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. Last Updated: 07/27/2016

Defense Spending to Rise in 2006

Russia will increase spending on domestic arms by 20 percent in 2006, Defense Minister Sergei Ivanov said Monday, marking a sixth consecutive annual increase.

"Next year's budget parameters are being debated at the moment but we can already say that in 2006, state arms procurement will increase by a minimum of 15 to 20 percent," Ivanov said at a meeting in the Far East city of Khabarovsk, Interfax reported.

A 20 percent increase would give the armed forces more than $1.3 billion in extra money to spend on the purchase of new weapons and maintenance next year.

2007 will also see an increase in spending, Ivanov added, but did not elaborate.

This year, Russia will spend 188 billion rubles ($6.5 billion) on arms procurement, with expenditure set to exceed revenues from arms exports for the first time since the break up of the Soviet Union.

The planned increase in spending, however, will have a limited impact on the domestic defense industry, as it has had to rely mainly on exports rather than domestic orders in recent years, some industry watchers and players said. Past promises of increased government spending have failed to materialize into orders, they said.

"Domestic arms procurement allocations have been consistently on the rise since the economy began to grow six years ago but we have not seen any purchase of weapons as such," said Konstantin Makiyenko, deputy head of the Center for Analysis of Strategies and Technologies, an independent, Moscow-based defense think tank.

Top military officials have repeatedly promised large-scale procurement would begin in 2005 but purchases have been limited, Makiyenko said. "Last year the armed forces took 14 battle tanks, six Topol-M missile complexes and upgraded five jet fighters -- this is not what I would call massive armament," Makiyenko said.

Earlier this year, Ivanov said the defense ministry's wish list for 2005 includes 91 tanks, a number of missile launchers, two warships, seven modernized Sukhoi fighters jets and nine defense satellites.

With domestic orders few and far between, exports remain the life line of Russia's defense industry, said Anatoly Dolgolaptev, chairman of the League of Assistance to Defense Companies, an industry association. "It is arms exports that have helped to preserve the defense industry in Russia," Dolgolaptev said.

Last year, Russia exported a record $5.6 billion worth of arms and expects export revenues of over $5 billion this year as well. In 2004, Russia's top defense company Sukhoi Aviation Holding generated $1.5 billion in revenues of which 92 percent came from exports.