The Durability of Russian Military Power: Moscow’s Prospects for Sustaining Direct Competition

My issue brief as part a series run by the Changing Character of War Centre at Oxford, assessing the durability of Russian military power. I recommend their centre’s website for some great Russia mil analysis. This briefing in particular focuses on manpower, materiel, and funding. I tackle the issue of whether Russia is able to sustain a competition with the United States, and the extent to which it will be able to sustain the military as an effective instrument of national power despite the many problems the country faces. I’ve found that some of the discourse on this subject, particularly with respect to manpower/demographics, could be better informed by data, and merits a closer look.

 

Political analysis in the West retains a strong bias towards measuring state influence and status according to economic foundations of power, yet Russia has demonstrated that military power remains an important instrument in international politics. Having enacted a period of military reform 2008-2012 and financed a sustained program of modernization, Russian foreign policy is increasingly underwritten either by the use of force, or threat of force, as part and parcel of coercive diplomacy. Though much attention is drawn today to indirect competition, it is Russia’s successful resurrection of military power which enables the country to ‘bench press’ above its weight in the international arena. Indeed, indirect competition is often messy, indecisive, and ineffectual without the weight of conventional military power supporting it.

While observers are cognizant of the resurrection of Russian military power, there remains, however, a considerable debate as to its durability. Simply put, many believe that demographic, economic and industrial trends are against Russia – the country will not be able to sustain this level of direct competition. Yet there is little to suggest, looking ten years out and even beyond, that Russia will suffer from those severe shortages of either manpower, money or materiel which would reduce Russia’s ability to underwrite its foreign policy. On the contrary, Russian demographic trends reflect only an increasing availability of manpower for the growing force, a sustainable defence budget in terms of spending, and a modernization program that will suffice to arm the force well into the 2020s. It can go on, and it will.

Much of the conversation on Russian demographics is simply ill informed. A decline of birth rates throughout the 1990s lasted until 1999. Russia suffered through a decade of declining health standards, fertility, falling birth rates, and emigration. Despite the decline in numbers of 18 year olds available for service, Russian armed forces expanded from perhaps around 700,000 in 2011 to over 900,000 in 2017. The contract share of the force swelled to as much as 380,000, or more than 50% of the enlisted force. Russian birth rates increased year on year from 2000 until 2015. This means that men born in 2000 will be of service age this year, 2018, and the pool of men aged 18-27 should increase every year from now until 2032.

Russia’s birth rate – World Bank

world-bank-rf-birthrates.jpg

Birth rates are hardly the only indicator responsible for growing manpower availability in Russia. The draft board, Voenkomat, has also helped clean up corruption in the number of health exclusions granted to those seeking to dodge service. In the past, many Russians would spontaneously become unhealthy upon turning 18. But with health exclusions revised, and the rampant buying of disqualifications now attended to, the amount of those deemed unfit had declined to only about 23% in 2016 according to head of the General Staff’s Mobilization Directorate Colonel General Tonkoshkurov. Russia’s chief military prosecutor, Valery Petrov, stated more recently in 2018 that overall draft evasion is down by about 30% from the corrupt heydays of the past. Beyond reductions in draft dodging, increases in pay, growing public respect for the armed forces, and overall improving conditions in the military have all had a positive effect on recruitment. Starting in 2018, a change in the conscription law now offers draftees the option of one year conscript service or two years under contract with better terms.

General demographics trends offer a complex picture of Russia’s future. Russian life expectancy actually reached a record high in 2017, and fertility rates are closing in on those in the United States, up from 1.157 in 1999 to 1.75 in 2016 (U.S. was at 1.8). Russia suffers from three principal problems in demographics: the demographic echo from the disastrous 1990s which will return to haunt Moscow in the mid-2030s, a declining workforce which is losing perhaps 600,000 per year in retirements, and the recent economic recession which slowed birth rates 2015-2017 (even despite generous state sponsored family programmes) which will have knock on effects years from now. Russia’s main problem is not so much the size of its population, but its productivity. Nevertheless, because Russia remains the primary labour market for the former Soviet Union, and is host to a large pool of immigrant labour, it does have answers readily available for the present decline in the labour force. Despite all these challenges, therefore, Russia’s current population is much healthier of late, with the longest lifespan witnessed, and manpower availability is likely to see sustained increases into the mid 2030s.

Fertility rates comparison – World Bank

Fertility rates WB
A steady decline in US fertility rate meets a rise in Russian fertility rate prior to the econ crisis

From a materiel standpoint, it is also difficult to observe looming shortages. The previous State Armament Program 2011-2020 was meant to jumpstart the defence industry, and effectively provided for a dramatic increase in the modernization rating of Russian equipment from 15% in 2010 to almost 60% in 2017 (according to official figures). That program’s achievements merit briefly recounting, as they include the acquisition of 418 aircraft for tactical aviation, 3 combat aviation brigades and 6 combat aviation regiments, 16 air defence regiments of S-400, more than 70 radars of various types for VKS Aerospace forces, 10 Iskander-M brigade sets, completion of Russia’s early warning radar network, 55 military satellites launched into orbit, 12 new regiments of Yars road-mobile ICBMs deployed, more than 3,000 modernized ground force vehicles, 3 new SSBNs and 2 new 4th generation SSGNs, together with diesel-electric submarines, corvettes, and auxiliary ships. This list includes upgrades in more specialized fields, including electronic warfare brigades and companies, new command and control systems to enable recon-strike and fires, together with more than 1800 drones acquired across services.

The funds spent by 2017 doubtfully exceed 50-60% of the original 19 trillion RUB allocated. Thus the new state armament program 2018-2027, at another 19 trillion RUB, plus 1 trillion for infrastructure, and 3 trillion for other security services, represents a sustained investment. Albeit with reduced purchasing power, the new state armament program will focus on areas neglected, or perhaps ‘jump started’ by its predecessor. These include large-scale acquisition of precision guided munitions, long-range standoff cruise missiles, transport aviation, bomber modernization, expansion of artillery, armour, and missile formations in the ground forces, more capable drones, and next generation tech like hypersonic weapons.

Even in Russia’s lagging industry, shipbuilding, one can see that core sectors of competence such as submarine construction remain capable of producing some of the most sophisticated platforms available. Russia currently has 11 nuclear powered submarines laid down, and is able to build a diesel-electric submarine in 18 months, with a division of 6 currently in production for the Pacific Fleet. Despite a messy divorce from Ukraine’s defence sector, the material is not only there to sustain Russian military modernization, but the production rates are more than sufficient even in troublesome sectors.

In other areas, such as the ground forces, the conflict in Ukraine and Syria has illustrated that Russian ‘good enough’ is can deal with the country’s military requirements for the coming decade. Modernized Soviet platforms are able to beat any former Soviet republic on Russia’s borders. Possessing them at high readiness, and large numbers, means Russia can effectively impose its will on neighbours or coerce them in a crisis. If anything, most of the challenges faced by Moscow are self-imposed, such as the decision to expand the ground force structure so quickly that it will inherently suffer in readiness and mobility. The defence industry has shown itself capable of producing current generation technology such that Russia has a viable path towards conventional deterrence vis-a-vis the United States, meanwhile less advanced elements of the Russian military are more than suitable for compellence in local and regional conflicts.

Assuming levels of economic growth at 1.5%, there is little to suggest that Russia cannot sustain this level of military expenditure, which will amount to no more than 4% of GDP. Meanwhile Russian spending on national defence will likely hover at around 2.8% of GDP, as the defence budget is only seeing modest cuts relative to other sections of the budget. The fact that oil prices are 50% above the $40 per barrel mark which the government used to underpin its budget expectations is yet another indicator that the economic outlook for defence spending is considerably better than usually appreciated. While the defence budget may still have fat to trim, coming off of historic highs in 2014, there is less urgency in spending on procurement after major gaps have been filled in 2011-2017, and the defence industry revitalized in the process. Adjusted for purchasing power parity, Russia remains just behind Germany as the second largest GDP in Europe. Although it is technically a middle income country, Russia’s raw GDP hides considerable purchasing power when it comes to defence spending and the ability to sustain its armed forces.

On the basis of macro indicators such as manpower, materiel, and money, therefore, Russia is positioned to sustain its policies, even if this means a prolonged confrontation well into the 2020s, and perhaps 2030s. More importantly, Moscow’s ability to leverage military power as one of the more decisive instruments in pursuit of its foreign policy objectives should be clearly understood. Russia can retain the current degree of military activity, snap readiness tests, large strategic exercises, expeditionary operations in Syria, and a rotating presence in Ukraine. The challenges Russia faces are consequential, often resulting in cycles of stagnation and mobilization, but they are not deterministic, as has historically been the case for this particular power.

The Collapsing Russian Defense Budget and Other Fairy Tales

Posted today on Russia Matters, a project by Harvard Kennedy School’s Belfer Center for Science and International Affairs.  Below is my latest piece in response to the headlines generated by SIRPI’s trends in military expenditure report alleging a 20% reduction in Russian military expenditure in 2017.

One can only observe with bemusement the growth in size, readiness and modernization of Russia’s armed forces when juxtaposed against recent news stories reporting a 20-percent decline in Russian defense spending from 2016 to 2017, described as the first notable cut since 1998. It is seemingly impossible for both trends to be real. Indeed, Russian defense spending is alive and well, with cuts limited to single digits. The announcement about its steep decline by the Stockholm International Peace Research Institute, or SIPRI, was erroneous. Changes in Russia’s handling of defense funding have led SIPRI and, before it, IHS Jane’s Defense Weekly to misreport the reduction. Now, for the second time in as many years, the miscalculation is proliferating across major media outlets.

The main source of the error is readily identifiable, arcane though it may be: In 2016 the Russian government started paying off defense-sector debt that had piled up over the years, which created the illusion of much higher spending on national defense and, accordingly, a subsequent decline the following year. Before this, the Defense Ministry (MoD) had managed to rack up close to a trillion rubles in debt to defense contractors, who had been producing equipment on credit borrowed from various banks. The MoD was paying the interest on these loans and the Russian leadership was none too happy about it. After the government decided to pay down the debt, the Finance Ministry provided 792 billion rubles for this purpose, a figure that seemed to boost 2016 defense spending from its actual 3.09 trillion rubles to 3.8 trillion. (Subsequently another 186 billion rubles was spent in 2017 on paying down debt, making the spending appear higher for that year as well.) According to the MoD, this measure saved 130 billion rubles in interest alone.

Another change disrupting the continuity of Russian defense-spending data, adopted by the government in 2017, was to tighten up controls on funding left over in the hands of the defense sector when it was unable to deliver weapons on time. Prior to this, the defense industry was allowed to build up stockpiles of money advanced for armaments that had not been produced as scheduled. Furthermore, some defense enterprises were clever enough to collect interest on these large advances, which sat in their accounts. At the end of the year, about 250-300 billion rubles ended up trapped in this manner, and the MoD had a hard choice to make: either further finance incomplete orders, and therefore reward delinquency, or return the money to the government budget and potentially lose it. To solve the matter, the MoD will now pull unspent funding back to the government budget under the condition that it will be reissued, and roll over payments into the following year. This means that some portion of each year’s budget (perhaps 5 percent or so) will flow into the next year.

In making its calculations SIPRI also converted the outsized budget figures from 2016 into U.S. dollars, which exacerbated the impression of a dramatic decline in defense spending in 2017. Measuring Russia’s defense budget in dollars is analytically unhelpful, since Russia’s defense sector doesn’t buy much of anything in dollars. Thus, the resulting figures are distorted by changes in currency exchange rates, and they are not adjusted for purchasing power parity. Ultimately, several percentage points in SIPRI’s alleged decline were likely due to currency devaluation, which is almost completely irrelevant to the matter in question.

While we are in fact witnessing a steady decline of Russian defense spending as a percentage of GDP, defense cuts in absolute terms have been modest at best. Official spending on defense dropped by about 8 percent from 2016 to 2017, from 3.09 trillion rubles to 2.84 trillion, and the defense budget was only scheduled for cuts averaging 5-6 percent over the three-year period of 2017-2019. (The numbers in this article reflect official defense spending, not total military expenditure, which might include funding for other militarized services like the border guards and Interior Ministry troops, or military pensions, which could add another trillion rubles to the bottom line.) Actual reductions in military spending began in 2015, by about 5 percent. Economic factors certainly played a role—primarily Russia’s recession and the drop in oil prices—but perhaps more important were the geopolitical factors: loss of access to certain defense articles imported from the West and the messy divorce from Ukraine’s defense sector. Due to the war with Ukraine, Russia’s defense industry could not buy components from its long-time partner across the border; this, in turn, delayed production and left the Russian Defense Ministry with less materiel to buy, while the funds to pay for it sat in government coffers instead of getting spent.

Russia’s defense expenditures are not a coherent data set and have become easy to get lost in given the changes that have taken place. Nonetheless, it is especially frustrating to see the narrative of “slashed military spending due to economic woes” resurface now, since the same miscalculation was made last year by Jane’s, which reported a 25-percent reduction in Russian defense spending from 2016 to 2017 based on Moscow’s advance announcement of planned expenditures. Jane’s later acknowledged the mistake and took down its original story, but by that time the sensational figure had already been reported widely in the news media.

Although it is impossible to know in advance how much will be spent in 2018, it is already looking like this year’s anticipated 5 percent reduction is unlikely to materialize. Instead of the planned 2.768 trillion rubles, the Russian budget’s defense chapter has already been amended to 2.953, a 6.7-percent increase; this higher 2018 figure likely includes carryover payments for armament procurement in 2017. Hence defense spending in 2018 is unlikely to decline, but the Russian leadership still intends to see military expenditure reduced as a share of GDP. Planned spending on national defense was envisioned at 2.815 trillion for 2019 and 2.807 trillion for 2020—also hardly a steep cut, and current performance suggests actual numbers will prove higher.

Moreover, despite a reduction in Russia’s purchasing power, the new state armament program for 2018-2027 is quite substantial for the defense sector, especially considering the amount of modernization and procurement of new equipment already accomplished under the previous one. The latest program allocates considerable resources for additional procurement. It is configured in a 19+1+3 formula, with 19 trillion rubles for the armed forces, 1 trillion in infrastructure spending and another 3 trillion for other security services, such as the National Guard. The previous program of 2011-2020 was valued at close to 19 trillion rubles (plus infrastructure investment), about half of which was spent by 2017, at a rate that might average 1.35 trillion per year.

Thus, Russian defense spending and procurement is in for a sustained trim, but the reductions are fairly minor in comparison to the sensational headlines. Moscow has long declared its intentions to halt the growth in defense spending and reduce military expenditure as a share of GDP over time. Given the complexity of Russia’s defense budget, and a data set that lacks continuity, the best thing one can do is tread with care when it comes to pronouncements.

Because budget work is kind of lackluster and doesn’t offer much in terms of photos, I’m attaching this picture of Ivan, our lead analyst of budget analytics and kibble.

Ivan director of budget analytics and kibble