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Grachev and his First Deputy A. Kokoshkin. The Russian Generals apparently did not support the proposed restructuring and tried to impede the process striving to keep the key financial and economic levers in their hands together with the associated capabilities. A lot of efforts and time was wasted.

Now the first command and control branch acquired two major tasks financial and economic support to all the activities of the Ministry of Defense and the Armed Forces and interaction with the defense-industrial complex to ensure supplies of military equipment and hardware.

The newly created procurement services of the RF AF united in the second branch structure the rear services support and the technical services support; that was also in line with the best practices of the advanced countries. The reduced scope of tasks led to reduction of the administrative military staff by four times while the remaining administrators were reoriented to military objectives. Many purely economic activities were withdrawn from the RF Ministry of Defense and included into the scope of services of OJSC Oboronservice namely: maintenance of arms/hardware and military equipment, modernization, repairs, liquidation of surplus stocks, utilization of arms and limitary equipment, maintenance of all real property facilities, production and supply of agricultural products and goods, trade and daily services, catering, printing products, hotel services, etc. As for other procurement functions, some of them were outsourced (wholly or partially) to third parties and covered such types of procurement as food supplies, bath and laundry service for the military people; aerodrome maintenance, truck shipments, fuelling, technical maintenance and service for troops and military equipment and arms. As a rule, OJSC Oboronservice has acted as a general agent of the Ministry of Defense using the bidding system for contractors.

The Ministry of Defense and the Armed Forces have never gone through such radical changes before. Their functioning in 2011 revealed both pluses and minuses. Among the pluses, there have been quite valuable results, in particular regarding troops disposition. It is worth noting that the number of guarded military settlements reduced from 22,000 down to 4,000 with the prospects to continue reduction to a less than a thousand of such settlements.

Only 7,000 people will be employed to guard them. The Air Force airfield network that used to have 356 airfields has been reduced down to 7 air bases with a more powerful infrastructure; this ensures better quality of airfields maintenance and operation. The released settlements and other facilities have been passed over to the local governments.

6.7.2. The RF military policy and its implementation Early autumn 2011 it appeared that the Ministry of Defense could not approve the contracts for construction of two nuclear submarines of Borey type and one multipurpose nuclear submarine of Yasen type with OJSC OSK (United Shipbuilding Corporation). As A. Serdyukov, Defense Minister, announced, OSK refused to disclose the price structure on its products as the customer demanded (the last portion of Rb 20bln out of Rb 581bn as a total value of the state order for 2011 were involved).

RUSSIAN ECONOMY IN trends and outlooks Though this scandal did not directly affect the combat potential of the Russian sea-based nuclear forces (there were no missiles for new submarines), still it was very disturbing since the government officials made a lot of promises to settle the situation in the second half of the summer. It is clear now that the attempts of Russias President and the Federal Government Chairman to get involved helped to save their faces only. Both officials made very important statements with regards to the military expenses and the national military and technical policy.

Thus President D. Medvedev addressing the members of the strategic exercise Center2011 on September 27, 2011, in the Chelyabinsk region1 announced that spending on defense, new arms, money allowances for the servicemen, their household activities and their apartments will remain the highest priority of the government. There are no two ways about it. Having evaluated this statement as an ethic prescription ( this is imperative) he reaffirmed that we (though the budget may regret this) will always have large expenses to support the defense and the security as this is our mission in relation to our citizens and our neighbors and linked this to such factors as the territory of Russia and its membership in the UN Security Council and availability of nuclear arms.

Unfortunately this statement of Russias President not only creates doubts as to his logics (regarding the mission of Russia with regards to the neighbors) bur contradicts Articles and 112 of the RF National Security Strategy for the period ending 2020 approved by President (SNB-2020)2, that do not include military expenses as one of the national security priorities or any aspect of the national security. Moreover, this document does not give the definition of the notion of a supreme priority (unlike the notion of the strategic national priority). Misunderstanding or ignoring the optimal balance concept expressed in SNB-means that the great power status and not the growth of national welfare is given preference, that the investment resources will be frozen and rates of economic growth decline in a long-term perspective.

V. Putin. Chairman of the Federal Government, in his introduction to the meeting dedicated to the issues of the defense and industrial complex on October 7, 20113 declared that there is a great large-scope task in front of us: to re-equip fully our army and Navy in the near 10 years. Though earlier D. Medvedev stated that the aim of our state arms program for the period 2011 2020 was a 70% re-equipment (30% by 2016) and not a 100%.

The challenge of a 100% or 70% re-equipment during 10 years seems to ignore the native and/or foreign experience and demonstrates that the program developers have not been aware of the balance principle and unable to look beyond the 10-year horizon.

The rationale of the 2020 state arms program and the opportunity for its implementation looks doubtful with account of the statements made by V. Putilin, the then First Deputy of the Chairman of the Military-Industrial Commission at the RF Government that the Ministry of Defense had no reasonable justification of the program; the former Deputy to Defense Minis Meeting with unit commanders involved in combat exercise Center 2011 (short-hand notes) September 27, 2011. http://news.kremlin.ru/transcripts/12836.

National security Strategy of the Russian Federation up to 2020. Approved by RF President Decree of May 12, 2009 No. 537.

V. Putins introduction at the meeting on the issues of development of the defense and industrial complex (short-hand notes) October 7, 2011. http://premier.gov.ru/events/news/16656/.

Section Institutional Issues try V. Popovkin also made it clear in March last year 1 that in Russia the share of state-of-art arms in the military equipment fleet is 20% for strategic nuclear forces and under 10% for general-purpose forces. For comparison: in the armies of the leading foreign states such share is 30% to 50%. If these data about the situation in the Armed Forces of the leading works countries are true, it means that Russia must reach these indicators as early as 2016 and surpass this level by 2020. It looks that the developer of the Russian arms program for 2011-2020 has never asked himself why the share of new arms and equipment in the world leading countries does not exceed 50% The announced 70% re-equipment plans by 2020 are unreachable due to the poor potential of the national economy, and the first year of the program delivery has proved this. What the plants of the defense and industrial complex will do if after 2020 the Army and the Navy are fully re-equipped: will they have to re-orient themselves to foreign markets since the arms samples have a service life of 25 to 30 years.

It is impossible to make a correct assessment of the Russian military and technical policy in 2011 without the account for the events occurred in 1H. May 2011 was extremely important in this respect since on May 10, President D. Medvedev held in the Gorky a meetingdedicated to the development of the Russia military and industrial complex where he informed that for the state arms program adopted late 2010 budget allocations would be four times larger than for the previous program.

On March 21, 2011, Prime Minister Vladimir Putin addressing the meeting in Votkinsk on the implementation results of the state arms program3, and on April 20, in the report of the RF Government on the results of his activity for 2010 in the State Duma affirmed that for the new arms program the government intends to allocate funds by approximately three times more vs the previous program4. It is obvious that if we compare the arms programs (for all power ministries) the Presidents assessment of May 10 is more correct than the government assessment given the declared growth of allocations from Rb 4.9 trillion up to Rb 21.5 trillion. It is worth noting that the said growth for the arms program of the Ministry of Defense was actually five times higher (more accurately by 4.9 times: from Rb 4 trillion to Rb 19.5 trillion).

It is hard to understand why the federal government has been disseminating false information for such a long time. Possibly,t our government is used to ignore such trifles and/or this is a simple arithmetic error. But it is quite probable that the use of such not fresh information determined, to a certain extent, the successful, in terms of the Russian military-industrial complex, approval of the state arms program by President since in terms of the budget almost triple growth of the budget allocations is not so frightening than the fivefold.

The approval of the state arms program for 2011-2020 by President Dmitry Medvedev is a case study. This fact became known only late February 2011 when Deputy Defense Minister Vladimir Popovkin announced at the meeting with journalists that the program was approved by President back on December 31, 2010, and this information was unexpected for the major We cannot afford buying poor arms// Military Industrial Courier. 2011. 28 March (No. 8); D. Litovkin Triumph and Circon march off to troops// The News. 2011. 11 March; National Defense. 2011. March.

Meeting on the issues of development of the Russias state arms program (Short-hand notes) 10 May 2011.


Introduction by V. V. Putin at the meeting on the implementation of the state arms program for 20112020.

(Short-hand notes). Votkinsk, 21 March, 2011. http://premier.gov.ru/events/news/14545.

Short-hand notes of the RF State Duma meeting of April 20, 2011. http://transcript.duma.gov.ru/node/ 3423/full.

RUSSIAN ECONOMY IN trends and outlooks ity of the attendees since the Defense Ministry liable sources asserted otherwise through January.

What made the Russian government conceal the approval of the state arms program worth over Rb 20 trillion for more than two months is difficult to say. The reference to the secrecy of the Decree does not sound convincing as there is an official practice of publication of extracts, statements and information about the signing of classified documents. It may be possible that the program was signed in the first days of January 2011 retroactively in order not to repeat mistakes made in signing two previous programs when unexplainable intervals between their approvals reached 10-12 months.

The previous practice with the state arms programs has shown that the attempts to delay their signing in order to improve the quality are not successful since the last minute finalized programs have not been duly implemented. The Russian state arms programs are unachievable in principle.

This fact escapes the interested community, possibly, due to the unique combination of ten-year (horizon) planning with the five-year plan adopted for our programs in the ex-USSR.

It is often believed that the new state arms program is passed because the previous program failed this is not true since the new program is adopted because time has come to do it: in Russia there is an established practice to adopt such programs once every five years. As the development of the next program starts several years before the first part of the previous program is finished the developers indeed have no possibility to review the results of the program implementation. However, the implementation results can be seen with a naked eye regardless of the traditional screen of the state secret. It is quite possible that the government authorities did not want to make a focus on the actual approval of the state arms program because of this.

The implementation results of the state military order in the first year of the program confirm our skepticism.

Thus, instead of the growth of the military production by 14% expected by the RF Ministry of Industry and Trade1 in shipbuilding, this production fell down by 15.72 while commissioning of Borey strategic ballistic missile submarines that, according to some optimistic declarations3 are almost ready for combat alert duty, is 6 to 12 months behind the schedule and expected at best by the end of 2012.

In 2010 and 2011, the shipbuilding production under the state military order was worth Rb 126 bn and Rb106bn and 765m accordingly, and these enable spending of Rb4,7 trillion of the state program for re-equipment of the Russian Navy4 only under the condition of annual growth of military shipbuilding production by 30.6% during the remaining 9 years. In 2020, the shipbuilding production under the state military order will exceed the 2011 production tenfold.

In a more realistic assessment of the production surplus by 10% at best, the required allocations for the shipbuilding part of the state military program do not exceed Rb1.7 trillion, in other words, the budget spend for the Navy equipment can be reduced by 64% (almost by three times). Thus a logical step (not in terms of budget saving but in terms of spending the Report of the RF Ministry of Industry and Trade: 20042011.

Shipwrights will not corrode, Red Star, 2012, February 4 (No. 19).

E.g. see To be strong: the guarantees of national security for Russia// Russian Gazette. 2012. February 20.

Buildup of the force// Vzglyad (A View)// 20122, February 6.

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