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. Last Updated: 07/27/2016

Defense Spending Faces $1.5Bln Boost

The Defense Ministry will get an extra $1.5 billion next year to spend on weapons, research and hardware upgrades under the draft 2002 budget passed by the government Thursday.

The funds will give new Defense Minister Sergei Ivanov the means to give servicemen salary hikes and implement reforms to build the military into a leaner and meaner force, analysts said.

The draft budget allots to the Defense Ministry 262.9 billion rubles, or $8.31 billion at next year's projected average exchange rate of 31.5 rubles to the U.S. dollar. The amount is 2.55 percent of next year's forecast gross domestic product of 10.27 trillion rubles. By comparison, the 2001 budget earmarks 218.9 billion rubles ($7.29 billion), or 2.82 percent of this year's planned GDP, for defense spending.

The Cabinet on Thursday discussed and then passed the draft budget handed over by the Finance Ministry on Tuesday.

The additional $1.5 billion will be used for arms procurement, research and development, the Finance Ministry said Thursday, Interfax reported.

This year, the ministry is getting 57 billion rubles ($1.9 billion) for arms procurement, research and development. The military is expected to spend more than the allotted amount, and the government has pledged to transfer part of an expected 2001 budget surplus to the ministry.

The draft 2002 budget also provides for $460 million to $470 million of defense spending to be used on military reforms, the Finance Ministry said. Planned reforms include slashing the armed forces from 1.2 million servicemen in 2000 to 800,000 in 2003 and raising salaries for junior officers by 100 percent and senior officers by 50 percent.

The planned increase in defense spending, while relatively large, falls below the 3.5 percent of GDP that former President Boris Yeltsin ordered several years ago. However, the Defense Ministry's budget is likely to be increased as it winds its way through the State Duma and Federation Council to President Vladimir Putin for approval. In previous years, the Duma has upped defense expenditures before giving its approval.

The planned hike in expenditures will allow Defense Minister Ivanov and his team of recently appointed deputies to spend heavily on repairs and upgrades to the fourth-generation weapons systems currently being used by the armed forces.

Ivanov has repeatedly said that keeping those systems operational and improving them is a top priority next year. He also says he wants to improve combat training.

Konstantin Makiyenko, deputy head of the Center for Analysis of Strategies and Technologies, said upgrades next year could include installing attack planes and helicopters with systems that would allow them — at night and in any kind of weather — to attack both air and surface targets and share targeting and other data while in flight.

The Defense Ministry also needs next year to spend heavily on C4I systems, which boost the coordination and combat readiness of units in Chechnya and elsewhere, Makiyenko said. C4I stands for Command, Control, Communication, Computer and Intelligence. The army currently only has two divisions, in the Nizhny Novgorod region and Tajikistan, that are always combat ready. A third division is being formed in Chechnya.

While the ministry will spend money on repairing and upgrading hardware, it does not plan to spend very much more on procuring new arms, said a source in the defense industry. The source, who asked not be identified, said Russian arms makers will continue limited production of the arms needed to battle in Chechnya. These arms include the Ataka air-to-surface missiles that have been used by attack helicopters in Chechnya.

The source said that some projects to develop fifth-generation systems — such as a fifth-generation fighter jet — are not getting a separate spending line in the 2002 draft defense budget, even though top aviation officials have vowed to have the plane ready for takeoff in 2006.

Makiyenko said development of the fighter and other next-generation weapons systems should take priority over the purchases of existing arms until the economy picks up speed and gives the Defense Ministry the means to sink billions of dollars into new arms.

A draft 2001-10 armament program drawn up by the ministry calls for the serial production of new arms to begin in eight to 10 years. The program is expected to win the president's approval this summer.