Russian Military Budget
Defence spending will be cut by 5 percent for 2021, taking it below the level of spending on state-backed industries for the first time since 2014. The Kremlin instead ramped up borrowing to pay for increased social spending ahead of critical parliamentary elections.
Russia had planned to allocate 3.1 trillion rubles [$41.6 billion] for national defense in 2021, 3.2 trillion rubles in 2022, and 3.1 trillion rubles in 2023. This was stated in the 18 September 2020 explanatory note to the draft budget for this period. "The budgetary allocations for the National Defense section in 2021 will amount to 3.113 trillion rubles, in 2022 - 3.231 trillion rubles and in 2023 - 3.257 trillion rubles," the document said. It also notes that the amount of budgetary allocations provided for in the bill compared to the previously approved amounts in 2021 has been reduced by about 119.38 billion rubles, in 2022 - by about 87.39 billion rubles, in 2023 compared to the volumes, stipulated by the bill for 2022, increased by about 25.76 billion rubles. The change in spending in the area of "National Defense" was influenced by an increase in budget allocations for the current maintenance of the Russian Armed Forces (in 2021 by about 5.14 billion rubles, in 2022 by about 8.59 billion rubles and in 2023 by about 35.73 billion rubles), as well as an update of the average annual US dollar exchange rate.
The State Arms Program for 2018–2027, approved by the president, provides for the allocation of approximately 20 trillion rubles for defense needs. The amount is astronomical. The bulk of these huge funds will be used to purchase state-of-the-art weapon systems.
Arms procurement costs are de facto reduced. In nominal terms, the cost of the state armament program 2018–2027 approximately corresponds to the volume of the current state program for 2011–2020. But taking into account inflation, the real amount of costs under the new state armament program will be reduced by about half as compared to GPV-2020. When the current GPV was accepted, the dollar was worth about 30 rubles, today - for sixty.
In the West, the assessment of the balance of military power is carried out in dollars based on the prevailing exchange rate. But such a comparative analysis gives a distorted picture, since Moscow buys the products of Russian defense enterprises for rubles. A Purchasing Power Parity calculation yields a Russian military budget of $170,000,000,000, which ranks fifth in the world just behind Saudi Arabia.
Michael Kofman, the analyst of the Center for US Naval Analysis, wrote in Defense News, “The best example of this problem is a recent announcement by the Stockholm International Peace and Research Institute that Russian military spending has fallen to the sixth highest in the world in 2018, at $61.4 billion. Rest assured, or perhaps discomforted: Russian defense spending is several times higher than $61.4 billion, and the Russian defense budget remains the third largest in the world, dwarfing the military expenditures of most European states combined. In reality Russia’s effective military expenditure, based on purchasing power parity (Moscow buys from Russian defense manufacturers in rubles), is more in the range of $150-180 billion per year, with a much higher percentage dedicated to procurement, research and development than Western defense budgets.”
Mikhail Alexandrov , a leading expert at the Center for Military-Political Research at MGIMO, estimates that ", the Russian real military budget - taking into account the expenditures on Rosgvardia, the Border Troops and the FSB (they are considered separately, as well as the US military budget does not include CIA and Coast Guard costs) - turned out to be about 200 billion dollars equivalent."
According to Russian press and Ministry of Finance announcements, from 2017 through 2019 Russian defense spending will be essentially frozen in nominal terms — and therefore declining in real terms. According to Vedomosti on 05 September 2016, the Economic Development Ministry made an unfavorable forecast based on the price of oil and gas. The Russian ministry predicted such results, proceeding from the price of oil at $40 per barrel. But the U.S. Energy Information Administration, Short-Term Energy Outlook, January 2018 forecast Brent crude oil to average $60 per barrel (b) in 2018 and $61/b in 2019.
The new state armament program (GVP) was signed by the president, Deputy Prime Minister Dmitry Rogozin said 26 February 2018. "Yes, the document was signed by the president, originally the GPU was to be adopted in 2016, but due to the events of 2014, connected with the fall in oil prices and currency jumps, the government's financial and economic block could not issue an accurate macroeconomic forecast," he said.
The state armament program is a document of medium-term planning for the technical re-equipment of the army and navy. It takes into account the analysis and assessments of possible threats to Russia's national security. The creation of the LG is coordinated by the Ministry of Defense of the Russian Federation, which attracts other ministries and law enforcement agencies, enterprises of the defense industry complex to develop the document. At the same time, the president's press secretary Dmitry Peskov confirmed the fact of signing a new state program of armaments, he admitted that he had misled media representatives with his previous commentary that Vladimir Putin had not yet signed the document with his signature.
At the end of 2017 it was reported that the main priority of the new LG will be the development of nuclear deterrence systems. Special attention will also be paid to high-precision weapons in the new SPV, in particular, the air and space systems of precision weapons, as well as ground systems. Planned and work on the creation of vertical takeoff aircraft. It is about the creation of aircraft with a short take-off and landing and about aircraft with vertical take-off.
Several factors seem to have converged on military spending levels.
- The global price of oil fell from over $125 / barrel in 2014 to below $40 / barrel in 2015. Russian state revenue declined accordingly. Oils prices had declined from about $80 / barrel in 1980 to about $25 / barrel in the 1990s, smothering Russian military spending in that decade. With the new century, prices began to rise, and by 2005 had surpassed $60 / barrel. The Economic Development Ministry's unfavorable forecast based on the price of oil at $40 per barrel was pessimistic, as oil has rebounded to $70 / barrel by mid-2018.
- When the price of oil was high, the Russian military embarked on a full spectrum modernization program that would have transformed Russia into a peer competitor to the United States in the 2025-2030 timeframe. But such an armes buidup bankrupted the Soviet Union, and was unafordable for the diminshed Russian State. As recently as the end of June 2017, the Ministry of Defense announced ambitious plans to build two universal landing craft (UDK) of the type "Priboy" and one aircraft carrier of the project 23000 "Storm" by 2030. But a host of conventional and strategic nuclear forces programs appeared becalmed across the board.
- With the success of the BREXIT referendum, and the election of Donald Trump, Moscow probably realized that such active measures campaigns were far more effective than a massive arms buildup, at a cost that was a trivial fraction of the arms modernization programs.
Russia's federal budget for 2018 envisioned a reduction in defense spending, but this will not affect the plans to re-equip the army and navy, Putin said 15 August 2017 at a working meeting with United Russia ruling party faction leader Vladimir Vasilyev. "I want to remind you that significant budget savings for the next year are stipulated, by the way, due to a cut in defense spending. This is not connected with the reduction of our plans to refit the army and navy. We will execute the state defense order and will make a new program," Putin said. Putin stressed that every ascpect of the country's 2018 budget should be carefully considered in the State Duma during the preparation process.
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 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”.
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