Russian Defense Spending.

• Author: Handley, John

RUSSIAN DEFENSE SPENDING

From STRATFOR and GLOBAL SECURITY

http://www.stratfor.com/sample/analysis/russias-problematic-defense-spending Non-subscribers use their email address to access the report.

http://www.globalsecurity.org/military/world/russia/intro.htm

Two recent articles address Russia's proposed defense spending. One, from STRATFOR, entitled "Russia's Problematic Defense Spending," (http://www.stratfor.com/sample/analysis/russias-problematic-defense-spending) contrasts the Russian finance minister's recommendation to cut $125 billion from the defense sector to President Putin's March proposal to increase defense spending $120 billion by 2020. The second article, from Global Security (http://www.globalsecurity.org/military/world/russia/intro.htm) entitled "Russia--A New Cold War?," addresses in much greater detail the problems the Russian government is having in modernizing its armed forces.

STRATFOR readers learn that the current European financial crisis has yet to cause much difficulty for Russia, which has some $600 billion in its "rainy day" cash reserve; however, this money is not meant for the budget. Even with oil recently selling at nearly $100 a barrel, the Russian government predicts a 1.5% budget deficit this year. Russia's finance ministry is concerned that oil prices may not stay that high because Russia is literally a petrol-rubble state with oil and natural gas profits constituting 50% of government revenues. The ministry also hopes to avoid further difficulty for the Russian economy from a worsening European financial crisis, especially Greek departure from the Euro zone.

Rather than cutting education, health care, housing, or utilities, the ministry believes that $125 billion can be safely taken from proposed defense spending. That proposal collides squarely with Putin's March proposal to increase defense spending from $650 billion to $770 billion from 2014 to 2020. Putin justifies this spending to counter the threat of NATO's European ballistic missile defense efforts and to modernize Russia's military.

If the past is prologue, Russia's military requirements will trump domestic concerns. Moreover Russia's defense industry must also resolve four specific problems: graft, production, declining exports, and demographics. Putin is nevertheless expected to approve a new Russian Federation Defense Plan that will establish defense priorities through 2016 while also addressing training, production (new large military...