How can Russia pay for its new weapons plans?

By MARTIN SIEFF, UPI Senior News Analyst  |  Oct. 17, 2008 at 6:38 PM
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WASHINGTON, Oct. 17 (UPI) -- Russia is planning to boost its military spending to its highest levels since the height of the Cold War, but where is it going to get the money to pay for it?

Former Defense Minister and current Deputy Prime Minister Sergei Ivanov, Russian Prime Minister and former President Vladimir Putin's trusted right-hand man in reviving the Russian military over the past eight years, announced Thursday that the Kremlin's military budget would be boosted to $50 billion next year.

"This is the total aggregate amount -- 1.3 trillion rubles -- for 2009. I hope that the State Duma will approve this sum in its second reading tomorrow (Friday)," Ivanov stated, RIA Novosti reported.

Ivanov, revealingly, said the increase would be greater than the one originally planned because military needs had been reviewed following the initial assessment of the Russian armed forces' performance in their successful operations in the former Soviet republic of Georgia in the Caucasus in August.

The Russian army overran one-third of mountainous and heavily forested Georgia in only five days from Aug. 8 to 12. However, reports in the Russian press have said the army's communications and command and control systems were very weak, and the Russian air force sustained unexpected losses from U.S-supplied anti-aircraft systems that the Georgians operated.

As a result, Ivanov said, the 2009 defense budget would be increased by 60 billion rubles ($2.3 billion) "in addition to the 20 billion rubles allocated for the establishment of two new military bases in South Ossetia and Abkhazia."

Ivanov made the statement after meeting with Russian President Dmitry Medvedev in Gorki outside Moscow. Medvedev agreed that the defense budget was essential, the RIA Novosti report said.

The latest report follows a report earlier this month that Russia was already going to expand its defense spending by almost 50 percent over the next three years, a senior legislator in Moscow said, even before Ivanov's comments.

"According to a draft federal budget for 2009-2011, expenditure on national defense will increase in 2009 by 25.7 percent from 1.02 trillion rubles ($40 billion) to 1.28 trillion rubles ($51.3 billion) and would account for 14 percent of total budget spending," said Viktor Zavarzin, chairman of the Defense Committee in Russia's lower house of Parliament, RIA Novosti reported.

By 2011 Russia's total defense budget would have expanded by a total of 45.6 percent compared with current levels, he concluded.

Zavarzin said much of the money would go toward increasing the pay and boosting the standard of living of serving troops.

These spending plans, however, have been announced just as the U.S. and European financial crisis and the recession woes now looming over the U.S. economy have sent global oil prices -- along with natural gas exports, Russia's main source of income -- into a disastrous global spiral.

Global oil prices peaked at an unprecedented $147 a barrel in July. On Thursday they spiraled down to below $70 on the New York Mercantile Exchange.

This global oil price collapse, therefore, has slashed the income Russian planners expected to fund their massive arms forces renewal and increase by 50 percent.

Will Russia be forced, therefore, to scrap its armed forces renewal and expansion plans? Or will it succeed in finding new ways to pay for them?


(Part 2: Why Russia won't abandon its armed forces expansion plans)

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