Putin resorts to defence cuts amid economic downturn

  • Mihai Turcanu
  • 4.9.2017 11:52

On 15 August, Vladimir Putin discussed with Vladimir Vasilyev, the leader of the United Russia parliamentary faction, the 2018 budget law that is expected to be approved by the Duma this fall. The President emphasised the need for budget cuts and specified that they will be achieved by scaling back the defence spending. He did not indicate clearly what military sectors will be affected by the cuts but added that the army and navy modernization programs won't be impacted. The cuts underline three major factors: Russia’s economic difficulties, the state of the Russian military, and last, but not least, Putin’s own standing in Russia.

The news represents a further confirmation of the fact that Western sanctions coupled with the economic crisis - caused by the sharp drop in oil prices, Russia’s own economic counter-sanctions and exacerbated by the government’s corruption - are taking a heavy toll on the country. In 2016, the defence spending constituted 3.091 trillion roubles (USD52 billion) or 19,2% of the federal budget, second only to the budget allocated for social sphere spending. The news concerning Russian military cuts for the next year follows the trend set in 2016, when the Russian MoD scaled back its spending by 160 billion roubles (USD2.7 billion). Earlier this year, IHS Jane’s and the National Interest reported that based on figures released by the Russian Federal Treasury that the defence funds for 2017 have already been significantly slashed by 7%, to about 2.84 trillion roubles (USD48 billion). Yet, when assessing the fluctuations in the Russian military budget it is also important to keep in mind that all the acquisitions are being carried out in roubles and from local vendors. Estimates in dollars are often misleading, especially now after four years of the rouble’s weakening.

 

“Defence cuts proposed by Putin for 2018 confirm that the Kremlin does not expect any significant economic improvement.”


Defence cuts proposed by Putin for 2018 confirm that the Kremlin does not expect any significant economic improvement and is bracing for more stagnation. This is a realistic attitude, given the serious consequences Russia is facing for its policy abroad, including the lack of credit due to sanctions or a 90% reduction in foreign investment from USD69 billion in 2013 to USD6.8 billion in 2015. Despite an earlier government forecast of a 2% GDP growth in 2017 the World Bank expects only a 1.3% GDP growth in 2017 and 1.4% in 2018. The perception that the stagnation is the new normal is most likely reinforced by the recent economic sanctions overwhelmingly approved by the US Congress, and the confrontational climate currently dominating the US-Russia relations following the alleged Russian interference in the American presidential election - in spite of earlier signs that the Trump administration hopes to improve relations with Moscow. 

Currently, the Russian army and navy are undergoing complex modernization programs. According to Russian Defence Minister Sergey Shoygu’s statement to the upper house of the parliament in May 2017, Russia has acquired more than 30,000 units of new and modernized weapons and equipment through these programs, including more than 50 warships, 1,300 aircraft, 4,700 tanks and armoured combat vehicles since 2012. Despite the official statement, such numbers - especially concerning aircraft - seem rather inflated. Yet, by 2022, the Russian Armed Forces are set to receive another 22.5 trillion roubles (USD370 billion) worth of new equipment, with aerospace forces hoping to reach 68% renewal rate, ground force 43% and airborne troops 58% by the end of 2020. The draft of the new 2025 modernisation program reportedly includes the completion of the RS-26 Rubezh, RS-28 Sarmat and rail-based Barguzin intercontinental ballistic missiles (ICBM). Further, it calls for procurement of new fighter jets and development of a new long-range bomber and nuclear submarines. Putin has stated clearly that the new budget law must not impact these projects. What is to be cut then?

Copyright Profimedia.cz
Visitors examine the Russian Topol intercontinental ballistic missile ICBM in Alabino, Moscow region, in 2017. Copypright Profimedia.


Dmitry Safonov, a military analyst for Izvestia, claims that the slashing will delay only some shipments and scientific work – such as the development of the Barguzin or the new Tupolev PAK DA strategic bomber, which are not considered of vital importance at the moment. Same goes for the development of a new aircraft carrier and a nuclear-powered destroyer. On the other hand, the work on the development of the Sarmat ICBM, especially in the light of the Trump’s administration decision to modernize and reinforce the US nuclear deterrent, will not be affected in any way by the envisioned cuts. Shoygu declared in May 2017 that the Krasmash plant (the Krasnoyarsk Machine-Building Plant) is working 24/7 on the development of the new nuclear-capable missile – Russia’s future main nuclear deterrent.

 

“Cutting military funds is probably not an option Putin is happy to resort to”

 

Will Putin’s own standing be affected by the military cuts? The Levada Center noticed that following the start of the Syrian campaign pride in Russia began to be associated with pride in the Russian armed forces, a situation which largely continues today. A poll from May 2017 showed that 37% of Russians find the greatest sense of pride in the Russian Armed Forces. Of course, cutting military funds is probably not an option Putin is happy to resort to, however, it is probably the easiest and most accessible of choices when it comes to easing the strain put by the Western sanction and economic crisis on the budget. Another option would be to fight the endemic government corruption: Russia currently ranks 131st out of 176 countries listed in the Corruption Perceptions Index 2016 by Transparency International. Further, 74% of Russians believe that there is more or the same amount of stealing and corruption today as compared to the early 2000s when Putin came to power.

 

“Putin prefers to cut military spending instead of going after his corrupt loyalists.”

 

Putin certainly understands the need to adopt a more sustainable financial strategy if his regime is to endure. But even with the Russian economy under so much stress, Putin prefers to cut military spending instead of going after his corrupt loyalists. Since his whole grip on power is built on corrupt government officials, it is not a surprising choice.

About author: Mihai Turcanu

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