Publication: Monitor Volume: 6 Issue: 184

Russia’s autumn conscription period opens amid a continuing political struggle over the size of the country’s military budget for next year and on the eve of a series of potentially important–and controversial–changes in the way in which money is allocated to the Defense Ministry. As reported earlier (see the Monitor, September 8), the current Russian draft budget for 2001 projects defense spending at 206 billion rubles (less than US$5 billion). This is an increase over this year’s level of defense spending, which has been pegged at 140 billion rubles, but constitutes only about 2.5 percent of Russian GDP. The amount is considerably less than many in the Russian Defense Ministry–and the parliament–would like to spend on the country’s armed forces.

Among the key questions attending the current military budget debate is whether President Vladimir Putin backs his Finance Ministry, which has settled on the 206 billion rubles figure, or those demanding increased defense spending. There have been reports that Putin has ordered allocations for the military to be raised to 271 billion rubles for 2001 (Vremya MN, September 9; Itogi, September 19), but they remain unconfirmed. His public statements on this score, moreover, have been mixed. In well-publicized remarks to military and government leaders on September 27, for example, Putin spoke of the government having spent “colossal sums” on the military. But at the same time he admonished the Defense Ministry to use this funding more wisely (see the Monitor, September 29).

If a recent Izvestia article is to be believed, the government has taken several steps in recent weeks which could reshape the military budget debate. For one, it is apparently considering taking over the Defense Ministry’s whopping 60 billion ruble debt to various private and government suppliers. According to Deputy Finance Minister Lyubov Kudelina, the ministry has already paid back 15 billion rubles of the debt, and will devote another 5.5 billion to that purpose in November. By the middle of this month, moreover, the Finance Ministry could decide to take responsibility for the rest of the Defense Ministry’s debt, she said. Should this come to pass, the Defense Ministry will be freed from debt payments and should therefore be in a position to devote a far greater portion of its annual funding directly to military needs. It will also, as Izvestia observes, have far less reason to complain about the size of the defense budget.

On the other side of the coin, however, the newspaper suggests that the willingness of the government to pay off the Defense Ministry’s debts has come at a steep price for the military leadership: namely, control over defense allocations. According to Kudelina, the government is now implementing a new accounting system whereby the government will calculate the defense budget based on its financial resources and then present it to the military leadership. Previously, the Defense Ministry had itself arrived at a yearly defense spending figure and had submitted it to the Finance Ministry. Kudelina suggested that the Finance Ministry is still not satisfied with its ability to oversee the manner in which the Defense Ministry makes use of the money it is allocated, but appeared to make clear that changes in this area will also be forthcoming in the years ahead (Izvestia, September 27).

Opposition to the Finance Ministry’s 2001 defense budget, meanwhile, appears to be centered at present in the Russian State Duma’s Defense Committee. The chairman of that committee, Andrei Nikolaev, is a retired general (and former top General Staff officer) who has emerged as an influential figure on defense matters. Nikolaev has accused the Finance Ministry of manipulating the defense budget figures to give what he says is a false impression that defense spending is on the rise. Nikolaev charges that virtually the entire nominal increase in defense spending from this year to next is lost when one considers both inflation and the fact that the Finance Ministry has moved several new expenditure items–including costs related to peacekeeping missions and military reform–into the defense budget. He has also complained about the manner in which much of the defense budget remains classified (a complaint, oddly enough, not shared by the Finance Ministry), and suggested that this lack of transparency obstructs the ability of lawmakers to resolve issues related to defense spending.

Nikolaev has urged that defense spending for 2001 be raised at least another 52 billion rubles–to nearly 260 billion (Nezavisimaya gazeta, September 15). Whether Putin will line up behind Nikolaev and the generals or back his Finance Ministry should become clear in the weeks to come. The Russian president’s position on this issue will say much about the state of civil-military relations in Russia, and also about the Kremlin’s political and economic priorities.