Russian Military Budget
Khrushchev had consistently regarded the growth rate of the Soviet economy, the improvement of the living standards of the Soviet people, as important an index of the growing power of the Soviet cause as Soviet military might. He has been willing to live with long periods of strategic inferiority so as to promote the country's economic growth. For example, between 1955-1958 he had secured a decline of two billion rubles in military spending, with the savings diverted into investment and consumption, and thereby enabled the Soviet GNP to increase annually by seven percent. This is not to say that Khrushchev has neglected the defense sector; he has in fact led the pack of reformers in remolding the Soviet armed forces for nuclear warfare of his military program; cutting back the conventional arms of service to offset the great cost of advanced weapons and to nourish the economy was the other part of his scheme.
The collapse of the Soviet strategy to put missiles in Cuba seems to have generated a strong current of opinion in favor of increasing the defense establishment's share of the country's limited resources. Both the deployment in and the withdrawal of missiles from Cuba were tacit admissions of Soviet strategic inferiority. As Soviet prestige dipped low in the wake of the crisis, as one CIA analyst put it "the remaining dynamism went out of Soviet foreign policy in much the same way that air escapes from a tire and with the same resultant immobility". The Chinese and their cohorts used the occasion to discredit the Soviet leaders with charges of "adventurism and capitulation." Soviet military morale seemed to slip to its lowest level since the announcement in January 1960 of a drastic unilateral troop-cut. Indirect evidence suggests that there was dissatisfaction among the military over Khrushchev's handling of the Cuban operation. Under such circumstances, the need to improve the relative strategic position of the USSR with genuine increments to the military became a politically irrefutable argument, and the position of the advocates of greater defense spending was consequently strengthened.
That the Soviet leadership would give greater impetus to defense was further suggested by the declaration of military superiority as a goal of Soviet policy soon after the curtain fell on Cuba. In a pamphlet on military policy and doctrine published in November 1962, the Soviet Defense Minister wrote: "The most characteristic feature of the present state of the development of Soviet military doctrine is the fact that it bases itself on the superiority of the armed forces 0% the USSR over the armies of the most powerful countries of capitalism, with respect to milltary-technological means and moral-combat qualities. Along the same lines, the 30 March CPSU letter to the Chicom Party introduced a new slogan: "As long as there is no disarmament, the socialist commonwealth must always have superiority in armed forces over the imperialists." Since Cuba, Soviet propagandists also proclaimed current military superiority -- at times qualified and at times not--over the West. Boasts of military superiority had dropped out of the propaganda in early 1961, and until the Fall of 1962 the Soviets were content to assert military parity with the West. Among the reasons for reintroducing boasts of current superiority, evidently, were the Soviet need to salvage some of the prestige lost in the wreckage of the Cuban operation, and, in the case of some Soviet leaders, to play down the strategic deficiencies of the USSR in order to draw off some of the urgency that other Soviet leaders attached to the problem of improving the Soviet' strategic posture.
In 1988 military spending was a single line item in the Soviet state budget, totaling 21 billion rubles, or about US$33 billion. Given the size of the military establishment, however, the actual figure was at least ten times higher. Western experts concluded that the 21 billion ruble figure reflected only operations and maintenance costs. The amount spent on Soviet weapons research and development was an especially well-guarded state secret, and other military spending, including training, military construction, and arms production, was concealed within the budgets of all-union ministries and state committees. Apart from considerations of state secrecy, this allocation of military spending to ministries other than the Ministry of Defense reflected the Soviet approach to managing resource allocation. Weapons produced by agencies such as the Ministry of General Machinebuilding [missiles] or the Ministry of Shipbuilding Industry [ships] were essentially provided as "free goods" to the Ministry of Defense.
By the mid-1980s, the Soviet Union devoted between 15 and 17 percent of its annual gross national product to military spending, according to United States government sources. Until the early 1980s, Soviet defense expenditures rose between 4 and 7 percent per year. Subsequently, they slowed as the yearly growth in Soviet GNP slipped to about 3 percent. In 1987 Gorbachev and other party officials discussed the extension of glasnost' to military affairs through the publication of a detailed Soviet defense budget. In early 1989, Gorbachev announced a military budget of 77.3 billion rubles, but Western authorities estimated the budget to be about twice that.
With the end of the Cold War, the combined military expenditure of Russia and other successor states of the USSR fell dramatically. The consolidated budget currently earmarks 2.5% of GDP, or 8% of total spending, for national defense programs. A return to the Soviet era means that 12-13% of GDP, or almost one half of the budget, will go on war. That would entail cuts in other budget expenditure. To maintain pensions and wages at their current levels, the government will have to dip into the $165 bln hedge fund for "future generations" i.e., the reserve fund and the national wealth fund, therefore fueling inflation.
In 1997 Russian military spending was around one-tenth of that of the USSR in 1988. Between 1988 and 1993 weapons production in Russia fell by at least 50% for virtually every major weapons system. Weapons spending in 1992 was approximately 75% less than in 1988. Almost all of Russia's arms production is for sales to foreign governments, and procurement of major end items by the Russian military had all but stopped. By 1999 Russia had dramatically downsized its military and was no longer channeling one fifth of its national resources into maintaining it. In 1997 Russian military spending was only 1/7 of its Soviet era peak in 1988 and 2/5 of its level in 1992.
In 1989, the Soviet military was one of the most feared on earth. By 1994, the Russian armed forces suffered a major setback when they took on rebel fighters in Chechnya and by 1998, tanks were parked from lack of fuel and officers were working second jobs during duty hours to make ends meet. Aircraft could not fly due to lack of spare parts and ships sat rusting at their piers. In 2000, the submarine Kursk sank, in a preventable accident, with the loss of 118 lives. While the budget for the year 2000 indicates that spending on national defense will rise by 50 percent to $5.3 billion, past practice suggested that the military will be lucky to receive a fraction of what is promised.
However, 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.
After nearly a decade of declining activity, the Russian military began to exercise its forces in mission areas it believed were essential for deterrence, global reach and rapid reaction. Open source reporting confirmed that ground force exercise activity in 2003 doubled that of 2002; training for use of non-strategic nuclear forces continued; and Russia desired to have the ability for its Navy and Air Force to operate globally, as evidenced in their joint exercises in the Indian and Pacific Oceans in 2003.
By 2006 Russia spent about 2.7 percent of its GDP on defense, about that of advanced European countries. Military leaderss protested that this was far too little to achieve foreign policy professed goals, while civilian leaders resisted militarizing the federal budget or economy as in Soviet times.
In the new millenium, the Russian economy remained very dependent on energy and other extractive sectors, such as timber, precious metals, non-ferrous metals and steel. In 2005 the Russian economy continued its sustained steady growth. GDP grew by an estimated 6.4% to $765.5 billion. However, this represented a decline from 7.1% growth in 2004. As in 2004, high world prices for oil and natural gas continue to be the engine behind much of this impressive growth. Russia ended 2006 with its eighth straight year of growth, averaging 6.7% annually since the financial crisis of 1998, while inflation was below 10% for the first time in the past 10 years. Although high oil prices and a relatively cheap ruble initially drove this growth, since 2003 consumer demand and, more recently, investment have played a significant role. The federal budget had run surpluses since 2001 and ended 2006 with a surplus of 9% of GDP. According to 2006 estimates, Russia's official GDP was $1.746 trillion (purchasing power parity) and $733.6 billion (official exchange rate), compared to the US GDP of $13 trillion.
According to first deputy prime minister, former defence minister Sergei Ivanov, restraining the growth of military expenditure was a matter of deliberate state policy. Speaking in May 2007, he stated that during the next three years the share of the MOD in the budget would hardly change. It had been, and would remain, 2.6-2.9 per cent of GDP. Russia, he declared, had no intention of returning to an arms race. In Soviet times the share had been 30 per cent of GDP. 'We don't intend to increase the military budget to such a degree that it becomes a backbreaking burden on the entire economy, on social policy. We shall not step on this rake a second time.'
By 2007 the Russian defense budget had almost quadrupled to $31 billion over the previous six years. In 2005 Russian defense spending rose 22 percent, 27 percent in 2006 and analysts estimate that in 2007 it could increase by an additional 30 percent. In 2007 the Russian Government approved a re-armament program through the year 2015 with a $240 billion budget. During the passage of the draft three-year budget thought the State Duma in 2007, amendments boosted social spending, not outlays on the military and security.
As of 2007 there were plans for a significant raise in compensation for military personnel. A 10% readjustment of salaries took place on Jan 1, 2007 according to position and rank; on Dec 1, 2007 another adjustment of 15% will take place, with a subsequent increase of 608.33 rubles (cost of food rations per month). As a result the amounts received by military personnel in cash will increase significantly. For example between Dec 2007 and Dec 2008 a regiment commander will receive 20,503 rubles; this includes the added food ration cost (whereas in Jan 2005 he would have received 11,261 rubles); a battalion commander will receive 17,101 rubles (vs. 9,284 rubles in Jan 2005), and a squadron commander will receive 14,792 rubles vs. 7,847 rubles. At the same time will food rations and board will remain unchanged. Further pay increases for military personnel are planned for 2008-2010: an increase of 15% beginning Sept 2008, and another of 6.8% beginning Aug 1, 2009. The amount provided in lieu of food rations is also subject to inflation adjustment.
In 2005 the average pension sum for persons discharged from the Armed Forces of the Russian Federation was 4,200 rubles; by 2009-2010 through annual increases this amount shall reach 7,500 rubles. In 2008 the federal government will spend 173.3 bln. rubles to pay the pensions of retired military personnel, which is an 18% compared with 2007. In 2009 and 2010 this amount will rise to 211.8 bln. and 245.5 bln., respectively.
In 2008 the federal government planned to set aside 8.3 bln. rubles in mortgage payments toward housing military personnel; this figure was to rise to 11.7 bln. in 2009 and 14.2 bln. in 2010. The amount of down payment amount would rise from 40,600 to 82,800 rubles in 2007; amount paid on the mortgage will be adjusted annually using a deflator index. As of 2007 54,700 individuals were participating in the program; this figure will grow to reach 82,700 service men and women in 2008, and 178,400 by 2010. The federal budget for 2008 includes additional funds that make it possible to provide all members of the Armed Forces of the Russian Federation with permanent housing by 2010, and service housing by 2012. Service members of other federal agencies that require military service will receive permanent housing by 2011 and service housing by 2013. In 2008-2010 a total of 156.2 bln. rubles will be appropriated to this end, including 36.5 bln. in 2008, which is double the 2007 amount.
Russia's Defense Ministry would spend around one trillion rubles ($40 bln) of federal budget funds in 2008. "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 on 26 February 2008. She also said that in 2008-10, military spending would account for 15.5-16% of aggregate federal budget expenditure. Kudelina 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. Russia has downsized its Armed Forces to about 1.1 million personnel, but military spending has increased dramatically under President Putin. Defense spending was set to total 1.18 trillion rubles ($45 billion) by 2010.
Russia will boost defense spending 26 percent to a post-Soviet record in 2009 as it adds weapons and raises salaries, Finance Minister Alexei Kudrin said 11 September 2008. Defense spending, including arms purchases and pay raises, will reach 1.28 trillion rubles ($50 billion) in 2009, Kudrin told lawmakers in Moscow. Kudrin said the new weapons component of the budget will advance 30 percent, though he declined to give exact figures because that information is classified by the military. The increase was approved before the conflict with Georgia, said Kudrin, who is also a deputy prime minister. As of March 2007 total 'national defence' spending for 2009 had been slated to reach only 1.053 trillion rubles.
Russia's budget spending on state defense orders will amount to 1.2 trillion rubles ($46.8 billion) in 2009, first deputy prime minister Sergei Ivanov said on 12 September 2008. The spending figure was outlined in the Russian budget for 2009-2011 which was due to be considered by Russia's lower house of parliament, the State Duma, on September 19. The three-year budget envisaged additional spending of 170 billion rubles ($6.63 billion) in comparison to previous annual programs.
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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.
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