Russian Defense Reform: Current Trends

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RUSSIAN DEFENSE REFORM:CURRENT TRENDS

Irina Isakova

November 2006

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The views expressed in this report are those of the authorand do not necessarily reect the ofcial policy or position of theDepartment of the Army, the Department of Defense, or the U.S.Government. This report is cleared for public release; distributionis unlimited.

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This article is a revised text of the authors presentation at theconference entitled The U.S. and Russia: Regional Security Issuesand Interests, held in Washington, DC, on April 24-26, 2006.

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FOREWORD

This monograph is another in the series of studieson aspects of Russian defense and foreign policy beingpublished by the Strategic Studies Institute (SSI). Thesemonographs derive from a conference that was jointlysponsored by the Strategic Studies Institute; the EllisonCenter for Russian, East European, and Central AsianStudies at the Jackson School of International Studiesat the University of Washington; the Pacic NorthwestNational Laboratorys Pacic Northwest Center forGlobal Studies; and the Institute for Global and RegionalSecurity Studies. This conference, titled The U.S. andRussia: Regional Security Issues and Interests, washeld in Washington, DC, on April 24-26, 2006, andexamined many different regional dimensions of this

bilateral relationship. Since the fall of the Soviet Union, the topic of Russiandefense policy has not received great attention. Clearly,the rebuilding of Russian military strength is a highpriority of President Vladimir Putin, and one to whichhe and his subordinates have devoted considerabletime and resources. Therefore, inattention to Russiandefense policy is unwise and even dangerous becauseit causes us to overlook potentially major changes notonly in Russian policy, but in international affairs moregenerally. Dr. Irina Isakovas monograph represents aneffort to overcome our neglect and provide readers acomprehensive account of the defense reform, or whatMoscow calls optimization. It encompasses virtually allaspects of the reform of the forces, their organizational

structure, the nancing of the military, reform of thedefense industrial sector, etc. This topic is both timely


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and particularly relevant and provides a signicantaddition to the series.

DOUGLAS C. LOVELACE, JR.DirectorStrategic Studies Institute


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BIOGRAPHICAL SKETCH OF THE AUTHOR

IRINA ISAKOVA is a freelance analyst and anAssociate Fellow at the Royal United Services Institutefor Defence and Security Studies (RUSI), London;monthly contributor to the business consultancy OxfordAnalytica, Ltd.; member of the International Institutefor Strategic Studies (IISS) and Chatham House; and aSalzburg Seminar Alumna. She served as a SpecialistAdviser on Russia and the former Soviet Union to theHouse of Commons Defence Committee (2000-05)and as a foreign policy expert at the Foreign AffairsCommittee, Russian Federation Council (1994-99).Before conducting research at RUSI, Dr. Isakova wasa Research Fellow at Kings College, London; ResearchAssociate at the IISS, London; Head of Section at the

Institute of the USA and Canada Studies, RussianAcademy of Science (RAS), Moscow; and Directorof International Programs at the Russian ScienceFoundation. She was a Guest Scholar at the BrookingsInstitution, Washington, DC; Visiting Scholar at theLondon School of Economics; and member of theAspen Institute (Berlin) working group on East-Westrelations (1989-93). She held the UK Defence DiplomacyFellowship (1999-2002); the NATO-EAPC Fellowship(1998-2000), and a Ford Foundation grant (2000-01).Dr. Isakova testied at the Helsinki Commission onSecurity and Cooperation in Europe and before theU.S. Congress, May 1994; at the Joint Hearings of theCommittees on Foreign Affairs of the State Duma andFederal Council on RussianUkrainian relations (July

1994), and on Belarus-Russian relations (January 1995).She was a member of the inter-Parliamentary workinggroup, RF Parliament, on the evaluation of the Russian


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national security concept (1995). Dr. Isakova haswritten widely on a range of topics related to Russia,

the Commonwealth of Independent States and BalticStates, NATO, and EU enlargement; U.S. foreign policy;and European and regional security issues. Amongher numerous publications are Russian Governance inthe Twenty-First Century: Geo-strategy, Geopolitics, andGovernance (Frank Cass: London & New York, 2005)and Regionalization of Security in Russia(Whitehall PaperNo. 53, RUSI, 2001). Dr. Isakova received an M.A. fromMoscow State University and a Ph.D. in History fromISKRAN, Russian Academy of Sciences.


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the military, is concentrating its efforts on sustainingand modernizing nuclear strategic forces and creating

robust counterterrorist special-purpose forces. Theseare judged to be the initial and essential tools forresponding to both global and regional/local securitychallenges. Training is increasing, changes are beingintroduced to command and control and mobilizationpolicy across the defense and security sectors, and newweapons systems are coming on line. Modernizationof Russias defense and security establishmentis considered to be one of the primary nationaldevelopment programs. The business community isexpected to join the governments efforts in fundingthis process, especially the procurement programs.This monograph attempts to describe the frameworkand current patterns of Russias defense reform.


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RUSSIAN DEFENSE REFORM:CURRENT TRENDS

INTRODUCTION

The Russian Federations (RF) defense reform hasproceeded through different cycles and stages, almostalways under both internal and foreign criticism. Evenin 2006 the debate continues, not only about whetherit has been successful, but also about whether thereis some sort of road map in reforming the Russianmilitary and security services. In the recent past, defensereform in Russia has lacked the attention it deserves.Rather, the acute nancial and structural problemsthat the Russian military was facingdeterioration ofits potential and capabilities, growing crime rates, and

hazing in the militaryserved as the focus of analysisand research. Many defense analysts therefore saw thedeclared goals and tasks of defense reform as merewishful thinking or theoretical exercises. As a result,new trends in implementing defense reform wentalmost unnoticed except for the assessments of a fewmilitary experts.1

Today an assessment of current developments inRussias defense reform once again has becomeessential for several reasons. First is the increasingprobability of Russian energy supplies becoming anintegral element of the U.S. energy supply system. Aswas revealed in March-April 2006, the U.S. marketis ready to receive up to 10 percent of its supplies ofliqueed natural gas (LNG) from Russia. There is even

a possibility of increased LNG deliveries to a level of30 percent of the U.S. market. The security of energysupplies thus becomes an important issue for both theU.S. and Russian defense and security establishments.


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The Russian military services, especially the navy,2have been given new missions in providing security

to offshore installations, platform infrastructure, andmaritime transport routes. Their ability to providesecurity in these elds thus becomes important fortheir U.S. counterparts. Moreover, the proceduresand rules of engagement (ROE) that could allow jointU.S.-Russian actions also become part of both statessecurity agendas.

Second, the state of Russias nuclear posture raisesadditional questions about the nature of the strategicrelationship between Russia and the United States. Thearticle The Rise of the U.S. Nuclear Primacy by KeirA. Lieber and Duryl G. Press in the March 2006 issue ofForeign Affairsquestioned the capability of the Russiannuclear triad to continue a policy of deterrence, or towithstand and respond to a U.S. preventive nuclear

strike.3

This article triggered a strong political reactionin Russia. It inspired a debate among policymakersand defense experts about the state of Russian nuclearforces and the nature of the future strategic and nuclearrelationship between the United States and Russia.

Third, the success of Russian defense reformswill have a direct impact on the results of the 2007parliamentary and 2008 presidential elections inRussia. Defense reform affects up to 30-40 percent ofthe voting constituency. The decisions taken as partof its implementation touch those who serve, theirfamilies, and veterans of the Ministry of Defense (MoD)and other services, not to mention those who considerthemselves to be potential conscripts. Such groupshave a huge stake in the decisions taken in reforming

the mobilization base of the defense establishment.The preferences of this 30-40 percent of voters could becrucial in determining the results of the next elections


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and the choices the nation will make in dening itsdefense direction over the next decade.

Fourth, a restructuring of Russias military-industrial complex is considered to be an essentialelement of defense reform. The creation of verticalintegrated holdings in specialized sectors (aviation,shipbuilding, information technology, etc.) is regardedas one of the essential tools for restructuring the defenseindustry and for channelling private, including foreign,investments into the defense sector. The creation ofsuch holdings presents a dilemma for western and U.S.companies, i.e., whether to consider the new Russiancorporations as potential partners or competitors. Forinstance, United Aviation Construction Corporation(UACC), one of the proposed aviation holdingscurrently being organized, is going to consolidate themajority of Russian aviation rms and related research

and development (R&D) bureaus in the eld. Theproduct line of Russian Region Jet (RRJ) is going tobe its main core civil project, in which the U.S. BoeingCorporation is represented substantially. Irkut, one ofthe Russian rms that is to participate in the merger,offered to sell 10-25 percent of its shares to the EuropeanAir Defense System (EADS) prior to completion of themerger, potentially making EADS an active participantin the giant Russian aircraft rm UACC. Fulllment ofsuch defense reforms, which tend to entangle Russiandefense-related industries with those of the West, haveenormous political, economic, defense, and strategicimplications for U.S. companies. The implementationof new regulations for investment in the defensesector in Russia thus creates additional challenges and

opportunities for the U.S. rms.Fifth, implementation of defense reform creates

new patterns of civil-military control, revealing the


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patterns of Russias understandings of transparency,accountability, etc. Sixth, and nally, the proposed

patterns of the modernization of the armed forces anddefense reform in general demonstrate with whomand how the U.S. military can better communicate andcooperate with the Russian armed forces in order toaddress jointly new security challenges.

The basis of the current reform effort wasestablished in the late 1990s. By the end of 2003, therewas an increasing number of reports that the Russianmilitary had emerged from the crisis of survivaland was entering a stage of systemic development.The latest version of military reform (2004-08) is beingimplemented now, at least in part. Professionalizationof the military continues, although at a slow pace andwith some setbacks; and the goal to provide the armedforces with high-tech equipment and the capability to

use it has begun to be realized. Military reform is supposed to touch the structuralelements of the military (reorganization of the GeneralStaff in the Ministry of Defense and introduction of newprinciples of military command and control); reductionin numerical strength; initiation of a transfer fromreservist mobilization principles to a system of contractservice;4 implementation of security sector reform,with emphasis on counterterrorism; and achievementof an overall modernization of the defense technicalbase. Despite inconsistencies in implementation of itsoriginal designs, Russian military reform has a roadmap. Its goal is to realize the transition of archaic,inefcient defense machinery to a new-generationdefense posture, capable of addressing the whole

complex of contemporary challenges. Neither of thesegoals has been reached, but in each area a number ofsteps to introduce systemic changes have taken place.


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Currently the focus of defense reform is:

New command and control principles;

Mobilization system;

Modernization and rearmament;

Security sector reform (with special focus oncounterterrorism measures); and,

New forms of civil control over the military.

Preservation of nuclear deterrence is also consideredto be an essential element ofin fact, an absoluterequisite fordefense reform.

Defense reform in the RF was a long-awaitednecessity. It was needed to deal with the internalrequirements of military organizations, to addressneeded changes in response to internal strategictransformations of society and its administrativemanagement system, as well as to current challengesposed by the spread of international terrorist threats.5

DEFENSE MANAGEMENT:COMMAND AND CONTROL

The Russian military is undergoing radical

changes in command and control procedures andstructures. Present innovations could be consideredas a provisional phase, testing the best mechanismsfor transferring defense machinery from the MilitaryDistrict structures to regional commands and strategicdirections or areas. The process is to be completed in2011-15.6

Initial Design.

The federal program, embodied in a documenttitled On operational readiness of the territory of


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the Russian Federation for the purposes of defenseuntil 2025, prepared by the General Staff, received

the support of the Ministry of Finance, the State LegalDepartment of the Presidential Administration, and allsubjects of the Russian Federation. It also was certiedby the RF Ministry of Justice and was submitted to theGovernment for its approval.7This document broughttogether military planning within Russias FederalDistricts (FD) and programs of social-economicdevelopments in the regions. The new administrative structure of the state islinked directly with the future of military reform, whichis to be implemented on the basis of the universallyintegrated effectiveness-cost-feasibility model. It isalso linked to the reform of the established strategiccommands, operational task forces (OTF), and jointlogistics, which are considered essential elements of

new cost-effective approaches to defense and security. Two types of conicts are envisioned:

Local/regional/global conicts with regulararmies (international interstate conicts).

Local/regional conicts with irregular militaryformations (intrastate conicts), separatistmovements, and criminal groups, banditformations, and terrorist insurgencies. Thesetypes of conicts could be purely internal andfocused on anticrime, antiterrorism, and actionsto reestablish a constitutional order. They couldalso occur outside the borders of the state (on theterritory of the Commonwealth of IndependentStates [CIS]) or be classied as cross-border

conicts.

Depending on the type and nature of the conict,the objectives assigned to these task forces differ


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among themselves. The task forces goals and missiondetermine the structure of the unit and its functions.

The concept of the task force was legitimized in theFederal Law, On Defense(1996), where it was stressedthat joint efforts and coordination among differentforces such as those of the Ministry of Defense (MoD),Ministry of Interior (MoI), Ministry of EmergencySituations and Civil Defense (MChS), FederalBorder Troop Service (FBTS), Russian Electronic andCommunications Intelligence (FAPSI), and the FederalSecurity Service (FSB) would be essential in ghtingagainst enemy special forces, airborne troops, andcriminal elements, and in guarding and defendingcommunications, military installations, and vitaleconomic and state facilities. The task force conceptwas conrmed in the RF Military Doctrine (2000) as abasic organizational and combat formation design to

be used in an internal conict (Article 5, No. 6) and innational defense against external threats (Article 13). Cooperation and coordination of the task forcesdepend on harmonizing the demarcation zones be-tween the military and other force structures. Before theConcept of State Policy on Military Development of Russiauntil the Year 2005was approved in early August 1998,there were different types of overlapping demarcationzones for the MoD and other force structures. In 1998there were eight military districts and four eets, sevendistricts of the MoI, six FBTS districts and nine regionalcenters of the MChS. The Concept of Military Reformestablished a single system of military-administrativedivision of Russian territory into strategic directions.8This harmonization of security space was aimed at

overcoming the disunity of the various defense-relatedentities operating in a common area. In a situationof grave nancial shortages, it was also designed to


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unify the mobilization reserves, technical support,procurement policies, and logistics, and to coordinate

command and control functions within the mentionedstrategic directions. Abandoning the duplicative functions of servicesand infrastructures was also considered to be a primetask of defense reform. As was stated by PresidentPutin at the RF Security Council meeting in November2000, Keeping duplicating military structures doesnot help the countrys defense and damages the armedforces.9

The RF Military Doctrine of 2000 (Article 22) denesthe functions of the Operational Strategic Commandsas follows: Command and control by the on-scenecommander includes command over the interservicegroups of general purpose forces, as well as planningand organizing joint activities with other military units,

formations, and institutions responsible for militarysecurity within the boundaries of their responsibilitiesand the unied system of military-administrativedemarcation of the territory of the RF.10

Setting the Parameters.

On January 25, 2006, the Defense Ministrysnewspaper, Krasnaya Zvezda, published an article onRussias military policy by Chief of Staff of the RussianArmed Forces Army General Yury Baluyevsky, whoreported on the dramatic upcoming changes in themilitary structure of the army and navy. These includethe transformation of current military districts intooperational and strategic directions; restructuring

of divisions and armies into more exible militaryunits with enhanced maneuverability; and formationof task forces. Task forces already are operating in the


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Kaliningrad Region, now a special district, and onthe Kamchatka Peninsula.

Moreover, the General Staff has been testing theoperation of task forces at the brigade-to-corps levelsin the Leningrad Military District since January 2006.In 2005-07, an experiment on practical implementationof the transfer of the command and control functionsto strategic directions and establishment of functioningregional headquarters task forces of the united servicesbegan. The experiment is to be completed by 2007,with recommendations on the best practices for thesubsequent transition period.11

It was reported that the transition to the strategicdirections and task forces is to start only after theresults of the experiments are obtained and analyzed,sometime between 2008 and 2010. The politicaldecision on the transfer was made, according to the

Nezavisimoye Voennoye Obozrenie, at the RF SecurityCouncil meeting on July 9, 2005.12After the institutionalstatus of the General Staff was downgraded in 2004,its main attention was focused primarily on suchtraditional functions as threat evaluation, developmentof theoretical doctrinal concepts, planning, andstrategy. Any public statements coming from the Chiefof the General Staff therefore should now be seen asa declaration of policy adopted and approved by thepolitical-military authorities at the highest levels.In addition, Minister of Defense Sergei Ivanov said,on the record, that there were no plans to make anyserious changes in Russias military structure until theyear 2010. This statement was intended to set a propertime schedule for transition. Instead, it confused some

defense experts, who assumed that current Russiandefense reform was only a minor adjustment13ratherthan a radical transformation of the entire Russiandefense establishment.14


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The Presidential address to the Federal Assemblyon May 10, 2006, conrmed the plans for radical

transformation of the defense posture. News mediasources connected with the government went further byciting the decisions of the MoD Collegium (April 2006)and explaining the main parameters for command andcontrol reform:15

The existing six Military Districts and foureets are to be transformed into three Regional

CommandsWest European (West), CentralAsian (South), and Far Eastern (East)basedon integrated command and control of groundand naval forces located in the current MilitaryDistricts.

As part of the reform, the commanding ofcerwill be in charge of all services and militarydefense formations, with the exceptionof Strategic Nuclear Missile Forces. Thecommanding ofcer is to be responsible forterritorial defense in cases of terrorist attacksand/or local/regional conicts.

The Air Force is to merge with the StrategicMissile Forces and Space Forces.

Airborne troops are to be subordinated to theMain Ground Forces HQ.

A joint logistic and procurement system is to beestablished for all defense/security services.

The MoD Collegium approved a plan of transformationof the command and control structure proposed bythe General Staff. The transformation is expectedto be completed between 2011 and 2015. It has beensuggested by some defense experts that the proposed


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command and control system partly resembles that ofthe United States.

JOINT LOGISTICS

Setting up a unied logistic system is also anessential part of the optimization or reform of thedefense/security infrastructure. The Armed ForcesLogistic Support Service is being streamlined so as tobetter accord with the countrys economic capabilities.16Ivanov, soon after being appointed Minister of Defensein 2001, wrote in Krasnaya Zvezda that there wouldbe a rationalization of logistics as part of militaryreform.17 Services such as warehousing, transport,and healthcare for both the army and the paramilitaryforces answerable to the Interior Ministry would beintegrated under a single command in each military

district.18

As was stated in the Ministrys White Paperon Defensepresented in October 2003, among the goalsand tasks of military reform was to speed up theunication of logistic support and technical assistanceof the military and other services.19

This process meant establishment of a uniedlogistic system for the military and other services withinseven federal districts. The system was an essential andbasic element of the optimization of the Armed Forcesand became a principal plank in reforming the militarysystem. The unied logistics system presupposedcertain changes in the military system itself:

Optimization of the command and controlsystem and elimination of duplication ofcommand structures in the regions.

Unication of procurement orders for themilitary and other forces.


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Merger of medical, infrastructure support,and transportation systems that would lead to

signicant reductions in personnel. Introduction of a territorial system of recruit in-

duction within the boundaries of the administra-tive districts.

Among the goals and tasks of military reform wasthat of speeding up unication of the logistics support

and technical assistance facilities of the military andother services. Some of these goals now are beingaddressed.

UNIFICATION OF THE PROCUREMENT REGIME

In 2005-06 a new mechanism for commissioningprocurement projects and monitoring their delivery

was introduced. In order to make more efcient use offunds, members of Parliament recommended in 2004that the government re-create a Ministry of DefenseIndustries. In 2005 some steps were taken in thisdirection by the RF executive branch when the FederalService on State Order and Federal Military TechnicalService were created within the RF MoD. In March 2006,

a decision was made to create a Military-IndustrialCommission (MIC) to centralize and strengthen theoperational management of the military-industrialcomplex and act as a new state institution for uniedsupply and equipment procurement for all powerministries, with the MoD having the leading role.20The MIC was established formally as a permanentlyfunctioning institution within the RF government

on March 20, 2006. Minister of Defense Ivanov wasappointed immediately to lead the MIC. On March 21, 2006, President Putin namedVladislav Putilin, former director of the Defense and


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Security Programs Department at the Ministry ofEconomic Development and Trade, as deputy head of

the Military-Industrial Commission with ministerialstatus.21The MICs status, parameters, and duties werenot dened and announced by the government untillate April 2006. It was given responsibility for oversee-ing long-term strategy and planning and performingoperational management of R&D procurementprojects; introducing a strict monitoring mechanism onpricing of defense projects; and monitoring the overallrestructuring of the military-industrial complex. In the RF 80 percent of the arms and defensesystems are produced by monopoly producers. TheMIC is authorized to prevent creation of monopoliesof producers and R&D in the internal market bystimulating competition between the enterprises inproduction of spare parts, but eliminating competition

during the production stage of the completed item.22

TheMIC also denes the main parameters for state defenseorders, including timing, pricing, and personnel policyin the defense enterprises.

Other ofcials assigned to the Commission besidesIvanov and Putilin are the head of the General StaffArmy General Yury Baluevsky; Minister of EconomicDevelopment and Trade German Gref; Minister ofFinances Alexei Kudrin; Minister of Industry andEnergy Victor Khristenko; head of Rosprom BorisAleshin; head of Rosatom Sergei Kirienko; head ofRoscosmos Anatoly Perminov; General Director ofRosoboronexport Sergei Chemezov; and Director of theAdministrative Department in the RF GovernmentMikhail Lychagin. Igor Borovkov, the rst deputy

Minister of Atomic Energy and director of theDepartment of Defense Industry and InformationTechnology in the RF Government, was appointed


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as the Chief of Staff of the Commission, with wideresponsibilities for framing the Commissions decisions

and monitoring their implementation. In addition,there are several permanent staff members assignedto monitor and oversee specic sectors of the defenseindustry. These members of the staff were ordered toleave their previous posts and concentrate full time ontheir new responsibilities. They are:

Alexander Goev, Director of the Krasnogorsk

Optical Mechanical Plant, who was maderesponsible for weapons/weapon systems andplatforms for the Ground Forces;

Vladimir Pospelov, Vice president of the StateCenter of Nuclear Shipbuilding (Severodvinsk)and former head of the Rossudostroeniye (Russianvessel building), who was made responsible forthe navy procurement programs.23

Alexander Bobryshev, General Director of Novosi-birsk Chkalov Aviaproduction Corporation,who monitors aviation and space programs.24

Joint Logistics and Command and Controlin Procurement Policies.

A joint approach for logistic support and procure-ment is to be implemented with the help of a jointcivil agency dealing with the procurement programsfor all defense and security services and agencies.The Civil Agency for procurement and outsourcingof arms and military equipment is scheduled tobecome operational in 2007. By the end of this year,

the government promised to establish a joint systemof procurement for all state defense orders and for allservices.25In November 2005, in order to stimulate this


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process, Ivanov was appointed First Deputy PrimeMinister with an expanding portfolio, which included

implementation of the military-technical policy,as well as formulation and execution of the StateDefense Order; restructuring the military-industrialcomplex; overseeing the nuclear, space, and missileindustries; and exercising responsibility over theexport control regime and dual-use technologies witha view to preventing proliferation of weapons of massdestruction (WMD).

Some Russian experts have suggested that the Fed-eral Defense Order Service26 could well be removedfrom the MoD and placed under Ivanovs directsupervision as rst deputy prime minister. The mainpurpose would be more complete and energeticcompliance with the transformation of the defenseindustry and establishment of a civilian joint

procurement agency, which would act on behalf of allservices/defense communities.27However, the leadingrole of the MoD in the oversight of procurement policiesis apparently to remain unchallenged.

Special Forces and Intelligence.

Streamlining command and control procedureshas affected the highly sensitive spheres of defenseorganization as much as it did the intelligencenetworks and special purpose forces. In accordancewith the Plan of Military Construction for 2006-10and in line with a decision of the RF Security Council(March 2005), a unied command headquarters forSpecial Purpose Forces is to be established, directly

subordinated to the President. This arrangementallows the Russian President to make decisions on theirdeployment (outside the country, in case of necessity,


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to counteract terrorist threats) without approval ofthe RF parliament. The state budget, according to the

news media, has a separate provision in the 2006 scalyear to cover such measures. These developmentscan be considered revolutionary. The main principlefor establishing a new military service takes intoconsideration not only the technical characteristicsof any military hardware used, but also the possiblemissions, particularly those involving worldwidespecial operations such as antiterrorist operations. Theoverall training and monitoring of all special forces,it was reported, are to be transferred to the MainIntelligence Directorate (General Staff) by June 2006.28These units are going to be engaged mostly with theWestern Combined Joint Task Forces (CJTFs) in NorthAtlantic Treaty Organization (NATO)/EuropeanUnion (EU) operations, together with peacekeeping

units serving under other international organizations.This measure was advertised as a step to allow theRussian MoD to respond more directly and efcientlyto small-scale conicts, to neutralize nonstate actors,and to counter nonmilitary threats in cooperation withsecurity services and police units.

The centralization drive and optimization processis also affecting military intelligence, as widelyreported in the Russian press in early April 2006.According to General Baluevsky, the goal of suchreform was making a more efcient system of militaryintelligence, better equipping intelligence units in theservices, and stepping up the process of centralizationand planning under the General Staff.29The changesmean that the Intelligence Directorates of the Air

Force, Navy, and Ground forces are to be dissolved,with army intelligence units subordinate to the MainIntelligence Directorate and responding directly to


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it. The Intelligence Directorates of the services areto be transformed into departments with less staff,

allowing the ministry to cut personnel from 20 to 6persons; new units are to be headed by ofcers at therank of colonel instead of lieutenant general as wasformerly the case.30 Under the previous system, theregional directorates were responsible for the trainingof special forces units.31 Thus, according to RussianDuma member and ex-Deputy Minister of DefenseAndrey Kokoshin, Russia is in the process of forminga completely different military triad: strategic forces(with traditional elements of strategic missile, navy,and aviation forces); conventional forces (consisting ofground and nonstrategic navy and air components);and special antiterrorist forces.32

Antiterrorist Network/Security Sector Reform.

Command and control reform entails the intro-duction of changes not only in the armed forces,but in all elements of the defense organization of thestate that should be capable of effectively providingself-defense in any developing circumstances of theinternational situation.33 On December 15, 2002,it was announced that the Russian Prime Ministerapproved appointments to the Federal AntiterroristCommission and signed the order on the Status ofthe Commission. The nominations conrmed theestablishment of a permanent institutional body thatwas to act as a center for coordination of the security,border guard services, and militia (police) on aregular basis, including emergencies. This decision

entailed establishment of a new coordination systemfor antiterrorist security. The Commission was maderesponsible for formulating the RF antiterrorist strategyand tactics; coordinating the actions of the ministries,


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services, and executive authorities at all levels aimedat neutralization and prevention of terrorist attacks,

as well as for addressing the conditions that promotethem. The Commission was also made responsible forinitiating and introducing antiterrorist legislation. Thedecisions made by the Commission are binding on allfederal executive institutions, executive authoritiesof all subjects of the Russian Federation, regionalantiterrorist commissions, and all organizations of theRF.

The Federal Security Service (FSB) provides opera-tional management and logistic support. Informationsupport and policy assessments are provided by allfederal ministries, agencies, and services representedon the Commission and the authorities involvedin any potential terrorist incident on a case-by-case basis. As former Minister of Interior General

Kulikov pointed out, the difference between the newsystem and the 2002 arrangement so far as securitycounterintelligence operations were concerned lay inmore efcient procedures and a clearer division offunctions. Both the President and Prime Minister arethe approval authorities for overall operational plans,but operational implementation is left to the specicservices.34The roles of the FSB and Ministry of Interioras the main players in the Commission were conrmedby the then Prime Ministers decision No. 2149. Theurgent need to address the terrorist threat broughtabout the increasing inuence of the security services.The trend has intensied since 2003, as the FSB becamede facto a leading senior service, as it was called byDmitri Trenin, senior defense and security expert from

Carnegie Center, Moscow. As a result, the hierarchyof responsibilities and subordination was adjusted toreect the growing importance and prominence of theantiterrorist apparatus.


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which are responsible for monitoring all elements ofthe executive institutions in case of an emergency.

For instance, the NAC is in charge of coordinatingthe territorial organizations of the federal executivepower institutions, regional power structures ofthe RF subjects, and local authorities in preventivemeasures against terrorism. It is expected to minimizethe impact of terrorist actions and coordinate activitiesof the civil institutions after any terrorist attack.Practical planning, coordination, and execution of theoperations in post-attack periods are under the directsupervision of the NAC.37At the rst NAC meeting, thefollowing organizations were represented: the NationalAntiterrorist Committee; seven Federal Districts (at thestatus of Presidental Envoy); the Military Districts; theDirectorates of the MoI in the Federal Districts; and theSecurity Services in the Federal Districts. In cases where

emergency rule is invoked, the NAC has a network thatcould be used effectively for direct governance of anyregion or group of the Federation and for coordinationand monitoring of political and economic activities.38

In addition, the presidential team took steps totighten control over personnel policies in the securityservices. On December 27, 2005, President Putin signedamendments to Articles 4 and 6 of the Federal Law,On Defense, intended to harmonize the main documentwith the changes introduced to the federal laws Onthe FSS (FSB)(Article 16) and On the Federal ProtectionService(Article 18), which expanded the authority of thePresident. These amendments granted sole authorityto the President for deciding the numerical strengthof military personnel and civilian employees of both

the FSB and Federal Protection Service. An afrmativedecision on the amendments was voted by the StateDuma on December 9, 2005, and by the FederationCouncil on December 14, 2005.39


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making it more manageable and legally binding, witha step-by-step introduction of service by contract of

additional specialized categories of servicemen anddraftees.

Professional Armed Forces.

Formally, the professionalization experimentstarted in 2004 and is supposed to produce results bythe end of 2007. Full professionalization at unit levelremains a target which will apply rst to the airborneforces and formations designated for operations in theareas of conict. Main contingents of the airborne forcesare to be transferred to service by contract by 2007.According to the ofcial statistics, there are severalunits that already have become fully professional,such as the 76th Airborne Division in Pskov and the

31st Airborne Brigade and 42nd Motor Rie Divisiondeployed in Chechnya. The 98th Airborne Division inIvanovo is to become fully professional by June 1, 2006(more than 6 months ahead of schedule). The 106thAirborne Division is to become partly professionalized,with draftees and volunteer servicemen combined.The 21st Airborne Battalion in Ulyanovsk is waitingto start transformation by 2007.42 Naval crews werenamed as the second tier priority of forces selected tobe transferred to contracts.43The drive to transfer themajority of the services to contracts also has affectedthe MoI, Border Guards, etc. There are comprehensivetransformations now taking place in the MoIs unitsand the special forces.

However, there already are several emergent

problems with the process of professionalizationof the armed forces and other services. First is thedifculty in adhering to the time schedule or annual


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targets for getting young men to enroll in militaryservice on contract. There is an unresolved dispute

between the Minister of Defense and MoD staff in theirassessments of the time frame needed to achieve theproclaimed goals. According to the public statementof the Minister of Defense, the MoD has to have 130-140 thousand contracted servicemen, or 50 percentof all army personnel, as professional forces by 2007.Judging by the MoDs assessment, however, it wouldbe difcult to reach this target by 2007. By the year2007, it is intended to have cut conscription from a 2-year to 1-year period of service and to have reducedthe period of alternative service from 42 months to18. But the number of those volunteering for contractservice is not meeting annual targets. For instance, in2004 the number of those registered for contract servicein the Moscow Military District was only 17 percent of

the targeted gure; in the North Caucasus, 45 percent;in the Volga-Urals, 25 percent.44 Presently there are109,000 sergeants serving under the MoD, but only23,000 are under contract. Second, the MoD is faced with the problem ofkeeping up to numerical strength those regimentsthat already have been transferred to contract service.Moreover, according to the Military Prosecution Ofce,an increasing number of contracted servicemen fromthe aforementioned units have been relieved of dutiesfor drunkenness and violence. Also, there has been anincreasing tendency for soldiers serving under contractto fail to return for duty after vacation. Third, double-booking has been occurring, as whencontracted servicemen were induced to re-register in

particular other regiments or units in order to servethe governments ulterior purposes. For instance,1,000 servicemen from the 42nd Motor Rie Divisiondeployed in Chechnya were induced to re-register


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with the 46th Motor Rie Division slated to take overin Chechnya from the 42nd, thus conveniently keeping

them deployed in the region.45

Financial and organizational difculties areallegedly among the reasons for these problems. Thereare almost no nancial incentives to join the serviceby contract. Irregular payment and low salaries incomparison with the civilian sector are the rule. (Thecontracted soldiers monthly salary is about 5,000-6,000rubles if he serves locally, and about 15,000 rubles ifhe is sent to a conict area.) The low pay was amongthe reasons named for why over 2,000 volunteersquit the 76th Pskov Airborne Division, according toKomsomolskaya pravda.46 In addition, the standard ofliving of servicemen deteriorated considerably with thecancellation of the traditional social benets to them aspart of the national social and economic reforms that

were introduced in 2004-05.The absence of professionally trained noncommis-

sioned and junior ofcers, who are most responsiblefor the educational development, morale, and ethnicassimilation of servicemen, also contributed todeteriorating professionalism in the units. Failureto make sufcient provision for a professional corpsof noncommissioned ofcers is considered a hugedeciency of the reform process, one which could inthe long term result in the de facto metamorphosis ofthe enlisted ranks into a band of unreliable mercenariesrather than a professional army. In 2005-06, the MoDtried to improve the situation through several policydecisions:

The MoD sought legislation to introduce

stricter rules for application to those who fail tocomply with the terms of contracts. Presentlythe amendments to the federal laws regulating


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this issue are being debated in the Russianparliament.

The Ministry is supporting creation of militarycenters in civil universities and colleges forpromotion of professional military service.

The MoD has introduced a new clause in thecontract for those receiving military education.If, after graduation from a military college orinstitute, the serviceman decides to leave the

armed forces and work in the civilian sector,the graduate has to pay the full cost for his/hereducation after discharge.

As an indirect nancial incentive to boost serviceby contract as well as to increase the numberof serving ofcers, the MoD has introduced aprogram of liberal home mortgage benets.

They are given to those who join the service inor after 2005 and are planning to serve in themilitary for no less than 20 years.

The MoD has decided to introduce contractedsergeants in the RF army as the intermediateleaders between soldiers and commissionedofcers. They are to be responsible for training

and education of the conscripts. On May 26,2006, at the session of the State Duma on defensereform implementation, Minister of DefenseIvanov conrmed that the MoD was working ontransferring the positions of sergeants and pettyofcers, as well as aircraft and ship crewmen, tocontract service. If the present plans for militarymodernization are to succeed, an additional

26,000 sergeants on contract could be serving inthe RF armed forces eventually. The changes areintended not only to combat hazing and crime


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within military ranks, but also to provide thenecessary conditions for professionalizing the

military. Thus, the sergeant augmentation wasnot just a reaction to public condemnation of thepublicized hazing incidents, but rather a reason-ed necessity for that aspect of defense reformcalling for true military professionalism.

Enhancing the Draft System.

On May 10, 2006, President Putin conrmed that noshift to an all-volunteer force was envisaged. Thus thedraft system, strongly defended by the top brass, willremain in place despite mounting public objections. Inorder to deal with the numerous challenges to effectivemobilization, the MoD undertook measures, on the onehand, to increase the mobilization base for conscription,

and on the other to upgrade the quality of those calledto join the armed forces. In 2005-06, several new policieswere tested. For example, the MoD is taking steps toimprove the draft registration process, one aim beingto reverse the decline in the annual harvest of draftees.Several measures were introduced:

Until recently, there was a set of legal deferments

allowing draftees to evade a draft call. The MoDhas proposed, the Government supported, andthe Parliament is in the process of approving,the suspension of nine types of deferment,leaving the remaining ones untouched. Nolonger will delays be given to young fathers,medical professionals working in rural areasand regions, graduates of naval colleges and

academies, graduates of academies of art, civilservants (including those registered to run forthe legislative bodies), and employees of defenseenterprises.


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At the same time, the MoD is promotingreduction of the term of mandatory military

service. By 2007, the term of service is to bereduced from 2 years to 1.5 years; and by 2008 to1 year. Moreover, a new interpretation is beingapplied to alternative service. Previouslythose applying for alternative service in lieu ofserving in active military units could invoke onlytheir religious/pacist beliefs as justication.However, if new amendments are adopted,any compelling explanation for such a requestin written form, whether based on religious/philosophical convictions or not, should besufcient for consideration. However, the MoDopposes allowing service in the police (militia) orre service to count as an alternative to militaryduty. The term of alternative military service is

to be reduced as well, from 3 years to 1.5 yearsby 2008. This reduction is to be accomplishedin parallel with the term reduction for activemilitary duty. Another liberalization ofalternative service being proposed is eliminationof residency restrictions, thus permittingalternative duty in the part of the RF where theconscript permanently resides.

Another point addressed was the allegedineffective work of military district commissar-iats, as reected in their inability to enforcea call-up of young men of draft age. The RFgovernment therefore introduced plans toreform the national system of military districtcommissariats, with the ofcers in charge

now to be rotated after 3-year terms. Over 600commissariats, generally those covering largerterritories, are to be closed or merged. The 3-yearrotation in the recruitment centers is intended


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to reduce corruption among the ofcers (e.g.,bribes in exchange for deferments) and thus

increase the number of those inducted into theservice.

The ofcers from the reserve centers are to beeither placed within the regular mobilizationorbit or transferred to active military units.These innovations are to be introduced in 2006.In responding to military district commissariat

complaints about the absence of nancialassistance to promote contract service, the MoDinitiated a 24-hour-a-day RV/TV service. Theprogram Star (Zvezda) could be heard andviewed in 58 regions of the RF, thus hopefullycovering the propaganda gap. Among its goalsare enhancement of military services imageand promoting the benets of contract service.

Patriotic education is becoming an importantelement of the public relations and news mediawork of the MoD and other services.

The MoD has proposed a series of programsto resolve health-related problems and loweducational levels of draftee contingents. TheMoD has introduced a system of rigorous

medical screening of young men eligible forthe service. Hospitals henceforth are requiredto send medical data of potential draftees tothe military district commissariats throughoutthe year. Thus, the disqualication of a drafteeon medical grounds is to become much moredifcult to fake. Special military training and

education courses are to be reinstated in thesecondary schools to upgrade physical tnessand the educational and professional levels of


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potential draftees. Special training programs arebeing introduced in the military commissariats

to provide physical training for futureconscripts.

All these changes have long-term goals aimedat addressing not only demographic loopholes inrecruitment, but also the profound reductions in thequality of military recruits. Until recently, the armedforces mostly drafted reserves with working classbackgrounds from industrial estates and rural areas.This imbalance was a deciency since the recruitmentpool ought to be socially balanced and, mostimportantly, better ready for new generationequipment and new military tasks. The militarywould like to upgrade the educational level of allrecruits. Special attention is being given to the new

generation of recruits in view of the importantprocurement programs being implemented by 2008-10. In the year 2000 assessments, qualitative changes inthe mobilization base were targeted for achievement by2010. According to the most current public statementsby authorities, the timing of mobilization reformhas been advanced by 2 years; reform is expectedto be completed by 2008. Meanwhile, the closingof deferment loopholes is supposed to provide themilitary with more boots on the ground, obtainingrecruits, rst of all, from the regions with higher-than-average unemployment among young men, as well asrural areas. The selection process is intended to easesocial tensions while preserving recruitment potentialfrom higher educational backgrounds for future

mobilization campaigns. As a demonstration of the armed forces transforma-tion, the MoD is introducing new regulations that reect


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Strategic Nuclear Deterrence.

Moscow is investing heavily in strategic nuclearforces and special operations forces until it canreform its conventional military. The focus is on thenuclear triad (strategic air, naval, and ground forces)for sustaining nuclear deterrence. Though publiclyand ofcially Moscow has conrmed its interest inpreserving the nuclear triad, the currently existingprograms concentrate mainly on the modernizationof naval and ground-based nuclear strategic forces by2015-20. The RF constantly reiterates its continuingintent to preserve nuclear deterrence. On March 30,2006, President Putin, addressing a special meetingon the military nuclear complex, said that analysis ofthe current international environment and prospectivetrends of its development determines that Russia

should consider nuclear deterrence as a cornerstoneof its policy, to guarantee its national security and thesafety of its nuclear weapons complex.48

Russia was and is consistent in promoting minimumdeterrence. In 2005 and 2006, Russias Minister ofDefense conrmed the attainment of a level of adequatesufciency in strategic nuclear defense as a prioritystate policy. In comparison with that of the Union ofSoviet Socialist Republics (USSR), the Russian nuclearpotential is considerably less: 39 percent fewer strategicbombers, 58 percent fewer intercontinental ballisticmissiles (ICBMs), and 80 percent fewer submarineswith ballistic missiles.49 But the remaining potentialis still enough to sustain the policy of minimumdeterrence. Major General Vladimir Vasilenko, head

of the 4th Central Research Institute of the Ministryof Defense (which is responsible for strategic nuclearplanning), pointed out in February 2006 that reductionsof missiles in the Strategic Deterrence Forces during


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the last years did not affect their ability to carry on thetask of strategic deterrence.50

At the same time, Moscow introduced changes inits criterion for assessing the sufciency of deterrence.Parity of nuclear weapons has become an insufcientcriterion for the strategic nuclear components. Thenew criterion for sufciency is based on the capabilityof nuclear forces to penetrate the enemys nationalmissile defense. A new posture could be announced by the end of2006 or even sooner. According to Yury Solomonov,head and chief missile designer at the Moscow Instituteof Thermal Technology (MITT), the main researchinstitute for the designing of ground- and sea-launchednuclear missiles, Russia could announce plannedchanges in its strategic nuclear capability by the endof the year.51Although ofcial details are not available

yet, there have been several public statements pointingto the following essential characteristics:

Balance, but not parity;

Minimal deterrence;

Asymmetric response;

Return of MIRVs; and,

Russias possible unilateral withdrawal fromthe Intermediate Range Nuclear Force Treaty asa response to similar U.S. actions.

General Yury Baluyevskiy, Chief of the GeneralStaff, hinted that Russia was giving up the principleof symmetry, that is, an all-out effort to preservequantitative parity with the potential enemy. It alsowill develop its armed forces asymmetrically, shapingpriorities that will deter reliably any threats. One suchpriority is a search for ways of most efcient use of


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military hardware . . . in conditions of limited resources,rst of all, nancial and economic.52With the April 3,

2006, publication of a new MoD policy statement, TheArmed Forces of the Russian Federation, Baluyevskyconrmed this shift. President Putin also stressed thepossibility of asymmetrical responses in his address tothe nation on May 10, 2006.53

This approach echoes the strategy of realisticdeterrence, which was introduced initially in the1990s. The concept signaled Russias acknowledgementof its limited nancial resources and force capabilities.Realistic deterrence implies abandonment of anorientation towards the preservation of militarybalance through quantitative parity in weapons, insteadreserving the right to respond to any aggressive actsby all possible means. According to Russias NationalSecurity Concept (2000), the country is giving priority

to diplomatic, political, economic, and nonforcemethods in crisis- and conict-prevention operations.However, the state reserves the right to use militaryforce unilaterally if the combination of nonmilitarythreats to national security is considered unacceptablydangerous.54

In other words, the principle of realistic deterrenceaccepts the possibility of becoming engaged in amilitary conict both through an escalating pattern andthrough ones inadequate or asymmetrical response(for instance, a unilateral strike as a response to a non-nuclear threat to the existence of the nation).55 Thisapproach is based on a new understanding of howthe state should maintain its inuence in vital areasby changing the nature of its presence, for example,

from physical deployment to monitoring a securityspace through intelligence networks; by keepingopen the option of upgrading its military presence in


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zones of inuence; and by adopting a new policyin relations with local communities. This approach

represents an attempt by defense and security forcesto address structurally the threats and challenges ofthe 21st century with adequate means and at the sametime to optimize the costs of national security anddefense postures.Two factors dene the posture thatRF strategic deterrence could assumenew weaponacquisitions and external weapon developments. Letsdiscuss each in turn: 1. New Weapon Acquisitions. Russia will retainits nuclear triad of land-based ICBMs, sea-basedsubmarine-launched ballistic missiles (SLBMs), andairborne strategic missiles that can deliver a nuclearattack from land, sea, or air without relying on thirdcountries. The nuclear programs have had 100 percentfunding support from the government in the last 2 years,

although some technical problems were encounteredin transferring funds originally allocated to the MoDand other services to the nuclear enterprises. Russia isplanning to complete the modernization of its strategicdeterrent components by 2015-20. It plans to deployup to 2,000 nuclear warheads as allowed within theexisting arms control treaties with the United States,in line with the U.S.-Russian Strategic OffensiveReductions Treaty (SORT). SORT requires that bothsides reduce their nuclear stockpiles to 1,700-2,200warheads by December 31, 2012.

Russias sea- and land-based missile groups wouldbe reequipped by 2015, and the Strategic MissileForces would then have 2,000 warheads. After 2015,the Strategic Missile Forces would be able to operate

efciently and without further modernization until2045, according to RF ofcial statements. Russia isplanning to maintain the SORT-approved number


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of warheads, even though decommissioning its SS-18 Satans. Its SS-19 Stilettos are being replaced every

year by single-warhead silo-based, road-mobileRT-2PM2 Topol-Ms. Two new missiles, the ground-launched Topol-M(SS-27) and the sea-launched Bulava-30 (SS-NX-30) ICBMs, can carry from three to sixwarheads. Moreover, news media reports have citedMoscows recent disclosure of a six-warhead multipleindependently targetable reentry vehicle (MIRV)Bulava. It was designed as part of Russias effort toimplement the Memorandum to START I (expiringin 2009). The news reports suggest that the number ofMIRVs per missile was likely to grow to 10 in the nearfuture.56

According to the designers, the missiles are basedon totally different principles and technology thanwere previous systems and are impossible to track or

intercept by available antimissile systems. Moscow isconvinced that it would take other countries 10-15 yearsto design ICBMs similar to Russias Topol-M (SS-27)and Bulava-30(SS-NX-30). The RF strategic componentbeing built is based on a missile unication principlewhich makes the use of nuclear missile capabilitiesmore exible and nancially efcient in production.Unication of the missiles generated savings up to 30-40 percent (or up to 12-15 billion rubles) in R&D andtesting. The cost ination rate in producing this newtype of missile is 1.95 percent annually, about the sameas the standard ination rate 1.93 percent for industryas a whole, according to the industrial productionindex.57

Production of the Topol-M missile was started

in 2006. Despite some concern expressed by defenseexperts about the low rate of production of the missilesand their delivery systems,58deputy head of the newlyestablished Military-Industrial Committee Putilin


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conrmed that measures are being taken to speed upthe production cycle.59Presently Russia has ve missile

regiments equipped with silo-based Topol-Mmissiles.Also, the rst regiment equipped with mobile Topol-Msystems will enter operational service in 2006. Last year Russia conducted successful launch testsof the Bulava SLBM, a submarine-launched versionof the Topol-M(SS-27).60While the tests will continueuntil the end of the year, the new delivery systemsare already under production. Fourth-generationsubmarines will be armed with the Bulava SLBM.61Several new Borey-class nuclear submarines are beingbuilt or planned for future construction at the Sevmashplant in the Archangelsk region. The rst one, theYury Dolgorukiy, was commissioned in 2006 and isexpected to enter active service by the end of 2008.The Alexander Nevsky is to be commissioned in 2007

and is planned to be in service in 2009; the VladimirMonomakhis expected to be commissioned in 2008 andto be in service by 2010. The MoD also has continuedthe process of modernizing older systems. For instance,the TopolICBM was modernized, tested on November29, 2005, and reentered service with a life expectancyof 23 years. After modernization, seven submarineswere returned to service with the Northern Fleet (12thSquadron). Special attention has been given to building aRussian system of global navigation (GLONASS) thatwould provide more reliability than even the U.S.-controlled global-positioning system.62It currently has12 operational satellites of the 24 ultimately required.This year, another six satellites are being sent into orbit.

Moreover, Russias system of space-based surveillancesatellites can detect missile launches worldwide. Thespace forces will increase their early warning capabili-


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ties with new equipment reportedly enabling Russiasearly warning system to function without radars based

abroad.63

In addition, according to Colonel General(Ret.) Victor Yesin, Vice-President of the Academy onsecurity, defense, and law enforcement and formerhead of the main staff of the Strategic Deterrent Forces,new land-based radar stations are being either built(with the one at St. Petersburg already in operation)or planned to be built in Russia proper to reduce itsreliance on the radar network deployed abroad.64

2. External Weapon Developments. Russian expertsbelieve that if the American missile defense postureis to be developed within the parameters of the U.S.Presidential Directive dated December 17, 2002,the existing and planned Russian nuclear deterrentcapabilities will not be threatened until 2020. The U.S.missile shield will have limited capabilities, which

would allow Russian missiles to penetrate it. Thus theU.S. shield would not require additional changes in theRF response. However, if elements of the U.S. MissileDefense System are to be deployed along the perimeterof RF territory, then additional adjustments in theRussian nuclear deterrent will be required. Moscowis waiting for an announcement from Washingtonon the nature of deployments in Europe (which wassupposed to be claried in spring 2006). As stated byRussian Minister of Defense Ivanov during his trip toSurgut, Russia, on March 23, 2006:

The U.S. administration recently announced plans toset up a base in Europe as part of its plans to deploy aglobal missile shield, and said it would determine the[receiving] country this spring. Russia will respond

to the deployment of the U.S. missile-defense base inEurope after it learns about the capabilities of the newmilitary facility, and the number of missiles deployedthere rather than its location. Only after this Russia willformulate its response.65


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Major General Vasilenko, head of the 4th CentralResearch Institute of the Ministry of Defense, observed

that:

Russia might consider unilateral withdrawal from theIntermediate Range Nuclear Force Treaty (1987) anddeploy a group of medium range (land-based) missilesif it must respond to the threats related to nuclear andmissile proliferation, modernization, and upgrading ofthe nuclear arsenals . . . belonging to the nuclear club.66

The existing technical and technological capabilityand industrial base allow Russia to resume productionof medium-range (1,000-5,500 km) and short-range(500-1,000km) missiles if a political decision on suchcountermeasures is made. Though in 2005-06 theRussian Ministry of Foreign Affairs ofcially conrmedRussias adherence to the Intermediate Range

Nuclear Force Treaty, forthcoming developments willdemonstrate whether both states are willing to preserveMutual Assured Security (MAS) in the nuclear sphereas established between the two states after the end ofthe Cold War.

Permanent Readiness Forces.

The airborne forces development program for 2006-10 implies the creation of special-purpose airborne andair assault units, and mountain rangers. The units areto differ by the type of equipment, training, and func-tions. In 2006 the airborne forces started to receivemodern equipment in accordance with the procurementprogram for 2006-08 tailored especially for the needs of

the units. First Deputy Minister of Defense AlexanderBelousov stressed that, until the end of 2006, the armedforces were to receive over 170 modern armored


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vehicles, i.e., 30 T-90 main battle tanks, 40 infantrycombat vehicles, and over 125 armored personnel

carriers (BTR-80 and BTR-90). The air force is to receive10 new helicopters (Mi-28 and Ka-50). Modernizationof 180 main battle tanks (-72, -80), 170 armoredpersonnel carriers, 90 combat vehicles, and 152 aircraftand helicopters will continue. Most importantly, theMoD procurement program for the airborne forces for2006-08 is focused on acquiring high-tech equipment,including personal theater navigation positioningsystems based on the GLOANASS; night vision goggles;new combat armored personnel carriers (BND-4); 125mm artillery pieces (Kord); machine guns (Pecheneg),etc. According to the MoD, such new equipment allowsRussia to increase combat strength of receiving unitsby two-fold.67

DEFENSE SPENDING

Defense spending has doubled in nominal terms(up 28 percent in real terms) since 2003. Althoughofcial overall spending on national defense is 30times lower than in the United States, it is difcultto compare statistical data on defense-orientedexpenditures. Since 2004, each year a different systemfor classifying defense expenditures has been presentedto the public and parliament. For instance, the nationaldefense budget headings in the 2004 state budgetaggregated to 2.56 percent of gross domestic product(GDP). However, the gure excluded data on certainsignicant defense-related expenditures (e.g., militarypensions and paramilitary forces), which were funded

outside the national defense budget. If we combine alldata on defense-related expenditures, according to theIISS assessments, then total defense spending came


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to over 680 billion rubles, or 4.05 percent of GDP.68The presentation format of the 2005 national defense

budget was changed due to the major structural reformof the RF government in 2004. As a result, under thenew budget classication system, all defense-relatedexpenditures were combined in a dedicated chapteron national defense, which contained an itemization offunds for R&D, maintenance of current equipment, andprocurement of new equipment for both the MoD andparamilitary forces, etc. There were several innovationsin the presentation format of the 2006 national defensebudget. The itemization principle of the previous yearwas abandoned, although the classied portion offunds transferred to the MoD (183.1 billion rubles outof 497.7 billion) and the 666 billion total allocated forall defense-related purposes was published.

Despite such impediments to budgetary clarity,

there are several obvious trends in defense spendingworth mentioning. In 2004, for the rst time since thedissolution of the Soviet Union, the funds allocatedfor internal defense equalled or exceeded the amountreceived for military exports. Defense expenditures in2006 grew to 1.3 times the gure for 2005. In 2006, thesum of federal defense orders exceeded prots frommilitary hardware sales abroad, i.e., $8 billion against$6 billion, according to Andrey Belianinov, newlyappointed head of the Federal Custom Service andformer director of the Federal Defense Order Service.69During the last several years, national defenseexpenditures have increased on the order of 25-to-30percent annually. In 2005 and 2006, although substantialattention was given to routine modernization of

existing equipment, one of the priorities of futuredefense reform is more focussed on intensive technicalmodernization of the RF armed forces as a whole.


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The goal is to increase the percentage spent onR&D and procurement as opposed to personnel. In

the past, 70 percent of defense spending went to fundpersonnel and only 30 percent went for procurement.For instance, in 2004 the personnel-to-procurementspending ratio was 63-37 percent; in 2005, 61-39percent; in 2006, 60-40 percent. The targeted goal is toreach 50-50 for procurement relative to personnelsupport. Specically, the RF Security Council in2004 established the goal of optimizing budgetappropriations through 2010-11 by achieving the 50-50ratio.70

The structure of the procurement budget wastransformed as well. Until 2005, funds allocated tooperational equipment were transferred mainly intoR&D. In 2005 and 2006, however, the MoD and securityservices are starting to receive actual deliveries from the

procurement projects, not just single items but complexdeliveries of equipment kits. At a press conference onMarch 28, 2006, Minister of Defense Ivanov pointedout that the MoD and the services nally had startedto commission new equipment in substantial volumes.From 2000 until 2005, the MoD commissioned only 40items of equipment, but in 2005 its commissioned listgrew to over 400 items.71However, this data shouldbe tempered by the fact that the Russian MoD hadbeen greatly underfunded in procurement, whichled in the last decade to the aging of the majority ofequipment, with only 20 percent of all equipment inthe MoD service being new. In comparison, 70 percentof Western military equipment kits are new.72 Serialproduction and deliveries of military equipment to the

Russian armed forces should be in full bloom by 2010. The state defense order for 2007 was taken underconsideration (rst reading) by the Military-Industrial


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Commission (MIC) on May 19, 2006, with a secondreading expected on June 2, 2006 (postponed). Defense

spending is projected to increase by 27-28 percent ingeneral in comparison with 2006, not just 20 percentas originally announced.73The MoDs 2007 order esti-mated a need for 302.7 billion rubles to cover equip-mentprocurement, repair, and R&D. Procurement programsof weapons and military equipment are to increase by22 percent; spending on repairs is to rise by 15 percent;and funding of R&D is to rise by 20 percent. The MoD isplanning to spend the equivalent of over 10 billion U.S.dollars for these purposes in 2007. Despite the lowerprojections announced earlier, Defense Minister Ivanovsaid that the next years procurement budget wouldrise by 27-28 percent. At the session of the State Dumaon defense reform, he stated that spending on nationaldefense was to exceed $29.6 billion (U.S.). Western

military experts assessed the newly provided statisticaldata cautiously. For example. Dr. Stephen Blank of theU.S. Army War College made this assessment: While[the new higher gures] might result from inationarypressures for raw materials, it might also suggest thatthe lack of transparency in Russian defense spendingis growing.74

The acquisition programs did cover nuclear andnon-nuclear items, contrary to the assessments of somewestern scholars.75 On May 18, 2006, First DeputyMinister of Defense Alexander Belousov stated that theRF armed forces received more than 170 items in 2006.The naval procurement program was revived withseveral important projects commissioned, includingstealth technologies.76However, despite the substantial

increase in funding, the volume of the state defenseorder in shipbuilding and vessel-building is still 100times less than the comparable gure for U.S. Navyprograms.


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There are 146 types of weapons and weaponsystems being designed and adopted for industrial

production to meet the needs of the MoD. Accordingto MIC Deputy Head Putilin, an additional 415 itemsof military hardware successfully passed the testing,and another 409 items passed the initial testing phase.77The MoI and internal forces budget for procurementprograms is expected to increase by one billion rublesin 2007. The Security Services budget for procurementprograms is to increase by 5 billion rubles in 2007.78Additional funding is to be provided for counterterror-ist operations and law enforcement activities inconict/hot spots across the country. Presently, theacquisition programs are implemented on the basisof a 3-year plan. On April 26, 2006, the State BudgetCommission adopted in principle the defense fundingparameters for 2007-09. The state procurement program

extending to 2015 is expected to be adopted in thesecond half of 2006.

In the course of implementation of the FederalDefense Order, several problems were revealed thattriggered intervention of the RF government:

Increasing costs of the procurement programsdue to the existing mechanism for pricing,

commissioning, and implementing the defenseprojects. The government demonstrated limitedability to regulate the pricing mechanisms onthe defense procurement projects. Problemswere registered with the limited efciency ofthe defense enterprises and the irregular owof nancing from the Ministry of Defence todefense enterprises.

Devaluation of export contracts occurred dueto the internal competition of the defenseenterprises for military export orders.


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The state of aged equipment and the technolog-ical base of defense enterprises has considerably

degraded in the last 15-20 years in the absence ofsubstantial nancial investments in the defenseindustrial sector.

As a result, the RF government took several ameliora-tive steps:

A new mechanism for commissioning procure-

ment projects and monitoring their delivery wasintroduced. As part of this process, the Military-Industrial Commission was established as wesaw earlier.

A decision was made to accelerate the creationof vertical holding companies as avenues forreforming the defense industry.

A new approach to funding defense projectswas introduced; the Public Private Partnership(PPP) principles allowed the government torely on business support in its plans of defensemodernization.

Reforming the Defense Industry.

According to Stanislav Puginsky, Deputy Head ofthe Federal Agency on Industry (Rostcom), completionof the reforms of the military-industrial complexis expected by 2010. The main concern of the RFgovernment and MoD ofcials has been the ability ofthe defense industry to deliver both the expandingmilitary export contracts and internal state defense

orders on time. An analysis of industry reform plansrevealed that the government has abandoned the oldpractice of preserving specialized labor forces as ameans of holding the countrys military-industrial


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complex together. The current focus is on establishingtechnologically competitive and nancially efcient

corporations that can swiftly deliver the neededproduct to the consumer.

The reform of the defense industry is to stimulatemergers and acquisitions among the presently existing579 state-owned enterprises and 428 shareholdingrms of the defense complex. The reforms aim totrigger needed bankruptcy declarations, closuresof some enterprises, and mergers of others. It isbelieved that approximately 46 percent of the existingenterprises could survive the reforms and be formedinto 40-45 integrated holdings with potential optionsfor further consolidation of assets. Integrated holdingsare envisioned in aviation, shipping, automobile,radioelectronics, information technology, tank build-ing, etc.

In 200506, a detailed feasibility study took place ofthe efciency and possibility of cooperation among 600enterprises traditionally involved in nuclear missileprocurement programs. In the last few months, thesenior management personnel of several dozens ofdefense enterprises were changed. A directing staff,with 20 and more years of experience, was ordered toretire, while new appointments were made with theaim of bringing fresh blood into the system. The newmanagement is expected to be free from any sentimentalattachments to the rms they were put in charge of soas to be able to introduce such needed but unpopularmeasures as personnel cuts, bankruptcy declarations,etc.

In his national address on May 10, 2006, President

Putin called for the swift creation of holding companiesin aviation/space and shipbuilding/vessel-buildingsectors. On the next day, he expressed interest in


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creating such holdings by the end of 2006. The RFgovernment is emphasizing creation of specialized

holdings in aviation, shipbuilding, informationtechnology, communications, etc., where PPPprinciples of combining state funding and businessinitiatives are to contribute to the swift revival ofnational industry and the military-industrial complex.For instance, a proposed aviation holding company,like the United Aircraft Construction Corporation, isto have different levels of engagement of private andstate sectors in military and civilian R&D.79The levelof state involvement in the military sector is to be noless than 75 percent; in transport and special-purposeaviation, it is to be around 51 percent; and in civilaviation projects, no more than 25 percent. Rosoboronexport, created by the merger ofRosvooruzheniyeand Promexport in November 2000, is

to oversee the process of creating holding companies.Rosoboronexportalready has experience in the creationand consolidation of helicopter rms as embodied inOboronprom, a Rosoboronexportsubsidiary. As part of thedefense industry reforms, Rosoboronexportis scheduledto be transformed into a state corporation. The rmwill continue to act as one of the main facilitators inestablishing specialized vertical holding companies.Rosoboronexport (with a budget grown to $6.1 billionand a portfolio worth over $20 billion) has not onlybeen coordinating arms export deals but, from 2002onward, started investing in the domestic defensesector by creating incentives for specialized holdings.Recent examples of such holdings are the following:Oboronprom, whichRosoboronexportestablished through

acquisitions and mergers of helicoptor producers, andthe automobile-building holding company, AvtoVaz,which Rosoboronexportacquired by buying a controllinginterest and installing its own management team. The


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next goal is creation of a shipbuilding holding company(the priority rms for acquisition are Severnaya Verf

and Baltiyskiy Zavod).80

In sectors where vertical integrated holdings have

not yet been set up, the mechanism of additional stateoversight over foreign defense orders was introduced.In accordance with the Presidential decree titled OnMilitary and Technical Cooperation between Russiaand Foreign States, dated September 2005, the FederalMilitary and Technical Service (headed by MikhaelDmitriev) was given the right to appoint managers toexecute export contracts, approvals of which are basedon collective decisions.

Additional Sources of Financing.

There is overall support for increasing defense-

oriented spending in Russia. The debates in theparliament have shown that MPs supported theallocation of more than one-third of the state budgetto defense needs. Some MPs such as Viktor Ozerov,Chairman of the Committee on Defense and Securityof the Upper Chamber, are keen to use nonbudgetarynancial means for military procurement, for example,nancing some of the military procurement projectsfrom the Stabilization Fund. However, for the timebeing any attempts to channel Stabilization Fundreserves into the defense sphere have been rejected bythe government. On May 12, 2006, First Deputy PrimeMinister Medvedev stated that the Stabilization Fundwas not planned to be used for such national programsas defense/security.

On May 10, 2006, the address to the nation byPresident Putin revealed only the main outline of thegovernments elaborate plans for the defense sector.


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There is an intent to combine tighter state control withliberalization of domestic investment opportunities by

introducing PPP principles in rebuilding the statesindustry and reforming the defense/security complex.Funding for the modernization of the armed forcesand services is to come from a variety of sources andthrough several channels. The main inux of funds tothe national budget is expected to come from customsand new taxing regulations, at least in 2007-09. Thefunds are not to be transferred directly to the nationaldefense budget, but implementation of certain socialand economic development programs is to benet thegeneral environment for implementation of the statedefense order. Several of the measures contemplatedare discussed here in greater detail:

Customs. In May 2006 the RF President orderedthe government to reintroduce direct control

over customs, given up in 2004, to the Ministryof Economic Development and Trade as amajor channel for increasing state revenues.The Federal Custom Service (which providesup to 40 percent of budget revenues) was thusresubordinated directly to the government. Inaddition, the Federal Custom Service was given

the authority to formulate norms and regulationscovering foreign economic activity. Its headis responsible for appointing and dischargingthe heads of regional departments and customofces, although the deputy head is appointeddirectly by the government. Andrey Belyaninov,former head of Rosoboronexport and a closeassociate of President Putin, was appointed

head of the Federal Custom Service on May11, 2006. As part of the reform initiative, theprivate custom checkpoints, which previouslyfunctioned on some borders, were closed.


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Arms Sales. Moscow introduced the practiceof prepaid agreements for future arms export

deals. On May 13, 2006, First Deputy PrimeMinister Ivanov announced that Russia wasabandoning the practice of selling its militaryhardware on credit or in exchange for promisedfuture incentives and paybacks.

State Control. The government announcedplans to increase its role in sectors of the

economy associated with national resourcesand industry, while creating favorableconditions for private investment. Measuresproposed include establishment of industrialholding companies and creation of ruble-denominated commodity exchanges for oil, gas,gold, etc.

More specically, on May 10, 2006, speakingbefore both chambers of parliament, cabinetmembers, and reporters, President Putinproposed setting up ruble-denominated oil andnatural gas commodity exchanges in Moscow.The feasibility of the proposal was establishedby several business teams with the participation

of Western partners during the early monthsof 2006. Particularly, increased dividends areexpected to be received from sales on the oilexchange. Preparations are to be completed bythe end of 2006, with full functioning to beginin early 2007. According to Russian experts,Russian companies lose up to $5-6 billion peryear on sales of Urals oil on foreign commodity

exchanges due to existing pr

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