Russian Military Budget
According to an April 2016 study by experts from the Stockholm International Peace Research Institute (SIPRI), Russian defense spending has fallen and the country no longer ranks as one of the world’s top three military spenders, having been overtaken by Saudi Arabia. In 2015, Russia increased its defense spending in rubles by 7.5 percent. However, the falling oil prices and the national currency’s collapse against the dollar have squeezed Moscow out of the top three slots on the SIPRI rating of military spenders: the Stockholm institute calculates defense spending in dollars.
According to SIPRI, in 2015 Russia increased its defense spending by 7.5 percent and the Defense Ministry’s budget reached $66.4 billion. The world’s biggest military spender, according to SIPRI, is the United States, which spent $596 billion on defense in 2015. It was followed by China, with $215 billion, and Saudi Arabia, with $84.2 billion.
Percentage-wise, Russia is one of the world leaders in terms of the share of GDP spent on defense. For instance, the United States’ defense spending makes up 3.5 percent of its GDP, with China’s reaching some 2.1 percent, whereas Russia’s amounts to 4.5 percent of its GDP. The Russian figure is the world’s largest after Saudi Arabia and the UAE, which spend 10.4 and 5.1 percent of their GDP respectively on arms.
Russian Prime Minister Dmitry Medvedev said 30 May 2016 that he had approved the "new version of the program of development of the military-industrial complex in the years 2016-2020". The head of government told the Cabinet at a meeting with the vice-premiers "We are currently upgrading the entire army, Armed Forces, Navy with new weapons, there are specific goals that need to be filled, and, of course, the (necessary) to ensure the competitiveness of what we do on a global scale".
Talking about the competitiveness of Russian weapons, Medvedev said that success on the global market can be achieved only with an advanced military-industrial complex. "Now it’s impossible to deceive anybody - either the major countries or that which had been formerly called third world countries, that is, developing economies - they all want to get advanced products," the prime minister said. According to him, "So we should produce exactly this kind of military products."
According to him, "Russia has good indicators on the arms trade in the world - we are the second country that supplies the weapons in such volumes in the international market." "We need to keep these positions," - Prime Minister set the task. According to Medvedev, "the program envisages the development of innovative potential of defense industry enterprises, improving the competitiveness of their products, the increase in industrial production growth, promotion of Russian military goods to the world markets, as well as issues related to the salary of employees of the defense-industrial complex."
Deputy Prime Minister Dmitry Rogozin reported that the implementation of this program will be allocated 1 trillion 67 million rubles of budgetary allocations. The first goal, according to Rogozin, is bringing the level of defense industry production technological readiness for the production of weapons and military equipment to 100%. While this year doing this ratio was 97%. The second most important task was to put into operation 929 new production facilities. The third was to ensure the share of innovative products in the production volume of up to 40%. And the fourth was to develop by 2020 no less than 1300 technologies for the production of military products.
"Formerly, even within the Soviet Union the gas turbine manufacturing industry was located in Ukraine. Now we are starting full-scale production of such engines that even the Soviet Union did not manufacture," Rogozin told the prime minister.
The Defense Ministry declared it was working on a state program for armaments till 2025 back at the end of 2015. Before that Defense Minister Sergey Shoigu said the program’s value was estimated at 30 trillion rubles ($454 billion). The program for 2011-2020 stood at about 20 trillion ($300 billion).
The Russian government approved on 25 May 2016 the state program "The development of the military-industrial complex" mission, which provided almost 35 billion rubles for four years. Responsible executor of the program assigned to the Ministry of Industry and Trade, its purpose - "improving the competitiveness of the products on the basis of the implementation of the innovative capacity and stimulate the development of the military-industrial complex." Among the objectives of the program called "development and implementation of innovative potential of the defense-industrial complex, to ensure the promotion of military products on the world arms market, ensuring stable operation and growth of industrial production of the defense-industrial complex, development of human resources and development of intellectual capacity in the defense industrial complex." The document notes that the program "is implemented in one stage - 2016-2020 years". Appropriations from the budget for its implementation will amount to a total of 34,893,260,000 Rubles. At that time, the exchange rate was 1 USD = 65.4643 RUB, so the allocation was a bit less that US$550,000,000 .
Moscow, a major player in the global arms business, has worked to re-equip and modernize its armed forces in recent years as well as boost its international sales. But 2014 was a turning point, with the drop in world oil prices, Western sanctions and limited manufacturing capacity may force Russia to slow those ambitions.
The Russian military budget will be reduced in 2016 by 5 percent due to the economic situation in the country. The 2016 military spending in the country was expected to amount to 3.14 trillion rubles (over $41 billion at the current exchange rate) or 4 percent of GDP. A 5-percent cut amounts to some 160 billion rubles. The Russian economy, highly dependent on energy exports, was experiencing a slowdown caused by a sharp decline in global oil prices and, to a lesser extent, by Western sanctions imposed on Moscow over its alleged role in the internal Ukrainian conflict — a claim the Kremlin repeatedly denied.
In 2015, the Russian military budget was reduced by almost 4 percent. Subsidies for the purchase of housing in 2014 were 26.5 billion rubles. In 2015, this article was allocated 37 billion rubles. In the new year 2016 it was planned to allocate 45 billion rubles.
In January 2016, the Ministry of Defense published a proposal for a comprehensive formation of its budget. It was envisaged to divide it into basic expenses in order to fulfill the tasks of military development in the near and distant future, and the cost of operational problems suddenly arise. At the suggestion of the Ministry of Defence of any curtailment costs of national defense should only be considered through the prism of a reliable state security. "We believe that any solution to reduce this or that article of the defense budget must be justified in the light of threats to national security and to obtain the approval of the Security Council. This decision was supported by the Russian president, "- said Deputy Defense Minister Tatyana.
Because of the crisis resulting from the sharp drop in energy prices and the economic sanctions of the West towards Russia budget execution in 2015 it was in jeopardy. Ministry of Defense of the Russian Federation even had to slightly reduce their costs.
In modern conditions when there is an urgent need for rapid and qualitative rearmament, the Defense Ministry was forced to advance businesses from 50% to 80% of the estimated amounts of the contracts for the supply of arms. Tatyana Shevtsova said that in 2016 the Defense Ministry will move to quarterly financing of the state defense order (SDO).
Nevertheless, some defense companies do not always comply with their obligations under the SDO. The Russian Defense Ministry was working with Federal Financial Monitoring Service, as a result, some companies have been identified misuse of budget funds. The funds could be spent on the production of other products not related to the SDO, to invest in securities, promissory notes, sent on loan servicing, etc. When allocated to the SDO means to an end, the company appealed to the Ministry of Defence for additional funding.
In January 2008, with world oil prices surging, the Reserve Fund hit a peak of $142.6 billion. Today, with oil prices having crashed and Russia the target of Western economic sanctions due to its actions in Ukraine, the picture is starkly different. The country will run out of resources for replenishing the Reserve Fund next year, said Russian Finance Minister Anton Siluanov in October 2015. “We will deplete our reserves by about 2.6 trillion rubles ($40.85 billion),” more than half of the total, Russian media quoted Siluanov as saying. “This means 2016 will be the last year we will be able to spend our reserves this way. After that, we won’t have such resources.”
Russia’s financial ombudsman, Pavel Medvedev said in October 2015 "Today in Russia there is an enduring opinion that military spending is something of boon, a stimulus for the domestic economy,” he said. “Many academic papers claim that money thrown at the production of tanks and missiles indirectly encourages the development of the economy. But that is not true. When you go to the store, you don't say: ‘Cut me a slice of a barrel of the tank.’ Everyone wants butter, bread, sausages and so on.”
Russia planned to spend on its armed forces in 2016 more than 2.2 trillion rubles. This was stated in the conclusion of the Duma Defense Committee on the draft budget, published in the electronic database of the State Duma 30 October 2015. According to the document, in the Russian Armed Forces in 2016 it planned to spend 2.233 trillion rubles, or 176.674 million less than is spent in the current. In 2015, on the same item of expenditure was spent 2.410 trillion rubles.
It is also noted that the section on "National Defense" in 2016 planned to spend 3.145 trillion rubles. The military spending also includes spending on non-military training and mobilization, mobilization preparation of the economy, nuclear weapons complex, the implementation of international obligations in the sphere of military-technical cooperation, as well as applied research in the field of national defense. Federal spending under section "National defense" on the nuclear weapons complex in 2016 will increase by about 4 billion rubles.
Russian Defense Ministry will have more than half of its spending in 2015 to fund a state-financed armament program, Deputy Defense Minister Tatiana Shevtsova said at a lecture delivered for students of St. Petersburg State Economic University on 22 Janury 2015. “This year the Defense Ministry will channel more than half of all expenditures to fund the state armament program,” Shevtsova said. Expenses on the defense industry will not be cut regardless the current economic situation, deputy chairman of the Military Industrial Commission board Oleg Bochkarev said. The state defense order will grow by more than 20% year on year in 2015 and by more than 40% in 2017, he said.
The Russian Defense Ministry intended to downplay the risks associated with the price difference due to changes in exchange rate. This was stated in an interview published 30 December 2014 in the newspaper "Izvestia", the Deputy Minister of Defense of Russia Yuri Borisov.
"We are very concerned about the situation with the growth of the dollar. We had planned to price options on state defense orders for 2015, 2016, 2017 in a stable economic situation, laying the purchase of imported components on the course of this summer," - said the deputy minister. The situation has changed and, according to him, if the government will not make the payment exchange losses, Defense Ministry "will have to either reduce the number of pieces of weapons, or give up some [personnel] positions."
According to Borisov, one of the main challenges is the strategic planning activities with wrong prediction of price parameters on the ten-year period. "The real inflation in the defense industry is higher than expected, including due to the fact that the forecast is calculated in civil industries, excluding especially the defense industry," - said the deputy minister.
State expenditures for the defense sector will not change regardless of the economic conditions in Russia, the military industrial commission board’s deputy head Oleg Bochkarev told TASS 19 December 2014. The state defense order market becomes more and more popular. It is guaranteed and confirmed with funds. Besides, the president has made it clear that defense expenditures would not change regardless of economic conditions, he said.
The volume of state defense orders for 2017 will grow more than 40% as compared to 2014, and in 2015 it will be 20% more, Bochkarev said. It has been growing continuously. It was 30% more in 2014 as compared to the previous year, Deputy Defence Minister Yuri Borisov said.
In early December 2014, Defense Minister Sergey Shoigu said that 25% more funds were provided from the budget in 2014 compared to last year for scientific research, tests, design work and purchases and repair of weapons and equipment. He also said that the number of weapons and equipment provided for troops grew 65%.
The cost of the State program of armament to the year 2025 would drop from 55 trillion to 30 trillion rubles through the development of strategic weapons and equipment types with similar characteristics, Defense Minister Sergei Shoigu said 19 December 2014 at the enlarged collegium session of the military. "The work has been completed on a type of perspective samples of weapons and equipment, have similar features and specifications. This will reduce the cost of State program of armament up to 2025, with 55 trillion to 30 trillion rubles, while maintaining the necessary amount of equipment," the report said. The cost of the State program of armament up to 2020 year is around 20 trillion rubles.
Russian Finance Minister said Anton Siluanov 07 October 2014 the country could no longer afford the multi-billion-dollar revamp of the armed forces previously approved by President Vladimir Putin. Siluanov said a new defense program should be drawn up to take into account the changed economic situation as the effects of the Ukraine crisis, including sanctions and capital flight, took effect. “A new defense program will be prepared now, and in its framework we want to reconsider the amount of resources that will be spent from the budget in order to make it more realistic,” said Siluanov, even though Deputy Prime Minister Dmitry Rogozin, in charge of the sector, had ruled out any cuts in military spending.
Between 2004 and 2014, Russia doubled its military spending and according to the newly adopted budget, it will further increase it from 17.6 percent of all budget spending this year to 20.8 percent, or 3.36 trillion rubles ($84.19 billion), in 2017. Defense spending was foreseen at 23 trillion rubles ($576 billion) in the decade to 2020 under the original plan to upgrade 70 percent of military equipment by then.
Under President Putin, the Russian leadership increasingly acted as though an improving military supported its foreign policies and conveyed the image of an active global power capable of asserting it national interests. It also supported the leaders' domestic political position.
In 2002 Dmitry Rogozin, the chairman of the foreign affairs committee a member of a pro-Putin faction in the Duma, stated that Russia had only two reliable allies - the Russian army and the Russian navy. Many others in the Duma have called for renewed increases in Russian military spending as the only way to guarantee respect for Russia in international affairs.
The presence of steady opposition among militaries forced the leadership of the Ministry of Defence and civilian authorities to imitate concessions trying to cajole officer corps. The increase of financing defence expenses in 2009 according to pre-crisis plans in 2009 could become the most impressive in the recent Russia’s history – almost by 27%, and the planned amount of total defence expenses in Russia was 4.15 trillion roubles. Dmitri Medvedev declared at the conference with military district commanders that the task of AF reform would be fulfilled at a stated time and all necessary financing would be provided. Thus, the President continued mastering the role of a “powerful” commander-in-chief, which was demonstrated by “militarization of budget”.
|DEFENSE BUDGET||ARMED FORCES||GROSS NATIONAL PRODUCT||GOVERNMENT
|Year||Rubles||Current $||,000||Current $||Constant||Current $|
All monetary values at official exchange rate (OER).
Purchasing power parity (PPP) exchange rates are the value of goods and services produced in the country valued at prices prevailing in the United States. This is the measure most economists prefer when looking at per-capita welfare and when comparing living conditions or use of resources across countries. The measure is difficult to compute, as a US dollar value has to be assigned to all goods and services in the country regardless of whether these goods and services have a direct equivalent in the United States (for example, the value of an ox-cart or non-US military equipment); as a result, PPP estimates for some countries are based on a small and sometimes different set of goods and services. In addition, many countries do not formally participate in the World Bank's PPP project that calculates these measures, so the resulting GDP estimates for these countries may lack precision. For many developing countries, PPP-based measures are multiples of the official exchange rate (OER) measure. The difference between the OER- and PPP-denominated values for most of the weathly industrialized countries are generally much smaller.
|Federal budget expenditures by category for 2012-2015. billion rubles.|
|# PR||Name||2012||2013||2014||2015||Changes to the previous year,%|
|02||Mobilization and Training Corps||7.3||6.79||6.88||6.89||92.8||101.3||100.1|
|03||Mobilization preparation of economy||4.89||5.6||5.7||5.7||115.7||100.9||100.9|
|04||Preparation and participation in collective security and peacekeeping||0.4|
|05||The nuclear weapons complex||27.4||29.28||33.3||38.57||106.6||113.8||115.7|
|06||The implementation of international agreements in the field of Military-Technical Cooperation||6.58||5.8||5.88||5.99||88.1||102.4||101.8|
|07||Applied research in the field of defense||170.77||198.3||233.9||228.5||116.1||117.9||97.7|
|08||Other issues pertaining to national defense||253.09||259.59||312.66||381.9||102.6||120.4||122.2|
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