emergencies, now considered to be part of total
military-related expenditure.

1 Billion in 4 Days
------------------------
by Konstantin Lantratov, Vlast | Kommersant.ru

The year 2005 was a success for the Russian military industry, official reports claim. The supplies hit a new record high of $6.126 billion. Yet, the accuracy of this figure is quite doubtful.
Russia arms exports have been steadily growing up to the annual $1 billion since the creation of Rosoboronexport, the united state mediator in the military and technical cooperation, set up by the merger of Rosvooruzheniye and Promexport on November 5, 2001. Every year, independent experts, however, persistently forecasted a recession in exports for the coming year. The slump never occurred, though, as Rosoboronexport was boosting exports setting new records and beating the skepticism of analysts for official data. This year, these doubts look grounded as never before. Official reports have reviewed the total volume of the Russian military export three times in the past two months.

Peculiarities of Military Statistics

Alexander Denisov, the first deputy director at the Federal Military and Technical Cooperation Service, announced on November 30 that “the plan of $5.1 billion, endorsed by the president, will be fulfilled and exceeded.” The $5.1 billion would have meant a 700-million slump in the exports in 2005, against indicators of 2004, which would be quite in line with the cyclic nature of the arms market, according to experts. “The fall in the military supplies is mostly due to fewer profits from heavy fighters,” Dmitry Vasilyev, an expert at Center for Analysis of Strategies and Technologies, said in an interview with Vlast. “The jets were delivered in 2002-2004 under old agreements while new contracts will be executed in 2007 onwards. We can say that the supplies of warships, which dominated the Russian export in 2005, acted as a link between old and new aircraft contracts and prevented the military exports from falling behind the level of 2000.” Other major arms exporters such as the United States, France, Germany and the UK regularly experience similar recessions, the Russian expert noted.

On December 28, the total figure for 2005 went up by $200 million. President Vladimir Putin reported at a session of the Military and Technical Cooperation Commission that the arms exports retained “the stable growth” and cited the sum of $5.3 billion. “This is somewhat less than last year but it is roughly the same level,” the president concluded.

Oddly enough, after New Year’s holidays, the “somewhat less” turned into “a new record” that Defense Minister Sergey Ivanov reported to Putin on January 18. “We have summed up final result, which is $6 billion in 2005,” the minister boasted pointing out that the success proved the efficiency of the new system of military and technical cooperation introduced in 2000. The president was not at all surprised by the news, judging from his reserved reaction. Still, neither Putin nor Ivanov would explain how the initial $5.1 billion came to be the record-high $6 billion.

However, this record was also broken a week later. The head of Federal Military and Technical Cooperation Service, Mikhail Dmitriev announced on February 9 that the agency “closed last year with the result of $6.126 billion.” The sum is more than $1 billion higher than the one that Dmitriev’s first deputy had posted. The change is unprecedented. The difference between preliminary results reported at the end of the year and the final sum that the arms export service usually announces in mid-February has never exceeded $100 million.

Foreign customers must have received military hardware under a major contract in last days of 2005, which explains that big discrepancy. Most experts agree that it probably was the supply of two submarines. St. Petersburg-based Admiralteyskie Verfi apparently delivered the last 636 project submarine of those five to China, each of them costing $225 million. The supply of the 971 project’s multifunctional atomic submarine could become the most sizeable purchase. The submarine was initially built for the Russian Navy in Komsomolsk-on-Amur by Amur Shipyard, a part of Shipbuilding and Boatbuilding Concern. The vessel must have been already handed to the Indian Navy after the Russian Navy formally accepted it. The first installment totaled $600, in unofficial reports. The sum and the cost of the St. Petersburg’s submarine give the $825 million discrepancy between preliminary and official results for 2005.

However, it does not explain why Denisov and Putin did not take these deliveries into account for their December forecasts. Perhaps, some political reasons made them reluctant to disclose the information about the sale of the multifunctional atomic submarine to India. No international treaties, however, restrict selling a submarine with an atomic-powered motor but without any atomic weapons or missiles with the range of over 300 km. What’s more, one can’t hide this fact. Such a sizeable submarine would be easily located by foreign space and aircraft reconnaissance systems.

Still, the sum total of the exports in 2005 could have been simply overestimated to mark a new record. Experts became skeptical as the authorities made these corrections. “National statistics have been the most accurate source of the information on the Russian military export so far,” Konstantin Makienko, the deputy director of Center for Analysis of Strategies and Technologies, told Vlast. “However, this source seems to be doubtful this year.”

Problem with the Volume

A dramatic rise in the number of purchase orders has become the most evident achievement of 2005, in terms of statistics. Sergey Ivanov presented a report to Vladimir Putin on January 18 saying: “We signed a number of contacts on last days of December, so the total volume now comes to $22 billion. The industry has thus secured sizeable orders for upcoming years.” Meanwhile, Mikhail Dmitriev released even more impressive data on February 9: “We have always had quite a big volume of military hardware worth of some $15-16 billion. The current figure is $23 billion which comes close to the Soviet times.” Such an influx of deals should entail a further boost of annual supplies. “The actual number of the armaments deliveries will surpass $7 billion from 2007,” Dmitriev promised. “This is the amount we can produce for sure.”

The impressive volume of orders may, however, bring some setbacks. The Russian industry, which had evidently degraded over the past 15 years, may prove unable to fulfill both foreign military contracts and the internal state orders on time. Constant appeals for more money to be earmarked from the budget have already vanished to give way to cautious apprehensions whether the military industry is able to manage these funds properly. In 2004, the state defense for the first time came to equal military exports. There’s more to it, the growth in the military budget now exceeds the growth in arms supplies.

Yury Baluevsky, the chief of the General Staff, was the first to voice concerns about a rising number of orders for the defense industry. He laid it on the line to Vladimir Putin at a session of the heads of the Russian armed forces last November. “My colleagues and I are not sure that we will get in 2011the armaments that we will need. It is mostly due to the bad correlation between the military policy and the capacity of the defense industry,” Baluevsky said.

Vladislav Putilin, the director of the Defense and Security Programs Department at the Economic Development and Trade Ministry, said in late December: “The state defense order grew 1.3 times in 2006, compared to 2005. The industry carries out the order for 2005 very slowly, so I would not like to say whether this figure is big or not. Given loads of problems, the 30-percent growth is substantial. We can also count foreign contracts. We have reshaped the financing of the capital construction in the military sphere to overcome the problem. The funds will be spent to modernize the defense industry in the view the growing output of new hardware and armaments.”

The Federal Defense Order Service’s director Andrey Belyaninov expressed similar fears in early January. “There are some problems in fulfilling the state order but there are currently no problems with its financing. This year, the sum of the federal defense order has exceeded profits from military hardware sales abroad - $8 billion against $6 billion. Military enterprises ought to be modernized. Otherwise, an increase in the state defense order or the growing number of overseas customers will bring no fruit.” Mikhail Dmitriev seemed to be the only person confident of the potential of the military industry. He told Vlast on February 9 that he is sure that the Russian defense industry will execute all export contracts in time.

Deprivatization Leading to Nationalization

The restructuring of the defense industry could solve this issue and improve the system of the distribution and execution of export contracts. The state has been engaged in the nationalization of private defense companies since 2001. A vivid example of this policy is the creation of the helicopter-building holding managed by the Oboronprom industry corporation, Rosoboronexort’s subsidiary. Major helicopter plants producing Mi helicopters were finally merged into the holding by the end of the last year. The joint company also bought the controlling stake in Kamov Holding from Sistema. Thus, Oboronprom has taken control over the two Russian helicopter schools, Mi and Kamov. Private companies like Rostvertol, however, did not contest this actual shift nationalization in public.

The creation of the United Aircraft Construction Corporation is on the way. Last year, Vladimir Putin endorsed the project that the head of the Russian Industry Agency, Boris Aleshin proposed in 2004 and has been promoting ever since. The Russian president announced the decision to create the United Corporation of major state and private aircraft-building firms at a session of the State Council in Zhukovsky on February 22, 2005. The state’s share in the corporation will amount to 75 percent. However, the presidential decree creating the corporation has not been signed yet, although it was due to be out in last April. It can be signed this week, according to latest reports. The controversy arouse as the state-owned share grew from 50 percent plus one stock to 75 percent and Aleshin expressed his ambitions to be the company’s head. The game is indeed worth the candle since the aircraft corporation may soon control at least 10 percent of the world’s aircraft market worth of $1.7 trillion, according to analysts.

The creation of a shipbuilding holding seems to be the next point on the agenda. In July, Boris Aleshin came up with his conception of the mixed state and private partnership in shipbuilding too. He believes that the holding should be based on the two major shipyards of St. Petersburg, Severnaya Verf and Baltiysky Zavod. Mezhprombank, controlled by Federation Council member Sergey Pugachev, bought 72.19 percent in Severnaya Verf in 2004 and 88.2 percent in Baltiysky Zavod in 2005. Boris Aleshin says that the state should include its three St. Petersburg-based design bureau, Severnoye, Nevskoye and Almaz, into the holding too. In his case, the state also seeks to hold the controlling stake.

However, Shipbuilding and Boatbuilding Concern is likely to oppose these plans. The concern, owned by Interregional Investment Bank, owns major stakes in Rybinsk-based Vympel plant, Yantar plant in Kaliningrad, Amur Shipyard and enjoys close cooperation with the Almaz design bureau.

The controversy has already fueled the fierce competition for the $1.56 billion-worth contract to build three frigates for India. The deal is to be struck in early March. Boris Aleshin sent a letter to Northern Shipyard back in August 2005 notifying that the company won the bidding for the contract.

Yet, Putin singed a decree Matters of Military and Technical Cooperation between Russia and Foreign States in September in an effort to knock down the domestic competition in those industries where the vertical-integrated holdings had not been set up yet. The decree enabled the Federal Military and Technical Cooperation Service to appoint executors of export contracts without tenders but based on collective decisions. The document stirred up the war for the Indian order as the board of the federal agency ruled to give the contract to Yantar, 51-percent owned by the state. Rosoboronexport, the Defense and Economic Development Ministries upheld the decisions whereas the Federal Industry Agency favored granting the contract to Severnaya Verf. The battle for the contract is not over yet. Defense Minister Sergey Ivanov ordered last week to shape a task force to weight the capacity of Severnaya Verf and Yantar in the construction of the frigate.

All these developments were enhanced by attacks of the two parties in the press. Moreover, internal wars in the Russian military industry are likely to continue until the state remolds the industry and obtains the controlling stake in key defense companies.



The Arms Russia Sold in 2005

Konstantin Makienko, the deputy director of the Center for Analysis of Strategies and Technologies, takes a look over the composition of Russian arms exports in 2005.

Things We Sold

Naval armaments became the most sizeable supplies of 2005 accounting for 45 percent of the total Russian arms export. Six Kilo-class submarines were sent to China last year. Three of them were built at Admiralteyskiye Verfi in St. Petersburg, two at Northern Machine-Building Enterprise and one at the Krasnoye Sormovo shipyard in Nizhny Novgorod. The six submarines cost $1.5 billion.

The Tayzhou 956EM torpedo-boat destroyer is the second-largest sale. The $1.4-billion contact to build two destroyers was signed in January 2002. The second vessel is to be constructed this year. South Korea got three Murena air cushion landing boats while India received a modernized 08773 submarine fitted with Club-S missile system from Zvezdochka shipyard in Severodvinsk.

The aircraft industry saw a phenomenon that has not occurred since 1994. It is the first time in the past ten years that not a single Su-27/30 fighter was sent abroad. The Irkut corporation kept on carrying out the licensing program to build 140 Su-30MKI fighters for India sending 5 complete sets ready for the assemblage at the HAL corporation’s plants. India also received 28 “conditional” sets which are apparently parts of fighters, according to unofficial reports. The deliveries totaled $600.

The MiG corporation sent 6 MiG-29SMT fighters to Yemen and modernized twelve earlier supplied MiG-29SE. The Russian company also modernized two MiG-29Bs for the Air Force of Eritrea. The shipments cost $300 million. 16 Mi-17 and 7 Mi-35 helicopters were delivered to Czech Republic to the amount of $150 million as the clearance of the Russian debt. Small lots of Mi-8 and Mi-17 helicopters were shipped to Vietnam, Malaysia, China, Iran, Sudan, Burkina Faso, Venezuela, Kazakhstan and Latvia. Some ten Ka-32 helicopters were sent to South Korea.

The sphere of anti-aircraft systems saw major transactions as well. The Almaz Antey concern sent two S-300PMU1 anti-aircraft missile systems to Vietnam gaining $250 million. The Russian company has started modernizing the Kvadrat anti-aircraft missile systems for Egypt.

Land hardware was also on the supply list in 2005 but the sales were not that large. UralAZ executed the contract to deliver 22 Ural trucks to Mexico. The 144 Factory of the Russian Defense Ministry and Kurganmashzavod have apparently fulfilled the agreement with Yemen on 180 BMP-2 infantry combat vehicles sending the remaining 52 vehicles. Tula Instrument-Making Design Bureau has started shipping Kornet-E anti-tank missile systems to Eritrea, according to some reports. The design bureau also delivered similar missile systems to Oman, says Alexander Denisov, the first deputy of the Federal Military and Technical Cooperation Service.

Things We Signed

The deal with China to sell 34 Il-76MD military transportation planes and 4 Il-78 inflight refueling tankers was the biggest one in 2005 costing $1.2 but the mass media put the price at $1.5 billion. China also ordered three sets of aircraft motors. The $267 million contract to deliver 100 RD-93 motors for Chinese FC-1 light fighters was struck in April. The $580 million order for 100 AL-31FN motors to be used for Russian Su-27SKs and Su-30MKKs followed in July. This pattern of Chinese purchases is quite peculiar. Beijing evidently prefers to gradually stop buying fight planes and start importing hardware and components parts that the Chinese industry is unable to produce so far.

Russia signed quite an important contract at the MAKS-2005 aviation salon for the Saturn research and development center to create AL-55I motors for Indian HJT-36 and HJT-39 training jets of the Indian Air Forces. The price of the contract is not that impressive at the first stage reaching some $250 million. But .ong-term-wise, Russia will finally develop its own technology for the 2-5 ton motors and will shed the dependence on the unpredictable Ukraine.

The sale of 29 Top-M1 anti-aircraft short-range missile systems to Iran, estimated at $800 million, also became a key contract of 2005. It seems to be the biggest Iranian order after Russia lifted the restrictions imposed by the Gore-Chernomyrdin memorandum.



Russia's 2005 STATE DEFENSE ORDER (30.12.2004)

The draft 2005 state defense order, which contains many secret provisions, will be discussed behind closed doors, a Cabinet source told RIA Novosti here today. In his words, the Government has always opted for such tactics, while discussing the state defense order.

All other issues will be discussed openly, RIA Novosti's interlocutor added.

The draft state defense order has already been discussed beforehand at a recent session of the commission for military-technical issues under the supervision of Russian Prime Minister Mikhail Fradkov.

Previously, Russia's Defense Minister Sergei Ivanov talked to correspondents, saying he was positive that the new state arms-procurement program for the 2005 period will be okayed during the Government's final session this year.

For his own part, Economic Development and Trade Minister German Gref told reporters last week that some provisions of the 2005 program will be revised, stipulating additional appropriations. Gref made this revelation last week, after visiting the Plesetsk space center in northern Russia's Arkhangelsk region. Among other things, this will concern the development of the Strategic Missile Forces and the Plesetsk space center itself, Gref went on to say.

The Defense Ministry eventually gets several times more money than it requests, Gref noted. As I see it, we will manage to coordinate this issue, finding a way out of this situation and obtaining ample interaction opportunities, the Minister added.

Indeed, present-day appropriations are something inadequate; and we will revise such appropriations for the 2005 period, Gref went on to say.

Defense Ministry officials believe that additional funds can be used to buy three more mobile versions of the Topol-M ICBM (Inter-Continental Ballistic Missile) complex.

Additional appropriations can be spent on the purchase of three mobile Topol-M ICBM complexes, due to be procured next year, a Defense Ministry source informed RIA Novosti. The Strategic Missile Forces would receive a Topol-M battalion comprising three launchers over the 2006 period, in case we obtain additional monies, the agency's interlocutor added. That battalion would become part and parcel of the Teikovskaya ICBM division, which is deployed in the Vladimir region (Central Russia).

Plans are in place to provide the Russian Armed Forces with four silo-based Topol-M ICBM complexes, 11 revamped Sukhoi Su-27SM fighters, 80 BTR-90 armored personnel carriers (APCs), two nuclear-powered submarines (an Mk 955 Borei-class submarine and one Mk 941 Dmitry Donskoi-class submarine), two Iskander shorter-range missile complexes, 91 {30 as in text- mistake} T-90 main battle tanks, as well as about 3,000 motor vehicles, throughout the entire 2005 period.

2004.

Most defense industry state orders in 2004 for new weapons - defense
minister OMSK. Jan 15 (Interfax) - Most of the 148 billion rubles allocated for state defense orders in 2004 will be used for creating new weapons and military equipment, Russian Defense Minister Sergei Ivanov told a news conference in Omsk on Thursday. "If we are talking about the re-equipment of the army, we will sooner or later have to give up good, high-quality Soviet weapons and begin making enough modern high-precision weapons, new space systems, missile systems, communication equipment, and precision weapons for ground troops, although there will not be as many as we made in the Soviet Union," Ivanov said. The Russian government has already approved a 148 billion rubles budget for state defense orders in 2004, he said. "The state expenditures on defense has been increasing since 2000. Their percentage in the GDP does not exceed 3%, it is somewhere around 2.6%," Ivanov said. The funding allocated for state orders is a separate item in the budget, he said. "The funding for state defense orders, which amounts to 148 billion rubles, is much higher than it was in 2003," Ivanov said.

[..]

"The priorities of the draft 2004 budget are in favor of security structures, to the detriment of the social sphere." He reported that spending on national defense in 2004 will be increased from 345 billion rubles to 412 billion rubles. The share of "security" items in the budget will increase from 25% to 27.2%. Zadornov told us about the consequences this sort of budget policy will have.

Question: Which items in the military budget have actually increased?

Mikhail Zadornov: It is too early to discuss military spending in detail now, since later we'll get the statement of the secret part of the budget that determines defense spending in more detail. Then we'll be able to talk about the structure of the defense budget. And now we can handle only general figures.

Mikhail Zadornov: Which items have suffered most of all because of the shift of the draft budget in favor of defense?

Mikhail Zadornov: First of all, it is the social sector in general that has suffered. Spending on this sector has been reduced by five billion rubles compared to the government's plans in July. Besides, the draft budget proposes less spending than the 2003 budget on such items as investment, industry in general, development of rural areas, transportation, telecommunications, support of media, the military reforms, and destruction of weapons, although some corrections are still possible until August 25.

Question: How will it affect the situation in the country if the security slant remains in the budget?

Mikhail Zadornov: There will be no serious outcomes within one year.

 

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