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Procurement Produced by the Foreign Policy Research Institute Exclusively for the U.S Eurasia Program Issue 3 March 2020 Procurement Produced by the Foreign Policy Research Institute exclusively for the U.S. European Command, Russia Strategic Initiative. Issue #3. March 5, 2020 Project leadership team: Chris Miller, Stephanie Petrella, Maia Otarashvili Designed by: Natalia Kopytnik © 2020 by the Foreign Policy Research Institute Prime Contract Number GS00Q14OADU401 OASIS Delivery Order Number 47QFCA18F0067 JCETII PS-03C: Foreign Policy Research Institute. Russia’s Military Defense and Arms Exports. FEDSIM LOA: 2018025DE-1270 This publication was funded by the Russia Strategic Initiative U.S. European Command Stuttgart, Germany http://community.apan.org/wg/rsi/ Our Mission The Foreign Policy Research Institute is dedicated to bringing the insights of scholarship to bear on the foreign policy and national security challenges facing the United States. It seeks to educate the public, teach teachers, train students, and offer ideas to advance U.S. national interests based on a nonpartisan, geopolitical perspective that illuminates contemporary international affairs through the lens of history, geography, and culture. Offering Ideas In an increasingly polarized world, we pride ourselves on our tradition of nonpartisan scholarship. We count among our ranks over 100 affiliated scholars located throughout the nation and the world who appear regularly in national and international media, testify on Capitol Hill, and are consulted by U.S. government agencies. Educating the American Public FPRI was founded on the premise that an informed and educated citizenry is paramount for the U.S. to conduct a coherent foreign policy. Through in-depth research and events on issues spanning the geopolitical spectrum, FPRI offers insights to help the public understand our volatile world. Championing Civic Literacy We believe that a robust civic education is a national imperative. FPRI aims to provide teachers with the tools they need in developing civic literacy, and works to enrich young people’s understanding of the institutions and ideas that shape American political life and our role in the world. Project Summary This project examines changes in Russia’s military-industrial complex and arms export industry amid U.S. sanctions, shifts in Russian political economy, and Russia’s evolving long-term military strategy. Throughout 2020, each month, the Foreign Policy Research Institute explores this topic by tracking and analyzing domestic and international shifts related to the Russian military-industrial complex, including: ♦ Trends in Russian military procurement and implications for Russian defense strategy. ♦ Measuring and analyzing Russia’s defense burden. ♦ Mechanisms of financing the Russian defense sector via state budget and the “anti-sanctions” bank, Promsvyazbank. ♦ The debt burden of the Russian defense sector and implications for future spending. ♦ Russian attempts to increase defense firms’ sales of civilian or dual-use products. ♦ Russian investment into advanced tech for the defense sector. ♦ The effect of sanctions on Russia’s aggregate arms exports. ♦ Indications of future arms deals in Russian and local press (e.g. Vietnamese, Chinese, Turkish) press. P 5 Procurement In 2020, Russia will complete its ten-year state armaments program (GPV) that was intended to resolve deficiencies revealed in the 2008 Russo-Georgian War. GPV-2020 focused on modernizing Russia’s military equipment with the Navy and Air Force receiving the bulk of funds. Russia’s new state armament program through 2027 seeks to counterbalance these trends. The Airborne and Ground Forces are now a priority, as GPV-2027 seeks to ameliorate Russian defense weaknesses that are relevant to both large-scale conventional conflicts and smaller Syria-type expeditionary operations. ♦ Russian defense procurement is organized around ten-year state armaments programs (gosudarstvennaia programma vooruzheniia or GPV), which dictate equipment procurement, repair and modernization, and research and development priorities for that period. The GPV is allocated across each year’s procurement conducted within the state defense order (gosudarstevennyi oboronnyi zakaz or GOZ). Although each GPV lasts for ten years, only the first five years are planned in detail, and a new GPV typically begins every five years. Russia’s current procurement activities are organized within GPV-2027, which began in 2018 and will last until the end of 2027. The previous state armaments program, GPV-2020, covered 2011-2020, and a new GPV was supposed to begin in 2016. However, Russia’s volatile financial position in 2015-2016 led Russian authorities to delay the approval of a new GPV until 2017-2018 when a more accurate ten-year economic forecast could be made.1 ♦ GPV-2020 was designed to compensate for the Russian Armed Forces’ limited procurement over the previous two decades, and it was approved soon after the 2008 war with Georgia. Although Russia prevailed in the five-day war, the Kremlin concluded that much of the Russian military’s equipment was outdated, and, in many cases, was worse than Georgia’s. The Russian military also embarked on a comprehensive reform under Minister of Defense Anatoli Serdyukov, which reduced the number of officers, increased the number of enlisted servicemen serving under contract, expanded constant readiness units, and shifted from a division structure to a brigade structure for the Russian Ground Forces. The Russian Armed Forces were allocated 19.4 trillion rubles as part of GPV-2020, though the actual amount of funds distributed will likely only reach 12.8-13.3 trillion rubles, or 65-70% of the stated figure. In addition, the program was backloaded, with only 5.9 trillion rubles, or 31%, to be spent in the first five years, and the remaining 69% from 2016-2020. By service, 25% of GPV-2020’s funds were supposed to go to the Navy, 24% to the Air Force, 17% to the Air-Space Defense Forces (in 2015 the Russian Air Force and Air-Space Defense 1 For information on Russian defense procurement, see: Julian Cooper, “The Russian State Armament Programme, 2018 – 2027,” NATO Defense College, May 2018, http://www.ndc.nato.int/news/news.php?icode=1167; Richard Connolly and Mathieu Boulègue, “Russia’s New State Armament Programme Implications for the Russian Armed Forces and Military Ca- pabilities to 2027,” Chatham House, May 2018, https://www.chathamhouse.org/sites/default/files/publications/research/2018- 05-10-russia-state-armament-programme-connolly-boulegue-final.pdf; Ivan Safronov and Alexandra Dzhordzhevich, “19 trillion put into service,” Kommersant, November 15, 2017, https://www.kommersant.ru/doc/3467573; Ivan Safronov and Svetlana Bocharova, “The main theme of Putin’s closed defense meetings will be the Navy,” Vedomosti, November 29, 2019, https://www.vedomosti.ru/politics/articles/2019/11/20/816770-glavnoi-temoi-vmf; Meeting of Russian Federation Security Council, November 22, 2019, http://en.kremlin.ru/events/president/news/62096. 1 Forces were combined to create the Russian Aerospacee Forces), 15% to the Airborne and Ground Forces, 5% to the Strategic Missile Troops, and the remaining 14% to other sources. This meant that the Russian Navy and Air Force were the relative winners of GPV-2020’s funding distribution. Although the Russian Ground Forces were the lowest relative priority in GPV-2020, they received greater funding after 2014 as a result of the war in Ukraine.2 ♦ The key target and primary metric for assessing GPV-2020’s success was the share of modern equipment. The Russian Armed Forces were supposed to increase their share of modern equipment (this includes new and modernized variants of older systems, such as the Su-35S fighter, T-72B3 tank, Mi-8AMTSh helicopter) from an estimated 15% in 2011 to 70% by the end of 2020. At the beginning of 2020, Deputy Minister of Defense Aleksey Krivoruchko said that the share of modern equipment was 83% in the strategic nuclear forces (76% for the Strategic Missile Troops), 75% in the Aerospace Forces, greater than 63% for the Russian Navy and Airborne Forces (VDV), and 50% for the Russian Ground Forces.3 According to Russian officials, the current overall share is above 68% and is on track to reach the 70% target by the end of 2020. ♦ However, many genuinely new systems—as opposed to updated versions of existing Soviet systems—are delayed. This includes the Su-57 fighter, Borei and Yasen nuclear- powered submarines, Armata tank, Kurganets-25 infantry fighting vehicle, and the S-500 air and missile defense system, which were either not procured at all during GPV-2020 or significantly missed their delivery deadlines and will be pushed into GPV-2027. Nonetheless, GPV-2020 achieved its primary aim of mass procuring modern equipment for the Russian Armed Forces, and strengthened Russia’s strategic nuclear deterrence and conventional 2 Ivan Safronov and Alexandra Dzhordzhevich, “19 trillion put into service,” Kommersant, November 15, 2017, https://www. kommersant.ru/doc/3467573. 3 Alexey Krivoruchko, “The path to the new decade,” Radioelectronic Technologies, No 1, 2020, http://hi-tech.me- dia/122019.html. 2 capabilities. Among the notable successes of GPV-2020, Russia has procured more than sixty S-400 air defense battalions and thirteen Iskander-M missile brigades over the past decade exceeding the planned targets. ♦ GPV-2027 aims to counter-balance the priorities of GPV-2020. The Airborne and Ground Forces are now a priority in GPV-2027, and increasing the share of modern equipment is no longer the most important
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