Russian Military Budget
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 would be lucky to receive a fraction of what was promised.
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 earmarked 2.5% of GDP, or 8% of total spending, for national defense programs. A return to the Soviet era meant 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.
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.
The 1996 defense budget of the Russian Federation, ratified by the State Duma in December 1995, allotted 78.9 trillion rubles (about US$19 billion), of which about 16 percent, or 12.6 trillion rubles (about US$3.0 billion), was allocated to acquisitions, and 7.3 percent, or 5.8 trillion rubles (about US$1.4 billion), was earmarked for research and development (R&D). Russia's 1995 budget had allocated 10.2 percent to R&D and 21.2 percent to acquisitions. By comparison, the 1996 United States budget for the Department of Defense totaled US$249 billion, of which US$39 billion (15.7 percent) was designated for acquisitions and US$34 billion (13.7 percent) for R&D. In February 1996, the Security Council allocated between 50 and 54 trillion rubles (US$10 to US$11 billion) to fund additional state orders from the MIC, including money for accelerated R&D and production of advanced weapons systems. This supplementary, targeted allocation represented a significant increase over the allocations for 1994 (US$2 billion) and 1995 (about US$3.4 billion), indicating a possible redirection of resources to R&D even as the military operating budget remained flat.
As of 1997 Russia's defense budget was estimated to be about $65 billion annually, about 45 percent of the 1992 total. According to another estimate, military expenditure had fallen from an estimated $257 billion in the USSR in 1987 to $24.1 billion in Russia in 1997, and as a proportion of GNP from 16.6% in 1987 to 3.8% in 1997. Yet a third estimate placed total military expenditures at $41.7 billion. By any estimate, Russian military procurement had slowed to a crawl. Whereas about 1,200 tanks and infantry fighting vehicles were bought in 1992, only about 355 were acquired in 1997. Production of combat aircraft similarly fell from 170 in 1992 to 35 in 1997. Other sources paint a decidely more bleak portrait, suggesting an almost complete cessation of military hardware acquisition in the 1990s. Even so, Russia still has the largest military forces and defense budgets of any country in Europe and Eurasia.
Yeltsin made it clear in mid-1997 that military reform would be constrained by economic resources, and his decision was confirmed in the National Security Concept. Following Yeltsin's decision, concrete steps were taken to reform the armed forces within the severely retrenched defense budget under the leadership of Defense Minister Igor Sergeev. In accordance with the reform program, Russia planned to reduce the number of troops by 300,000 in 1998 in addition to the 200,000 it had cut in 1997. As a part of the organizational reform aimed at increasing efficiency and cutting military personnel, the Strategic Missile Force and the Military Space Force were integrated in 1997 and the Air Defense Force was merged with the Air Force in 1998.
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.
The budget for the first three quarters of 1998 (January through September) was USD 7.00 billion or 50.6 billion new rubles (the average exchange rate for the first three quarters of 1998 was 1 USD equals 7.23 new rubles). Actual expenditures for this period were 4.66 USD or 33.7 billion, i.e. 66.5 percent of budget was fulfilled. For the first three quarters of 1998, actual military expenditures were 1.8 percent of overall GDP. The budgeted amount would have constituted 2.7 percent of GDP.
As opposed to the years 1996-97, the military's budget in 1998 was closed. An unofficial line-item defense budget is published on a monthly basis in Krasnaya Zvezda. This unofficial budget occasionally reflects discrepancies such as the receipt of less money by the Ministry of Defense than that which the Ministry of Finance announces as paid. Via this unofficial budget, the military demonstrates their accountability for what money is received, and documents their claim that they do not receive enough funds to be combat ready. On the other hand, the Finance Ministry and treasury have been unsuccessful in obtaining a detailed accounting of defense expenditures consistent with the budget. The Defense Ministry maintains the only federal government agency not yet included in the treasury's cash management system.
By the mid-1990s combat training had become virtually non-financed, with the military receiving only 6 percent of the resources required for combat training in 1998. Even this amount was apportioned only for maintaining infrastructure, forcing the military to finance fuel, ammunition, and training equipment costs from other sources. Training continues to be conducted on a reduced scale or is replaced by less resource-intensive activities (e.g., command post exercises replacing field tactical exercises). Personnel shortfalls, combined with lack of materiel, contributed to postponement or non-execution of unit training plans. In the ground forces, only 35 percent of planned regimental-level and 73 percent of battalion-level tactical exercises were conducted in 1998. Sea duty for Russian fleet submarines was reduced by 25 percent and for surface vessels by 33 percent. Russian air force elements executed between 15-40 percent of their standard training norms. This is contributing to rapid decay of combat readiness; according to MOD internal assessments, the average Russian soldier is only marginally combat capable.
By 1999 there was some indication of a new effort on the part of the Russian military to increase training activities, or at least to stage visible maneuvers to create the appearance of higher levels of combat readiness. The largest strategic command and staff exercises in the post-Soviet era, 'Zapad-99' (West-99), took place 21-26 June 1999. It involved the participation of five military districts (Moscow, Leningrad, North Caucasus, Volga and Urals MDs), three districts of the Internal Troops of the Interior Ministry, with participation of three Fleets (Northern, Baltic and Black Sea) and coordination of the Belarusian armed forces. The war game scenarios tested the ability of Russian armed forces to coordinate the repulsion of aggression from the West and so restore the territorial integrity of the Federation. This included repelling an offensive air raid on Belarusian territory and lifting a blockade on Kaliningrad region, as well as simulating the use of limited nuclear strike - a provision of Russian military doctrine employed when all conventional measures are exhausted - on the territory of 'neighbouring countries'. This exercise underscored Russia's desire to project power, but it was clear that by any comparisons with 'Zapad-81' this was a minor and unsustainable operation.
As of 01 January 1999, the authorized peacetime strength of the Russian armed forces was to be 1.2 million, following massive personnel cuts and reduction of peacetime billets over the previous two years. Actual personnel strength was difficult to determine, due to lack of standardized counting methods and internal security procedures, which obscure strength figures. The actual strength of the Russian armed forces probably was between 1.4 and 1.6 million as of early 1999. Ministry of Defense (MOD) and press reports estimated actual personnel strength of the armed forces at 80-85 percent of the authorized peacetime manning levels.
According to the minister of defense Igor Sergeev, out of 105,8 billion rubles appropriated to the Ministry of Defense in 1999 only 41,2 billion was received, which was less than 39% of the total amount. By 01 October 1999 the total expenditure for defence (excluding the Ministry of Atomic Energy) was 91.7 billion roubles, according to a statement on 07 October by the representatives of the Main Department on Military Budget and Financing of Russian Defence Ministry on the performance of the defence budget. Within 9 months 65.4 billion roubles had been transferred to the Defence Ministry accounts, which meant that the defence budget had been 71% fulfilled. As of June 2000 Russia's draft 2000 budget earmarked 110.9 billion rubles (or 2.17 percent of GDP) for defense. This was well under the 3 percent of GDP called for by the Duma, which had previously resolved that the assignments under the clause " National defense " in the 2000 year budget should be not less than 153 billion roubles -- 3% of a total internal product estimated at 5.1 trillion rubles.
On 15 September 1999 Deputy Prime Minister Ilya Klebanov said that by 01 September 1999 the state defense contract was paid up to the extent of 45 percent as against 20 percent by the same date of last year. And it is very likely that for the first time ever the 1999 state defense contract will be paid up in full, for the first time since 1992. The overall figure in the draft state defense contract for the next year was 36 billion rubles, including research and development, purchases of new military hardware and weaponry, maintenance and modernization as well as capital construction. And on 16 September 1999 Deputy Prime Minister Ilya Klebanov said that beginning in 2000, financing for state defence orders would be increased by 50%, and that all debts on state defence orders for the previous years would be written off by the end of first quarter in 2000.
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.
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