Over the past few years, Russia has increased its defense budget, and through this has carried out the required modernization of the armed forces. Now, defense spending is planned to be reduced in accordance with new needs and requirements. All these processes naturally attract the attention of foreign specialists. Thus, the American analytical company Strategic Forecasting Inc., also known under the abbreviated name Stratfor, presented its vision of the current situation in our country and an opinion on the prerequisites for its emergence.
On May 3, the company published an article under the telling title "What Defense Cuts Mean for Russia's Military" - "What the budget cuts mean for the Russian army." Stratfor reviewed the available data from a variety of sources, including research from reputable organizations, and formed their opinion on current events. In addition, they tried to predict how the situation will develop in the foreseeable future.
At the beginning of the article, Strafor notes: a strong blow has been dealt to the defense budget of Russia. Speaking about this, its authors refer to the data of the Stockholm Peace Research Institute (SIPRI). In a recent annual report, SIPRI wrote that in 2017, Russian defense spending decreased by 20% compared to 2016. The document states that Moscow is still trying to invest in defense, but the existing economic problems impose certain restrictions. At the same time, analysts noted that in order to understand the reasons for the 20 percent reduction, it is necessary to know the current context.
In the coming years, the development of the Russian armed forces will continue. However, the Kremlin now faces a new challenge. He will have to select priority programs for subsequent funding while reducing spending on others.
Stratfor recalls the events of the distant past. After the collapse of the Soviet Union in the nineties, Russia's military spending has been steadily declining. However, later, after Vladimir Putin came to power, there was a desire to restore the armed forces. Under the new president, the defense budget has grown steadily. Against the backdrop of general economic growth and higher energy prices, there were additional incentives. Thus, funding for the army increased after the "Russian-Georgian war" of 2008, which made it possible to identify the shortcomings of the existing army system.
The authors of the note point out that five years after the war with Georgia, new investments in the army fully paid off when Russia began to use its modernized armed forces in operations in Ukraine and Syria.
However, while Moscow was flexing its muscles in Syria and Ukraine, the Russian economy missed two significant blows. The first was to lower the prices of exported energy resources, and the second was painful sanctions by the United States and its Western allies. This resulted in the economic downturn observed from 2014 to 2017. Economic problems have forced the Kremlin to resort to tougher solutions. As a recent study shows, Stratfor notes, this has led to significant cuts in the defense budget.
Stratfor writes that the Russian defense budget is undeniably shrinking. However, this 20 percent drop in costs can be misleading when viewed in isolation from other factors and information. First of all, difficulties may be associated with the events of 2015. Then the Ministry of Finance of Russia made a large payment, the purpose of which was to pay off the accumulated large debt to a number of defense industry enterprises.
If this payment is not taken into account in general terms, the current reduction looks much more modest. For example, analyst Michael Kofman of the Center for Naval Analyzes has calculated that, excluding those spending, the current defense budget cut is only 7%, not 20%. In addition, accurately calculating the defense spending of a country like Russia is extremely difficult. A large amount of spending on defense, primarily on the development and implementation of classified projects, is often not disclosed, which seriously interferes with calculations. Finally, Russia's defense budget could start growing again if energy prices rise again.
Strategic Forecasting experts believe that the "explosive growth" of the Russian defense budget, which has been observed over the past fifteen years, is largely over. At the same time, the Russian armed forces will continue to be updated and improved in one form or another using various methods and means. However, as the authors of the note believe, Moscow will now have to abandon the previously used approach, which provided for the simultaneous and active coverage of all areas. Instead, it will have to limit itself to developing only key areas.
Referring to one of its previous analyzes, Stratfor tries to predict events for the foreseeable future. It assumes that in the future the Russian military and political leadership will pay special attention to strategic nuclear forces. In addition, high-precision weapons, as well as radio-electronic and radio-technical systems of different classes will remain a priority. In this case, the navy, which has "conventional" weapons, is likely to become one of the victims of the reduction in the military budget. It can affect it most strongly.
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Stratfor has included a curious graph in its "What Defense Cuts Mean for Russia's Military," showing Russia's overall economic performance and defense spending. In addition, it reflected the main events of recent years, energy prices and the positions in which V. Putin worked at different times.
The commentary to the chart notes that low oil prices and sanctions from foreign states are putting serious pressure on the Russian economy, including the defense budget. At the same time, certain problems of counting are indicated. The calculation of Russia's military expenditures cannot be carried out with high accuracy, however, even in such a situation, all the main trends can be seen. Thus, it is clearly seen that the Russian defense budget has been constantly growing for a decade and a half. And now, it looks like costs will be reduced.
The graph below shows the values of gross domestic product in trillions of US dollars at the current exchange rates (turquoise line). The GDP graph shows some average annual prices per barrel of oil. The blue graph depicts the military budget expressed in billions of US dollars at 2016 prices. For clarity, the gross domestic product and the defense budget are shown at different scales, although they are superimposed on each other. So, the scale for GDP is prescribed from zero to 2.5 trillion dollars, while for defense spending on the same schedule, the limits are from 20 to 70 billion.
On a chart from Stratfor, the turquoise line of GDP has been rising continuously from 2000 to 2008. Then there is an annual decline, after which the growth resumes and continues until 2013. From 2014 to 2016, new points on the graph are located one below the other.
The military spending schedule looks different. The blue line begins to strive upward already in 2000 and, changing its "steepness", continues to rise until 2016. The graph also shows the fighting in August 2008, the end of the counter-terrorist operation in Chechnya in 2009, the "intervention in Ukraine" and the Syrian operation. It is shown that in 2011, defense spending increased significantly. Further, the growth of the budget was uniform over several years, and in 2017 it decreased noticeably. It should be noted that the graph from Stratfor shows exactly those calculations, according to which the current reduction is not 7%, but 20%.
Different scales of displaying indicators clearly demonstrate the main trends, but at the same time do not allow assessing the ratio of GDP and defense spending. It is known that in 2000 the gross domestic product of Russia in "current dollars" was 260 billion. On defense in the same year, according to the schedule, they spent a little more than 20 billion - about 7-7.5%. GDP in 2008 exceeded $ 1.66 trillion, and the defense budget, according to Stratfor, during this period exceeded $ 40 billion, i.e. amounted to slightly less than 2.5%. In 2013, before the start of the observed drop in indicators, GDP almost reached $ 2.3 trillion, and about $ 55 billion was spent on defense - also only about 2.5% of the gross domestic product. Finally, for 2016, the declared GDP at the level of 1.28 trillion dollars and the military budget at the level of 70 billion dollars. Thus, due to the fall in GDP in dollar terms, the share of military spending reached 5.5%.
It should not be forgotten that in the graph from Stratfor, the gross domestic product is indicated in the current values of a particular year, while the sizes of defense budgets were adjusted to the 2016 rate. This makes it difficult to determine the real relationship between spending and GDP. However, in such a situation, the well-known picture is once again confirmed. Until the beginning of this decade, the Russian defense budget was growing along with the economy, and only the current State Armaments Program for 2011-2020 changed the situation in a certain way. However, even in this case, expenditures grew simultaneously with GDP.
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The version of Strategic Forecasting Inc. on the reduction of the Russian military budget in connection with general economic problems, of course, has the right to life. However, one should not forget the statements of Russian officials who have repeatedly announced current plans.
The military and political leadership of Russia in the past and this year has pointed out several times that the bulk of the most complex and expensive programs within the framework of modernizing the army are coming to an end, and this is helping to cut the budget. The peak of spending has passed, and after that, over the next five years, it is planned to reduce defense spending, bringing it to a level of less than 3% of GDP. However, even in a reduced form, the budget will be sufficient to maintain the army in the required condition and to continue the renewal of its materiel.
The development of the Russian armed forces in general and its financial aspects in particular arouse the natural interest of foreign specialists. Various assessments and forecasts are made. However, there are often biased publications that conflict with well-known data. With some reservations, Stratfor's latest post on Russian military spending is an example of this. She ignores the known information confirmed by officials, but at the same time offers an alternative explanation of the events, which better corresponds to the current trends in foreign political analysis.
However, regardless of the opinion of foreign analysts, Russia continues to modernize its armed forces. A significant part of the work has already been completed, and now it is possible to reduce costs in a certain way. And how this will be explained abroad is not so important when the army acquires a modern material part, and the country gets the opportunity to redirect money to other areas.
