Hole in the Russian defense budget noticed in America
Over the past few years, Russia has increased its defense budget, and due to this, it has implemented the required modernization of the armed forces. Now, defense spending is planned to be reduced in accordance with new needs and requirements. All these processes naturally attract the attention of foreign experts. Thus, the American analytical company Strategic Forecasting Inc., also known by the abbreviated name Stratfor, presented its vision of the current situation in our country and an opinion on the prerequisites for its appearance.
3 in May, the company published a note under the saying "What Defense Cuts Mean for Russia's Military" - "What the budget cuts mean for the Russian army." Stratfor specialists studied the available data from various sources, including the results of research from respected organizations, and determined their opinion on current events. In addition, they tried to predict the development of the situation in the foreseeable future.
At the beginning of the note, Strafor points out: a strong blow was dealt to the defense budget of Russia. Speaking about this, its authors refer to the data of the Stockholm Peace Research Institute (SIPRI). In a recent annual report, SIPRI wrote that in 2017, Russian defense spending declined by 20% compared to 2016. The document states that Moscow is still trying to invest in defense, but the existing economic problems impose certain restrictions. At the same time, analysts said: to understand the reasons for the 20-percent reduction, you need to know the current context.
In future years, the development of the Russian armed forces will continue. However, the Kremlin will now face a new challenge. He will have to choose priority programs for subsequent financing while reducing spending on others.
Stratfor recalls the events of the distant past. After the collapse of the Soviet Union, in the nineties, Russia's military spending was constantly decreasing. However, later, after Vladimir Putin came to power, there appeared a desire to restore the armed forces. Under the new president, the defense budget was constantly growing. Against the background of the general growth of the economy and the increase in energy prices, there were additional incentives. Thus, funding for the army increased after the “Russian-Georgian war” 2008 of the year, which revealed the shortcomings of the existing army system.
The authors of the note indicate that five years after the war with Georgia, new investments in the army paid off completely when Russia began using its modernized armed forces in operations in Ukraine and Syria.
However, while Moscow “played muscles” in Syria and in Ukraine, the Russian economy missed two significant blows. The first of these was to lower the prices of exported energy, and the second was painful sanctions from the United States and its allies from among the Western states. The result was a recession from 2014 to 2017. Problems in the economy forced the Kremlin to resort to tougher solutions. As shown by a recent study, - notes Stratfor - all this led to a significant reduction in the defense budget.
Stratfor writes that the Russian defense budget is undoubtedly decreasing. However, the specified 20-percent drop in costs can be misleading, if we consider it in isolation from other factors and information. First of all, the difficulties may be related to the 2015 events of the year. Then the Ministry of Finance of Russia made a large payment, the purpose of which was to pay off the accumulated large debts to a number of defense industry enterprises.
If you do not take into account this payment in general terms, the current reduction looks much more modest. So, analyst Michael Kofman from the organization Center for Naval Analyses calculated, excluding those expenditures, the current reduction in the defense budget is only 7%, not 20%. In addition, an accurate calculation of the defense expenditures of a country like Russia is extremely difficult. A large amount of defense spending, primarily on the development and implementation of secret projects, is often not publicized, which seriously hinders calculations. Finally, the defense budget of Russia may again begin to grow, if energy will again become more expensive.
Strategic Forecasting experts believe that the “explosive growth” of the Russian defense budget, which has been observed over the past fifteen years, has been largely completed. At the same time, the Russian armed forces will continue to be updated and improved in one form or another with the help of various methods and means. However, the authors of the note believe that Moscow will now have to abandon the previously used approach, which provided for simultaneous and active coverage of all spheres. Instead, it will have to limit itself to developing only key areas.
Referring to one of his previous analyzes, Stratfor is trying to predict the events of the foreseeable future. She suggests that in the future the Russian military and political leadership will pay special attention to strategic nuclear forces. In addition, the focus will remain high-precision weaponas well as radio electronic and radio systems of different classes. In this case, the navy, having "conventional" weapons, is likely to become one of the victims of the reduction of the military budget. Most of all, it can affect it.
***
Stratfor attached a curious graph showing the economic performance of Russia as a whole and defense expenditures to the note “What Defense Cuts Mean for Russia's Military”. In addition, the main events of recent years, energy prices and positions, in which V. Putin worked at different times, were reflected in it.
The commentary to the schedule notes that low oil prices and sanctions from foreign countries put serious pressure on the Russian economy, including the defense budget. This indicates certain counting problems. The calculation of Russia's military expenditures cannot be performed with high accuracy, but even in this situation one can see all the main trends. So, it is clearly seen that the Russian defense budget has been constantly growing for a decade and a half. And now, it seems, costs will be reduced.
The presented graph shows the gross domestic product in trillions of US dollars at current rates (turquoise line). The GDP graph shows some average annual prices per barrel of oil. The blue chart shows the military budget, expressed in billions of US dollars in 2016 prices of the year. For greater clarity, gross domestic product and the defense budget are depicted on different scales, although they are superimposed on each other. Thus, the scale for GDP is spelled from zero to 2,5 trillion dollars, whereas for defense expenditures on the same graph there are limits from 20 to 70 billion.
On the graph from Stratfor, a turquoise line indicating GDP values rises continuously from 2000 to 2008 years. Then there is an annual decline, after which the growth resumes and continues until the 2013 year. From 2014 and 2016 year new points on the graph are located one below the other.
The military spending schedule looks different. The blue line begins to strive upwards already in 2000, and, changing the “slope”, continues to rise to 2016. The graph also marks the fighting in August 2008 of the year, the completion of the counter-terrorist operation in Chechnya in 2009, the “intervention in Ukraine” and the Syrian operation. It is shown that in 2011, defense spending increased markedly. Further, the budget growth over the course of several years was even, and in 2017 it declined markedly. It should be noted that the graph from Stratfor shows exactly those calculations, according to which the current reduction reaches not 7%, but 20%.
Different scales of the image of indicators clearly demonstrate the main trends, but they do not allow us to estimate the ratio of GDP and defense spending. It is known that in 2000, Russia's gross domestic product in "current dollars" was 260 billion. On defense in the same year, according to the schedule, they spent a little more than 20 billions - about 7-7,5%. GDP in the 2008 year exceeded 1,66 trillion dollars, and the defense budget, according to Stratfor, during this period exceeded 40 billions, i.e. amounted to slightly less than 2,5%. In the 2013 year, before the start of the observed decline in indicators, GDP almost reached 2,3 trillion dollars, and spent about 55 billion on defense, also only about 2,5% of gross domestic product. Finally, for 2016, GDP is declared at the level of 1,28 trillion dollars and the military budget is at the level of 70 billion dollars. Thus, due to the fall in GDP in dollar terms, the share of military spending reached 5,5%.
It should not be forgotten that in the schedule from Stratfor the gross domestic product is indicated in the current values of one or another year, whereas the size of defense budgets was adjusted to the course 2016 of the year. This makes it difficult to determine the real ratio of expenditures to GDP. However, in this situation, the well-known picture is once again confirmed. Until the beginning of the current decade, Russia's defense budget grew with the economy, and only the current State Armaments Program for the 2011-2020 years in some way changed the situation. However, in this case, expenses grew simultaneously with GDP.
***
The version of the company Strategic Forecasting Inc. about the reduction of the Russian military budget due to common economic problems, of course, has the right to life. However, one should not forget the statements of Russian officials who have repeatedly announced relevant plans.
The military and political leadership of Russia in the past and this year several times indicated that the main part of the most complex and expensive programs within the framework of the modernization of the army is coming to an end, and this reduces the budget. The peak of expenditures has been passed, and after that it is planned to reduce defense spending over the next five years, bringing them to a level of less than 3% of GDP. However, even in a reduced form, the budget will be sufficient to maintain the army in the required condition and to continue updating its materiel.
The development of the armed forces of Russia as a whole and its financial aspects in particular arouse the legitimate interest of foreign experts. There are various estimates and projections. However, there are often biased publications that conflict with well-known data. With certain reservations, an example of this is Stratfor’s latest article on Russian military spending. She ignores the well-known information, confirmed by officials, but at the same time offers an alternative explanation of events, better in line with current trends in foreign political analysis.
However, regardless of the opinion of foreign analysts, Russia continues to modernize the armed forces. Much of the work has already been done, and now you can definitely reduce costs. And as explained abroad, it is not so important when the army acquires the modern material part, and the country gets the opportunity to redirect money to other areas.
The article “What Defense Cuts Mean for Russia's Military”:
https://worldview.stratfor.com/article/what-defense-cuts-mean-russias-military
3 in May, the company published a note under the saying "What Defense Cuts Mean for Russia's Military" - "What the budget cuts mean for the Russian army." Stratfor specialists studied the available data from various sources, including the results of research from respected organizations, and determined their opinion on current events. In addition, they tried to predict the development of the situation in the foreseeable future.
At the beginning of the note, Strafor points out: a strong blow was dealt to the defense budget of Russia. Speaking about this, its authors refer to the data of the Stockholm Peace Research Institute (SIPRI). In a recent annual report, SIPRI wrote that in 2017, Russian defense spending declined by 20% compared to 2016. The document states that Moscow is still trying to invest in defense, but the existing economic problems impose certain restrictions. At the same time, analysts said: to understand the reasons for the 20-percent reduction, you need to know the current context.
In future years, the development of the Russian armed forces will continue. However, the Kremlin will now face a new challenge. He will have to choose priority programs for subsequent financing while reducing spending on others.
Stratfor recalls the events of the distant past. After the collapse of the Soviet Union, in the nineties, Russia's military spending was constantly decreasing. However, later, after Vladimir Putin came to power, there appeared a desire to restore the armed forces. Under the new president, the defense budget was constantly growing. Against the background of the general growth of the economy and the increase in energy prices, there were additional incentives. Thus, funding for the army increased after the “Russian-Georgian war” 2008 of the year, which revealed the shortcomings of the existing army system.
The authors of the note indicate that five years after the war with Georgia, new investments in the army paid off completely when Russia began using its modernized armed forces in operations in Ukraine and Syria.
However, while Moscow “played muscles” in Syria and in Ukraine, the Russian economy missed two significant blows. The first of these was to lower the prices of exported energy, and the second was painful sanctions from the United States and its allies from among the Western states. The result was a recession from 2014 to 2017. Problems in the economy forced the Kremlin to resort to tougher solutions. As shown by a recent study, - notes Stratfor - all this led to a significant reduction in the defense budget.
Stratfor writes that the Russian defense budget is undoubtedly decreasing. However, the specified 20-percent drop in costs can be misleading, if we consider it in isolation from other factors and information. First of all, the difficulties may be related to the 2015 events of the year. Then the Ministry of Finance of Russia made a large payment, the purpose of which was to pay off the accumulated large debts to a number of defense industry enterprises.
If you do not take into account this payment in general terms, the current reduction looks much more modest. So, analyst Michael Kofman from the organization Center for Naval Analyses calculated, excluding those expenditures, the current reduction in the defense budget is only 7%, not 20%. In addition, an accurate calculation of the defense expenditures of a country like Russia is extremely difficult. A large amount of defense spending, primarily on the development and implementation of secret projects, is often not publicized, which seriously hinders calculations. Finally, the defense budget of Russia may again begin to grow, if energy will again become more expensive.
Strategic Forecasting experts believe that the “explosive growth” of the Russian defense budget, which has been observed over the past fifteen years, has been largely completed. At the same time, the Russian armed forces will continue to be updated and improved in one form or another with the help of various methods and means. However, the authors of the note believe that Moscow will now have to abandon the previously used approach, which provided for simultaneous and active coverage of all spheres. Instead, it will have to limit itself to developing only key areas.
Referring to one of his previous analyzes, Stratfor is trying to predict the events of the foreseeable future. She suggests that in the future the Russian military and political leadership will pay special attention to strategic nuclear forces. In addition, the focus will remain high-precision weaponas well as radio electronic and radio systems of different classes. In this case, the navy, having "conventional" weapons, is likely to become one of the victims of the reduction of the military budget. Most of all, it can affect it.
***
Stratfor attached a curious graph showing the economic performance of Russia as a whole and defense expenditures to the note “What Defense Cuts Mean for Russia's Military”. In addition, the main events of recent years, energy prices and positions, in which V. Putin worked at different times, were reflected in it.
The commentary to the schedule notes that low oil prices and sanctions from foreign countries put serious pressure on the Russian economy, including the defense budget. This indicates certain counting problems. The calculation of Russia's military expenditures cannot be performed with high accuracy, but even in this situation one can see all the main trends. So, it is clearly seen that the Russian defense budget has been constantly growing for a decade and a half. And now, it seems, costs will be reduced.
The presented graph shows the gross domestic product in trillions of US dollars at current rates (turquoise line). The GDP graph shows some average annual prices per barrel of oil. The blue chart shows the military budget, expressed in billions of US dollars in 2016 prices of the year. For greater clarity, gross domestic product and the defense budget are depicted on different scales, although they are superimposed on each other. Thus, the scale for GDP is spelled from zero to 2,5 trillion dollars, whereas for defense expenditures on the same graph there are limits from 20 to 70 billion.
On the graph from Stratfor, a turquoise line indicating GDP values rises continuously from 2000 to 2008 years. Then there is an annual decline, after which the growth resumes and continues until the 2013 year. From 2014 and 2016 year new points on the graph are located one below the other.
The military spending schedule looks different. The blue line begins to strive upwards already in 2000, and, changing the “slope”, continues to rise to 2016. The graph also marks the fighting in August 2008 of the year, the completion of the counter-terrorist operation in Chechnya in 2009, the “intervention in Ukraine” and the Syrian operation. It is shown that in 2011, defense spending increased markedly. Further, the budget growth over the course of several years was even, and in 2017 it declined markedly. It should be noted that the graph from Stratfor shows exactly those calculations, according to which the current reduction reaches not 7%, but 20%.
Different scales of the image of indicators clearly demonstrate the main trends, but they do not allow us to estimate the ratio of GDP and defense spending. It is known that in 2000, Russia's gross domestic product in "current dollars" was 260 billion. On defense in the same year, according to the schedule, they spent a little more than 20 billions - about 7-7,5%. GDP in the 2008 year exceeded 1,66 trillion dollars, and the defense budget, according to Stratfor, during this period exceeded 40 billions, i.e. amounted to slightly less than 2,5%. In the 2013 year, before the start of the observed decline in indicators, GDP almost reached 2,3 trillion dollars, and spent about 55 billion on defense, also only about 2,5% of gross domestic product. Finally, for 2016, GDP is declared at the level of 1,28 trillion dollars and the military budget is at the level of 70 billion dollars. Thus, due to the fall in GDP in dollar terms, the share of military spending reached 5,5%.
It should not be forgotten that in the schedule from Stratfor the gross domestic product is indicated in the current values of one or another year, whereas the size of defense budgets was adjusted to the course 2016 of the year. This makes it difficult to determine the real ratio of expenditures to GDP. However, in this situation, the well-known picture is once again confirmed. Until the beginning of the current decade, Russia's defense budget grew with the economy, and only the current State Armaments Program for the 2011-2020 years in some way changed the situation. However, in this case, expenses grew simultaneously with GDP.
***
The version of the company Strategic Forecasting Inc. about the reduction of the Russian military budget due to common economic problems, of course, has the right to life. However, one should not forget the statements of Russian officials who have repeatedly announced relevant plans.
The military and political leadership of Russia in the past and this year several times indicated that the main part of the most complex and expensive programs within the framework of the modernization of the army is coming to an end, and this reduces the budget. The peak of expenditures has been passed, and after that it is planned to reduce defense spending over the next five years, bringing them to a level of less than 3% of GDP. However, even in a reduced form, the budget will be sufficient to maintain the army in the required condition and to continue updating its materiel.
The development of the armed forces of Russia as a whole and its financial aspects in particular arouse the legitimate interest of foreign experts. There are various estimates and projections. However, there are often biased publications that conflict with well-known data. With certain reservations, an example of this is Stratfor’s latest article on Russian military spending. She ignores the well-known information, confirmed by officials, but at the same time offers an alternative explanation of events, better in line with current trends in foreign political analysis.
However, regardless of the opinion of foreign analysts, Russia continues to modernize the armed forces. Much of the work has already been done, and now you can definitely reduce costs. And as explained abroad, it is not so important when the army acquires the modern material part, and the country gets the opportunity to redirect money to other areas.
The article “What Defense Cuts Mean for Russia's Military”:
https://worldview.stratfor.com/article/what-defense-cuts-mean-russias-military
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