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Russian 2016 Defense Budget

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.

Russia does not plan to reduce military expenditure, said Russian Finance Minister Anton Siluanov in an interview with Bloomberg TV 13 January 2016. Russia has significantly strengthened its capabilities according to the Minister, in the absence of any measures at the current price of oil, the fiscal deficit could more than double. The budget deficit of Russia in 2015 year amounted to 2.6% of GDP. The Finance Ministry predicted this rate at the level of 2.8%-2.9%.

The Defense Ministry believe that any defense budget sequestration should occur only on the basis of the opinion of the Security Council of the Russian Federation, said Deputy Defense Minister Tatyana Shevtsova. She explained that the Defense Ministry proposes to change the approach to the creation and protection of the military budget, providing a basic set forth therein (minimally adequate) volume and expenditure for emergency purpose. "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 Shevtsova at a meeting with Russian journalists 20 January 2016.

The Russian defense spending will grow 0.8 percent in comparison with 2015, and will total some 3.1 trillion rubles ($50.1 billion at the current exchange rate), or 4 percent of GDP, according to the federal budget draft for 2016. In comparison, the 2016 US National Defense Authorization Act (NDAA) approved by the Senate in October, authorized $612 billion in military spending, including $38 billion in overseas contingency funding. According to the new Russian draft of October 2015, spending on social policies will increase by 6.4 percent in 2016 and will total $72 billion, or 5.7 percent of the country's GDP.

The military spending in Russia’s budget for 2016 will be cut but by less than 10%, Finance Minister Anton Siluanov told reporters on 25 June 2015. "It will be less (than by 10% which is foreseen for other sectors)", he said. The Minister added that his ministry proposes to reduce the military spending taking into account the decisions of 2015 and making them valid also in 2016-2018. "That means a reduction of ineffective spending on state programs. As for military spending the percentage of optimization of this program was lower this year but the sum that we managed to cut we also want to extract from the spending in the coming years," Siluanov said.

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).

In January 2008, with world oil prices surging, the Reserve Fund hit a peak of $142.6 billion. But 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.

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Page last modified: 07-05-2018 12:10:03 ZULU