Category Archives: Military Budget

OSK Cries Poor on Knyaz Oleg

A Borey-class SSBN (photo Sevmash Press-Service)

A Borey-class SSBN (photo: Sevmash Press-Service)

Russia’s United Shipbuilding Corporation (USC or OSK) is reportedly experiencing a shortage of funding for Borey-class SSBN Knyaz Oleg. OSK President Aleksey Rakhmanov told RIA Novosti on November 16, “Everything depends on issues of the shortage of financing which has somehow formed for us. We hope that [the launch of Knyaz Oleg] will be on schedule.”

Rakhmanov reportedly told the official news agency that the schedule for launching Knyaz Oleg has been pushed back several times.

Knyaz Oleg is the fifth Borey SSBN overall, and the second Borey-A boat. Like the first three Borey ballistic missile submarines, the Borey-A is expected to carry 16 Bulava SLBMs.

First-of-class Yuriy Dolgorukiy is assigned to the Northern Fleet. Aleksandr Nevskiy and Vladimir Monomakh are part of the Pacific Fleet.

Like Knyaz Oleg, unit four — Knyaz Vladimir — the first Borey-A is also destined to reinforce the Russian Pacific Fleet’s strategic nuclear force.

Rakhmanov’s public cry for more money is somewhat unusual and harks back to 2011 when OSK railed at the MOD for adequate financing to produce modern nuclear submarines.

Russia planned to have eight Borey boats in its order-of-battle by 2020. But with Sevmash taking six, seven, or eight years to lay down, launch, and commission them, Knyaz Oleg might be the last to reach the navy this decade. And Rakhmanov pretty clearly linked money to sticking to his SSBN production schedule.

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Slicing the GPV

Soon something like a final draft State Program of Armaments (GPV) 2018-2025 will go to Russian President Vladimir Putin. He’ll almost certainly affix his official approval prior to the end of 2017.

Many observers bet the new GPV will contain 17 trillion rubles for the MOD to procure weapons and other military equipment. GPV 2011-2020 was a little higher at 19.1 trillion. But the new GPV will disburse its rubles over fewer years. However, Russia’s high inflation rate (e.g. 11% in 2014, 13% in 2015) means a trillion rubles in 2011 bought more guns than it does today.

Last week, Deputy Editor Vladimir Gundarov published a pithy piece in NVO describing how the new funds might be distributed among Russia’s armed services. He sees a shift in favor of the Ground Troops and VDV which will force the Navy to “curb its appetite.” 

It happened already in GPV 2011-2020, writes Gundarov. It originally envisaged 4.7 trillion for the Navy, but this was reportedly cut to 2.6, while the army and airborne went from 2.6 to 4.2 trillion.

The rationale, he says, is multifold. The Ground Troops face the expensive prospect of fielding new generation armored vehicles on the Armata chassis. Given its involvement in wars in Ukraine and Syria, Russia faces a “complex situation” in the southwestern strategic direction requiring more attention to the army’s modernization.

But the main reason for rewickering MOD procurement is economic. GPV 2011-2020 was formulated with oil at $100 per barrel; it’s now half as much.

Gundarov concludes that Russia:

“. . . can’t spend money to buy arms and military equipment in the previous amount, particularly for such expensive systems as those for the Navy. So only the budget for strategic nuclear systems will be preserved whatever the price of oil.”

He doesn’t say where he got his numbers for this article, but it sounds like he based it on some expert opinion and off-the-record comments.

Declining Defense Orders

Smaller military budgets and delays in putting GPV 2018-2025 into place will apparently trickle down into reduced orders for Russia’s defense-industrial complex (OPK) in coming years.

According to TASS on June 15, Deputy Chief of the Main Armaments Directorate Boris Nakonechnyy said the MOD can’t fully “load” OPK enterprises with orders during the next GPV.  “As the primary customer for weapons and military equipment, the Defense Ministry can’t fully support the work of enterprises,” he told the news agency.

There may be some reduction in defense orders during the new arms program, Nakonechnyy said.  But he indicated the MOD would still support the scientific work (presumably the RDT&E) of Russian defense-industrial enterprises.

Nakonechnyy said the MOD doesn’t expect global military threats to decline, but it’s not possible to increase substantially the funding needed to counter them.  At the same time, he emphasized it’s important for Russia not to lose the current tempo of development in its OPK, and not to allow itself to lag behind world leaders in military technology.

Welding parts for BMP-3 at Kurganmashzavod

Welding parts for BMP-3 at Kurganmashzavod

TASS provided no context for Nakonechnyy’s comments.  Other media outlets ran the TASS story as is.  Utro.ru, however, provided its own interpretation of his remarks.

While perhaps somewhat alarmist, Utro writer Andrey Sherykhanov puts Nakonechnyy’s statements in the context of the continuing battle between the defense and finance ministries over future military spending.

Sherykhanov recalls the recent Vedomosti report putting likely appropriations for GPV 2018-2025 at 17 trillion rubles, three times less than the original MOD request.  The peak of defense orders, he concludes, is already past.  The military will have no orders for production enterprises, which will close and send their workers on indefinite furlough as they did in the 1990s, he writes.

But maybe, Sherykhanov opines, this won’t be necessary since President Putin has said the OPK’s potential should be harnessed to the needs of cutting-edge, science-intensive sectors like medicine, energy, aviation, space, and information technology.  Last year the Supreme CINC himself said 30 percent of OPK production has to be for the civilian market by 2025, and 50 percent by 2030.  Massive state defense-industrial holding company Rostekh has already announced that half of its output will be civilian by 2025.

Sherykhanov writes that there’s no real concern about this new program of conversion to civilian production at present:

“In the upper echelons of power, they spoke about it just a year and a half ago. There’s a gathering sense that the leaders of Russian defense enterprises aren’t beating their heads with this, concentrating as they are completely on military orders which OPK enterprises are provided until 2020.  That is, they act according to this scheme:  we’ll handle this, and then we’ll see.”

The State of the State Armaments Program

From the “better late than never” file…

On January 11, Aleksey Nikolskiy published an article on the next GPV for Vedomosti.  He laid out the state of the battle over state armaments program 2018-2025.

What Will They Spend?

According to Nikolskiy, the new GPV will be only half of what Russia’s Defense Ministry wants, if the Finance Ministry gets its way.

The GPV covers ten years, but the Russian government adopts one every five years. So the new program was due to be adopted and implemented last year.

The next GPV was being prepared in 2014-2015.  But with the poor economic forecast, Western sanctions, and the need for import substitution, the Kremlin elected to delay launching the new arms program until the first half of 2017, a former MOD official told Nikolskiy.

The new arms program is also late because industry’s initial promises on import substitution for Western as well as for Ukrainian products turned out to be too rosy, CAST director Ruslan Pukhov tells Nikolskiy.  But, he adds, it’s impossible to drag this out longer because industry needs to know the fiscal parameters of its work in the long-term.

The current program for 2011-2020 was approved in late 2010.  It contained 19.1 trillion rubles for the MOD.  That was more than $630 billion at the exchange rate of the day.  But, according to Nikolskiy, not more than 40 percent of this amount had been spent by the start of 2017.

Forty percent is 7.6 trillion, or roughly 1.3 trillion per year for the first six years of a ten-year program.  Leaving so much backloaded implies that Russian defense industry was unable to absorb and use more money, at least without massive graft and waste. So the new arms program might continue a similar annual rate of investment in acquisition.

Nikolskiy notes that every arms program the Defense Ministry requests is several times more than the Finance Ministry believes it can allocate.  In 2015, the former reportedly reduced its initial request for 2018-2025 from 55 to 30 trillion rubles while the latter was ready to agree to an amount not greater than 12 trillion.

Kommersant’s Ivan Safronov reported that Defense Minister Sergey Shoygu and Finance Minister Anton Siluanov spoke in “elevated tones” during a September 9 Kremlin meeting on the GPV.  With President Vladimir Putin chairing the session, the ministers reportedly argued over the necessity and feasibility of 22 vs. 12 trillion rubles for arms procurement.

This is the customary kabuki.  In 2010, the MOD came in similarly high — 36 trillion. The Finance Ministry responded with 13 trillion. Ultimately, they compromised at a figure closer to the latter’s preference — 19.1 trillion rubles.  In retrospect, it wasn’t surprising given that even Putin expressed his qualms at spending so much. 

What Will They Buy?

According to a defense industry manager who spoke with Nikolskiy, armaments tsar Deputy Defense Minister Borisov already announced the emphasis in the near term will be placed to a greater degree on the purchase of well-assimilated systems – for example, Su-30SM fighters or Improved Kilo-class (proyekt 636) submarines – and on modernized equipment which is significantly cheaper than new.

Meanwhile, the acceptance of fundamentally new types of armaments is passing into the more distant future.  They include important platforms like the T-14 / Armata tank and T-50 / PAK FA fighter, and even some strategic weapons, writes Nikolskiy.

This would represent some retrenchment from Moscow’s ambitions in comparison with what it originally wanted from the current arms program.

Additional Perspective

U.S. defense acquisition is still probably three times the $50 billion or less Russia might spend on an annual basis.  Russian procurement of arms attracts more attention and causes more concern than its volume alone warrants.

What Russia actually receives for the money it spends makes an interesting comparison with China.  Beijing clearly lags Moscow in high-tech weapons, but it seems to get greater industrial bang for its buck when bending metal.

For example, Chinese shipbuilding.  In ten years, China put 22 Type 054A frigates to sea. The Russian Navy received three or four frigates during the same years.  China is set to build its third aircraft carrier.  Russia’s lone Kuznetsov carrier will soon enter the shipyard to begin a three-year (probably longer) modernization effort.

Perhaps China hands will tell us if naval construction is a happy aberration for Beijing or if it enjoys the same kind of productivity in ground and air systems.

Conclusion

Rearmament is something that has gone Moscow’s way in recent years.  It has restored Russia’s image as a formidable power.  Rearming — even over-arming — has created and fueled a siege mentality at home.  That mentality keeps the Russian Federation distant from the Western community of nations, and its people remote from the kinds of socioeconomic demands Westerners place on their political leaders.  So the arms program has been part of Putin’s strategy for that reason if no other.

Moscow will want to maintain the momentum rearmament has generated since 2011.  Too much of a break in funding would slow defense industry, which had difficulty finding traction.

But Russia’s economic situation is harder now than 2010.

Best Guess:  GPV 2018-2025 will be announced with a nominal budget between 15 and 17 trillion rubles.

The Ministry of Finance will still groan at this amount, but will be secretly pleased at having kept arms spending at a reasonable level.

What money is actually disbursed, as we’ve seen, will be less than the full amount as the years go by.

Putin Launches GPV 2016-2025

Putin Addresses Session on GPV 2016-2025 (photo:  Kremlin.ru)

Putin Addresses Session on GPV 2016-2025 (photo: Kremlin.ru)

On 10 September, Kremlin.ru posted President Putin’s opening remarks to a session on developing the draft State Program of Armaments (GPV) 2016-2025.

Putin’s speech can be divided into several themes:  financing, the arms race, threats, particular weapons systems, and other tidbits.

A critical question is how will funding for a new GPV compare with the approximately 20 trillion rubles laid out or earmarked for GPV 2011-2020. But Putin took pains to stress only that financing for the new GPV will be based on the government’s macroeconomic forecasts.  He noted:

“The government has prepared two variants [not good and possibly worse?] of such a preliminary macroeconomic development forecast, and today, we will hear about it in a meeting with the government, and talk more about this.  We will proceed exclusively from realities, from our possibilities, and we will not inflate our military expenditures.”

“I ask you to choose and present the most balanced variant of resource support for the new state program of armaments before the end of October 2014.  It must fully account for missions in the area of military organizational development and still be realistic, and proceed, as I already said, from the country’s financial-economic possibilities.  But I am sure we can find a variant acceptable both according to financial support and to the quality of those weapons systems which we will discuss more today.”

This seems consonant with his statement last December that the OPK and military should not expect future procurement budgets to match what was laid out in recent years.

In this September 10 session, Putin eschewed interest in a new arms race, but stressed that Moscow has no choice but to take “countermeasures” against U.S. and NATO threats.  A few examples:

“[modernizing the armed forces and defense industry] is not connected to any kind of arms race . . . .”

“And we already many times said and warned that we will be forced — exactly forced — to take adequate countermeasures to guarantee our security.”

“We have spoken many times, and very much hope that there will not be excessive hysteria [from the U.S. and NATO?] when these decisions [about the GPV?] are finally made and begin to be realized.  I want to note that everything we are doing are only countermeasures.”

“Sometimes the impression is created, I just talked about this, that someone wants to launch a new arms race.  We will not, of course, be dragged into this race, it is simply absolutely excluded . . . .”

The Russian president also laid out at length his view of the threats requiring countermeasures:

  • U.S. missile defense;
  • U.S. Prompt Global Strike;
  • Militarization of space [?];
  • Conventional strategic weapons;
  • Prospective build-up of NATO forces in Eastern Europe.

He restated the official Kremlin narrative explaining why that alleged NATO build-up will happen:

“The crisis in Ukraine, which was actually provoked and created by some of our Western partners, is now being used to reanimate this military bloc.”

A regime that wants to prevent a Maydan on Red Square pretty much has to declare that the revolutionary impetus came from outside.  It also has to overlook that it was the seizure of Crimea and the start of Moscow’s war in eastern Ukraine that awakened NATO.

Look for a more detailed exposition of Moscow’s new threat assessment when the updated Military Doctrine appears in December.

What did Putin say about what will be purchased under the new GPV?  In short, not too much new:

“. . . our fundamental systems:  both of a defensive nature and strike systems have simply already reached or are reaching the end of their service lives.  And if we need to replace them, then replace them, of course, with prospective, modern ones having a future of long use.”

“I note that for the draft GPV-2025 there is already a unified system of preliminary data which confirmed the basic directions of arms and equipment development for the period to 2030 and formed a list of types determining the future profile of weapons systems.”

“Most of all we are talking about the creation of a rational list of strike means, including the guaranteed resolution of nuclear deterrence missions, about rearming strategic and long-range aviation, and continuing formation of an aerospace defense [VKO] system.”

“Further.  In coming years, it is already essential to support the breakthrough development of all components of precision weapons, to create unified types of general purpose arms and equipment, and for the Navy — new ship projects, standardized in armament, command and control systems, and communications.”

Overall, continuing the course and priorities — such as they are — of the current GPV.

Now, the tidbits . . . .

Putin seemed to say the 2015 goal of more than 30 percent modern arms and equipment has already been reached.

According to the president, more than 3,600 items of “fundamental weapons” (68% of the contracted quantity) have already reached the troops this year, along with 241,000 other items [presumably procurement not part of a major weapons system].

Putin gave only the briefest acknowledgement that, with looming sanctions, defense industry must be ready to manufacture its own critically important equipment, components, and materials.  Industry, he said, should also be looking to produce important civilian machinery in the future.

He only slightly criticized work on past GPVs, saying:

“It goes without saying we must carefully analyze the experience of realizing the previous programs, including the problems and oversights which led to delays in placing and fulfilling orders, and at times even to tasks not being completed.”

However, Putin also took the chairmanship of the Military-Industrial Commission (VPK) on himself, indicating that he thinks the GPV could use some “manual control.”

That’s about 950 words describing what Putin said in roughly 1,200.  One hopes his speech has been deconstructed and reconstructed in such a way that it illuminates more than the original.

Overfulfilling the Plan

News on the Russian military of late carries a distinctly positive tone.  The army is always receiving new weapons systems, completing major training evolutions, and signing up thousands of new contractees.

A contrast from years past when there was either no news or bad news about the military’s development (or lack thereof).  Probably neither editorial line accurately reflects, or reflected, reality.  Things are never as good, or bad, as they’re presented.

Ever an honest contrarian on the widest range of issues, Nezavisimaya gazeta now asks, somewhat obliquely, whether the frenetic activity of Russia’s Ministry of Defense is outrunning its financial support.

In an editorial last Thursday, NG wonders if the MOD can accelerate completion of many tasks without additional financing.

It isn’t the first time financial flags have been raised.  Several times over the last year, reputable media sources asserted that Sergey Shoygu’s MOD would face sequestration soon.  It hasn’t happened yet.  Maybe the possibility is more pregnant given that Russia’s economy is flatlined right now.  In some ways, worse than flatlined (e.g. the ruble exchange rate).

But we digress . . . .

NG reports that Shoygu, at last week’s collegium, reiterated the impermissibility of falling off a single task in the MOD’s “Action Plan 2020.”  The reports of MOD officials said there have been no failures, only many impressive figures about the “thoroughly dynamic process of perfecting the state’s defense system.”

General Staff Chief, Army General Valeriy Gerasimov reported the facts to the assembled generals and high-ranking civilian officials.

To wit, by year’s end, 580 modern bunkers and storage facilities will be built in 15 arms depots as well as 160 facilities for RVSN ground-based strategic nuclear weapons, Ground Troops missile brigades, pre-fab radar stations, Borey and Yasen submarine bases, and new airfields.

NG concludes:

“The fact is the scale of construction is grandiose, fully speaking for those amounts of financing the state is directing at the needs of the Armed Forces.”

The paper gives examples of hardware being acquired . . . 27 BTR-82As for the Western MD in January alone, 12 Su-35S fighters for the Eastern MD in February, 220 aircraft, 8 ships and submarines, 14 SAMs, 50 air defense radars, and more than 200 armored vehicles in 2014.

Meanwhile, the MOD’s capital construction chief Roman Filimonov reported a decision to move deployment of a pre-fab radar in the east up a year to 2014, outfitting of five VDV military towns up two years to 2014-2015, and quicker completion of a host of other projects planned for the more distant future.

Again NG concludes:

“The intentions, of course, are good.  It just pays to remember that last December the parameters of the military budget for 2014-2016 were specified. And no one promised the army any additional money.  And without it hastening fulfillment of plans appears highly problematic.”

An NG news story the following day added:

“We recall that the Minfin came out categorically against any increase in the military budget.  More than this it insisted on moving ‘to the right’ the terms for implementing several defense projects.  It seems in the Armed Forces they agreed with the financiers’ demands.  In the event that directors of central organs of the military command, in whose interests recalculation measures are planned, don’t know how to find sources of financing for new work, they’ve been promised a forced redistribution of resources from facilities already in the plan to facilities appearing with the changes introduced.  The collegium agreed to proposals voiced by Filimonov.”

So what do we take from this?

There’s no imminent threat to funding a rejuvenated Russian military.  The current pace of development, achieved in 2012, will continue while Russia’s economic and political system can bear it.

But the NG articles may foreshadow even tighter budgets.  Independent media are debating how to lift a stagnating economy still based on hydrocarbon rents.  The Sochi Olympic hangover may have just begun.  Government (and military) budget parameters are set, but they never really feel firm.  The MOD  just focuses on the money it has now.

In Soviet central planning, overfulfillment usually meant sacrificing quality to meet quantitative targets and time schedules, to make careers, and to earn bonuses.  Today it means more demand, less supply, tighter markets, and rising prices.  And even in the post-Serdyukov MOD, it means more opportunities for corrupt scheming.

A Swedish Defense Debate

Two Swedish observers recently engaged in an exchange of opinion pieces regarding the connection between a supposedly more muscular and threatening Russia on the one hand, and an allegedly feckless Swedish defense policy on the other.

Here we are, of course, more interested in their divergent views of Russian military power rather than in (as they are principally and rightly concerned) its affect on Sweden’s defense.

Stefan Hedlund

Stefan Hedlund

Uppsala University professor Stefan Hedlund wrote first.  His article appeared originally in Svenska Dagbladet.

Hedlund concludes the Swedish legislature is radically changing its long-held view of Russia as relatively benign to one of Moscow as a growing threat to Sweden’s national security.  Proponents of this view, he says, point most often to Russia’s militarization and its increasingly autocratic political system.

However, he says President Vladimir Putin himself basically admitted the government’s 20-trillion-ruble State Armaments Program is failing.  Failing because the OPK, on the whole, cannot produce weapons and equipment of requisite quality, in necessary quantities, according to specified deadlines.

He cites the Bulava and Yuriy Dolgorukiy.

Just one good example among many he could have picked.

Then Hedlund concludes:

“Perhaps it was simply naive to think that the Russian military industry could pick up where it left off two decades ago, after standing at a virtual standstill, and all of a sudden produce weapons system [sic] at high international standards.”

He turns to politics, and the fragmentation of the Russian political elite just beneath Putin.

He sees it this way:

“These political developments don’t add up to the picture of an every [sic] more strong-fisted leader [Putin] who hasn’t ruled out waging war on his neighbours.  It is much more probable that Russia will be paralyzed by infighting for a long time to come, and an ever degrading economic outlook will mean the government may have to retrace it steps on promises to keep up salary developments and shore up pensions.  There might simply not be money left for the military.”

Hedlund hits key elements of the problem with Russia’s alleged militarization:  the OPK’s inability to deliver arms and a clearly evident Finance Ministry rearguard action to rein in military procurement spending.

Finally, Hedlund concludes it’s essential to discuss Sweden’s defense policy problems “without muddling it up with incorrect perceptions about the development [sic] in Russia.”

Political science PhD candidate Annelie Gregor responded to Hedlund with this essay.  Ms. Gregor neglected to add that she is, apparently, an employee of the Swedish Armed Forces.

Annelie Gregor

Annelie Gregor

Gregor argues Hedlund claims Russia is not in the midst of a military build-up and is turning away from authoritarian rule.

This is not at all what Hedlund said. 

Hedlund maintains Russia’s militarization isn’t effective and Putin’s autocratic style masks concerns about domestic politics that are more important to him than building up the armed forces or attacking a non-contiguous Nordic country.

Gregor’s first point about the recent surprise readiness evaluation in the Far East simply has to be ignored.  Not because of her primarily, but because of how others have futzed it up. 

She says it “involved” 160,000 troops.  Others have said Russia “mobilized” or “deployed” this number.  The entire manpower contingent of the Far East Military District (probably some 160,000 men) certainly wasn’t “involved” in those exercises, and those troops certainly weren’t “mobilized” or “deployed.”  They already actively serve in the region where the exercise took place. 

It is true to say recent Russian exercises have featured some re-deployments and equipment movements from other districts, but they are limited to what Russia’s strategic mobility resources can manage.

Difficult as it is to believe, Gregor cites Russia’s performance in the five-day war with Georgia as evidence of a threat to Sweden.

The same Russian Armed Forces that were caught off guard, and initially acquitted themselves so poorly that a major military reform program started immediately afterwards to improve their readiness and capabilities.

As more evidence, Gregor recalls this spring when “two Tu-22M3 Backfire heavy bombers simulated a large scale aerial bombing on Sweden.”

Two Backfires with nuclear-armed cruise missiles would be more than enough to ruin Sweden’s day.  But one notes they are not “heavy bombers” nor do two constitute anything “large scale.”  The incident was, perhaps, more about flying time and asserting Moscow’s right to use international airspace.

Gregor then argues with Hedlund about whether revenues from oil, gas, and arms sales will be adequate to support Russia’s “militarization” in the future.

This part of Hedlund’s article was, unfortunately, not translated.

One contends, however, that if Hedlund said the Russian defense budget will decline as its oil earnings decline, he’s right.  In fact, one could go further and say the budget is irrelevant.  What does matter is what Moscow actually buys or gets for it.  

The Russians are getting more training (because they can buy more fuel), but they aren’t getting new weapons on the schedule they originally laid down.  

And corruption remains a huge tax on the budget, just check on the criminal cases against former Defense Minister Serdyukov’s former deputies. 

And it’s obvious to serious observers that arms sale profits don’t go to the big white building on the Arbat.  They go to Rosoboroneksport which is connected more to high-level political infighting than to the Defense Ministry.

Hedlund never said Russia is turning from authoritarian rule as Gregor alleges.  Hers is a classic “straw man” fallacy.

Hedlund responded to Gregor’s response.

He argues Moscow’s “increasingly bellicose [anti-Western and anti-NATO] rhetoric is for domestic consumption” and its “aggressive actions, such as simulated nuclear strikes on Warsaw, indicate weakness and a desperate clamoring for attention.”

Anti-U.S. and anti-NATO speech will probably always be popular in Russia.  Simulated nuclear strikes are warnings to Europeans of the consequences of cooperation with the U.S. in missile defense (or anything else for that matter).

Hedlund says he’s done anything but argue that Russia is turning from authoritarian rule.  He concludes:

“What I have argued is that there is a very large difference between present-day Russia and a truly militarized authoritarian regime that would constitute a true danger.”

Eloquently put.  Putin’s regime is a clumsy, capricious, and ineffective brand of authoritarianism.  It recalls the late years of the Tsars more than Hitler’s Germany or Stalin’s USSR.  Dangerous to a degree, but not an existential danger.

Perhaps there’ll be yet another installment in this debate.