Publication: Monitor Volume: 6 Issue: 194

Russian Deputy Prime Minister Aleksei Kudrin announced on Monday (October 16) that the country’s projected defense spending for next year has been increased by 12.5 billion rubles, but it remains unclear whether the increase will be viewed as a victory or a defeat by the Russian military leadership and those in parliament who also favor higher defense expenditures. Kudrin provided few details of the new budget figures, which will apparently bring defense spending for 2001 to 218.5 billion rubles, but suggested that the increase has been approved in large part to help finance military reforms (RIA, October 16; AFP, October 17). The Kremlin and the Russian Security Council earlier this year began drafting what they say will be a comprehensive plan of military reform, one expected to include manpower reductions of some 350,000 in Russia’s regular armed forces. Additional cuts are also expected in the military units of the country’s various security ministries.

Projected defense spending in the draft Russian state budget for 2001 had been set at 206 billion rubles (about US$5 billion). This is a considerable increase over the 140 billion rubles allocated for defense this year. However, the Russian Defense Ministry, joined by like-thinking Russian lawmakers, have argued that when inflation and a recent restructuring of the defense budget are taken into consideration, the 206 billion ruble figure in fact amounts to only a small increase over this year’s spending in real terms. Some top Russian lawmakers, including Duma Defense Committee chairman Andrei Nikolaev (a retired general), have called for an increase of at least 50 billion rubles in defense spending for 2001. And there have been reports that President Vladimir Putin himself favors a figure of 270 billion rubles in defense spending for next year.

Against this background, Kudrin’s announcement of the more modest 12.5-billion-ruble increase may not meet with much enthusiasm at the Russian Defense Ministry. The figure would be more meaningful, and perhaps more acceptable to the military, if it is accompanied by government moves to pay off the Defense Ministry’s 60 billion ruble debt to various private and government suppliers. A top Finance Ministry official suggested late last month that the government was considering doing this, but it remains unclear whether the payoff has been finalized. Russian military leaders, meanwhile, have pointed to abysmally low defense procurement levels over the past decade as justification for increased spending now. They argue that the military reform program they are about to embark on will also require more funding. They also say that the process of demobilizing several hundred thousand soldiers will increase defense expenditures over the short run (see the Monitor, September 29, October 4).

As if to illustrate the need for greater military spending, a defense industry official was quoted on October 16 as saying that Russia’s Strategic Missile Troops are being forced to step down the rate at which they are deploying their new Topol-M strategic missile complexes due to funding shortages (Itar-Tass, October 16). That argument plays into the military reform debate as well as the budget debate because current defense planning shifts spending priorities from the strategic missile troops to Russia’s conventional forces.

Meanwhile, the Russian Defense Ministry will reportedly take an unexpected hit on revenues in another area. A Russian daily reported yesterday that Prime Minister Mikhail Kasyanov has endorsed a plan whereby revenues raised by both the sale of surplus Russian military hardware and some other forms of military-technical cooperation with foreign countries will no longer go exclusively to the Defense Ministry. According to the newspaper, some 75 percent of such revenues will still go to the army, while 15 percent will go toward a government program aimed at providing housing for retired servicemen. The remaining 10 percent, however, is now to go to Russia’s Federal Agency for Governmental Communications and Information (a Russian security agency). This “sharing” of defense revenues is said to be something new. It may also prove significant, according to the newspaper, because Russian revenues in this area are expected to soar over the next several years (Vremya novostei, October 17).