Russian defense spending faces many new realities by Reuben Johnson Several years ago when then-Russian President Dmitry Medvedev announced the beginning of a modernization program for the Russian armed forces, many analysts voiced skepticism that it could be carried out successfully. At the time, there were two main reservations voiced by critics, including Russia’s then-finance minister Aleksei Kudrin. One perceived problem was that total proposed spending of around $700 billion over a decade would simply be too much for Russian industry to absorb effectively over that period of time. This is largely due to the contraction of Russian industry over the previous two decades, and particularly through the
disappearance of numerous second- and third-level component suppliers. Officials from Russia’s Ministry of Trade and Industry, which has oversight for the defense industrial sector, stated more than once that if industrial enterprises were too overwhelmed by trying to manufacture too many weapons systems too fast, “the result will be an increase in prices and a drop in quality.” Another issue was the steady decline of Russia’s world market share in defense exports, a revenue stream that has traditionally been relied upon to finance new weapon systems. As far back as 2009, Anatoliy Isaikin, the current director of Rosoboronexport,
With prospects looking bleak for T-50 exports, the Russian military aircraft industry might be better served by getting as much as possible out of the more mature Su-35 program.
the state-run weapons export agency, told the Rossiyskaya Gazeta newspaper that a drop in research-and-development funding meant that Russia may soon “trade only in tank, ship and aircraft hulls,”
Russia has hopes to export its new T-50 fighter to various countries, such as China and India.
Russia Says Defense Export Growth Is Defying Sanctions Russia claims to be the world’s number-two defense Putin told the meeting that politically motivated equipment exporter, according to data released by Presi- attempts to block Russian defense exports constitute dent Vladimir Putin at the May 25 meeting of the country’s unfair competition, without being specific about particuCommission on Military Technical Cooperation lar cases of alleged interference. He claimed with Foreign States. According to the Russian that Ukraine had been forced to break its longgovernment, the value of exports achieved by established ties with the Russian industry in a the country’s state-backed arms sales agency way that had brought its own domestic indusRosoboronexport (Hall 2c Stand C198) in 2014 try to the point of bankruptcy. was more than $15.5 billion. Putin stated that In April, Rosoboronexport CEO Anatoly this gives Russia 27 percent of the global marIsaykin told the Kommersant newspaper that, ket, behind the U.S. at 31 percent. despite economic sanctions, Russia increased During 2014, Russian defense companies the value of its defense orders in 2014 by $22 signed around $14 billion worth of new conmillion, reporting the breakdown of exports tracts, taking their total backlog to $50 billion. Rosoboronexport CEO last year as being 41 percent for air forces, 27 Anatoly Isaykin Among the country’s top export customers are percent for armies, 15 percent for air defense India (28 percent), Iraq (11 percent), China (9 percent), Viet- systems and 13 percent for navies. He, too, condemned nam (7 percent) and Venezuela (6 percent). Russia delivered Western sanctions against Russia as amounting to “unfair military equipment to 62 countries last year and has military competition” and “petty tricks” that he said have become technical cooperation ties with a total of 91 states. “more concentrated and cynical now.” –C.A.
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with the consequence that the market for high-technology systems will be conceded to nations that are becoming more competitive with Russia in the world arms market. “The share of Russian research-intensive products in global exports was 6 percent in 1990, 1 percent in 2000 and 0.2 percent in 2008,” said Isaikin to illustrate his point. “The country spends on research and development four times less than Japan, three times less than Germany and two times less than the Czech Republic.” More recently, pressures on the Russian defense industry have been compounded by factors such as declining oil revenues, the collapse in the value of Russia’s ruble currency and the impact of economic sanctions imposed in response to the military conflict in Ukraine. Last July, Medvedev, now Russia’s Prime Minister, insisted that these unforeseen events would not result in a reduction in the state defense orders that are the central element in Russia’s modernization of the nation’s armed forces. Two Key Programs
But more recent developments suggest that “engaging in the Soviet-style method of trying to repeal the laws of economic reality by decree and declaring that there will be no cuts in weapons procurement has not produced magical results,” said a Russia-based defense analyst, speaking to AIN on condition of anonymity. Two key Russian defense programs central to Russia’s military modernization plans are the Sukhoi T-50 and Su-35 fighters. And it remains to be seen whether the Russian
government will stand by its earlier spending commitments to these programs. On March 23, deputy defense armaments minister Yuri Borisov visited the Komsomolskna-Amure Aviation Production Association (Knaapo) plant that manufactures both aircraft, declaring that the facility is fully prepared to start series production in 2016. However, he went on to point out that the defense ministry reserves the right to “reevaluate” the number of units it intends to purchase and under what timeline. “Due to the newly emerged economic conditions, our plans can be adjusted accordingly,” he said. “A better approach now might be to hold the T-50 in reserve and move forward on this later while in the meantime getting as much as possible out of our fourplus generation [Su-30MK and Su-35] fighters.” Yuri Slyusar, who had only recently been appointed as the CEO of the United Aircraft Corporation (UAC), which owns Knaapo, said that the company agreed with the defense ministry’s position. The military modernization plan was supposed to include the purchase of 52 T-50s, now being referred in the Russian military by the acronym of PFI (Perspective Frontline Fighter). Originally, the Russian air force was due to receive eight aircraft per year in the 2016-2018 time frame and then 14 more from 2019-2020. According to a source close to the program and with direct knowledge of the current budget constraints, this schedule would have been feasible if Russia’s economic Continued on page 62 u