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The data on dynamics of other IMS does not appear encouraging, either. As noted above, with the rise of SCAs and the need to project troops from one direction to another, the focus of attention should be on equipping Russian Air Force with military cargo aircraft and helicopters, and, perhaps, some other means of urgent transportation, which are not there as yet.

Joint declarations by the Russian and Ukrainian military leadership on renewal (after some modernization) of the cooperative production of a uniquely efficient Antonov-124 and a smaller Antonov-70 seem inspiring, albeit they were made before, too. The past efforts resulted in their rejection by representatives of Russias MIC and even those of the Russian Air Force, who were reluctant to share with foreigners prospective lucrative receipts and possibilities for their private use. Overall, in 2010, the Air Force received 4 combat aircraft, but lost 6 other ones in accidents.

The Military Balance. London: IISS, 20082010.

RUSSIAN ECONOMY IN trends and outlooks The military-economic conclusion by the first three groups of IMS is evident: despite an increasingly growing volume of spending, there has been no adequate surge in the number of modern weaponry across the groups in question.

The situation with the fourth group, which is designated for cyberwar, is yet gloomier.

Without much details, let us note that the modern soldier is, as a rule, equipped with protected communication and data transmission/receipt, and positioning and navigation gear; infra-red and laser target capture devices; and, if need be, outside arms, friend-or-foe devices, and many other gadgets, which he can control using a backpack PC. That is why the main reason behind the voluntary recruitment to, and professionalization of, such armies is the need to bring all the soldiers respective skills to perfection.

Unfortunately, Russias AF have found themselves in a completely polar situation, with troops having no access to even the most primitive means of communications. The greatest achievement so far became the permission to privates to use cell phones they buy for themselves a great economy of scale, indeed, in the eyes of those keen to retain a cheap conscription-based army. It seems that they train cannonfodder, rather than a modern army.

Nonetheless, the Minister of Defense is confident that, in 2010, a new military composition of the Army and Navy was created, the military command and control system, the ones for logistics and supplies and military training underwent a fundamental change1.

However, there exist other assessments. In the logistics and supplies sphere, the 2010 level of economic crimes was up by 10% compared with the prior year and worth a total of Rb. bln.-plus, 2 while kickbacks in the state defense area hit 40%. The Defense Minister was bold in characterizing the situation: When I Came to the Ministry of Defense, frankly, I was flabbergasted by the volume of thievery, and that sensation is till with me. Financial debauchery and impunity of the people whom no one ever audited3.

6.6.3. The Military-Fiscal Policy and the Problem of Openness Once the peak of the economic crisis was over, the level of stability of the financial and economic planning on the federal level rose substantially. While the 2009 federal budget underwent 7 modifications, the last years one was modified only twice: in July and October4.

Between the moment the RF President approved the first version 5 of the federal budget and the moment of adoption of the third one6 appropriations under section 02 National Defense rose from Rb. 1,257 bln to 1,278 bln., or by 1.7%, with a 3.7% general increase in federal spending over the period in question. On a year-on-year basis the appropriations in question plunged by 2.9% in real terms7, along with a 0.2p.p. contraction in their volume relative to GDP down to 2.87% of GDP.

The Military Balance. London: IISS, 20082010.

Kostyukova I. Korruptisya v oborone//Vzglyad. 2010. 19 November. URL: URL: http:// vz.ru/politics/ 2010/11/ 19/448506.html/ Pavlikova O., Ukolov. R. Korruptsia atakuet // Profil. 2010. 29 November ( 44).

The April changes per Federal Act 71-FZ of 4 May 2010 . practically did not affect the expenditure part of the budget.

On the federal budget for 2010 and the planned period of 2011 and 2012: Federal Act 308-FZ: passed by the State Duma on 24 October 2009.

On introduction of amendments to the Federal Act On the federal budget for 2010 and the planned period of 2011 and 2012: Federal Act 278-FZ: passed by the State Duma on 21 October 2010.

With the use of the index- GDP deflator (the first Rosstats estimate for 2010 110.3%).

Section 6.

Institutional Problems The level of secrecy of the 2010 federal budget expenditure slightly reduced compared with the previous year (Table 35), despite the Rb. 28, 268 bln.-worth increase in secret appropriations due to the double adjustment of the budget. Secret appropriations disappeared from expenditure sub-section 0704 Secondary vocational training, but were still retained in subsections 0701 Preschool education, 0801 Culture and 0908 Physical culture and sport.

The proportion of secret appropriations in sections 04 National economy and 05 Housing and utilities continued to rise, with the respective annual increase rate in the latter section exceeding 12 p.p.

Table Proportion of Secret Appropriations in the Federal Budget Expenditures in 20032010, as % Code and name of the Section (sub-section) 2004. 2005. 2006. 2007. 2008. 2009. that comprises secret expenditures 1 2 3 4 5 6 7 The federal budget expenditures, total 9.73 9.83 11.33 11.80 10.33 11.92 10.0100 GENERAL PUBLIC ADMINISTRATION ISSUES n/a 1 n/a 3.67 6.28 5.52 8.66 4.0108 International relations and international cooperation 31.88 18.04 0.01 < 0.01 3.66 0109 The state material reserve 97.73 93.33 82.86 89.23 92.18 90.17 85.0110 Fundamental research 2.13 1.22 1.12 0.97 0.0114 Other general public administration issues n/a n/a 0.05 0.72 0.28 4.42 1.0200 NATIONAL DEFENSE 37.22 38.40 42.06 42.77 45.33 46.14 45.0201 The Armed Forces of RF 35.39 36.11 33.07 35.59 37.11 39.04 38.0204 Mobilization preparation of the economy 100.0 100.0 100.0 100.0 100.0 100.0 100.0205 Preparation for and participation in provision of the collec- 100.0 100.0 100.0 tive security and peacekeeping activities 0206 Nuclear arms complex 100.0 100.0 100.0 100.0 100.0 100.0 100.0207 Implementation of international obligations in the sphere of 100.0 41.05 45.22 46.90 50.65 100.0 100.military-technical cooperation 0208 Applied research in the area of national defense n/a n/a 98.37 93.94 93.69 93.20 91.0209 Other issues in the national defense area n/a n/a 2.49 8.79 24.38 29.21 41.0300 NATIONAL SECURITY AND LAW ENFORCEMENT 23.33 20.79 28.52 31.64 31.07 31.84 31.0302 Interior Ministry bodies 3.40 3.01 4.76 6.31 5.16 4.97 4.0303 Interior Ministry troops 13.21 11.10 11.76 10.31 9.80 10.25 8.0306 Security bodies 100.00 98.91 97.80 95.49 97.31 99.05 97.0307 Border Guard bodies 19.73 22.88 100.00 98.97 97.62 100.00 98.0309 Population and territory protection from emergency situa- 43.69 41.74 59.02 62.39 50.65 51.39 50.tions of natural and technogenetics situation, civil defense 0313 Applied research in the area of national security and law n/a n/a 73.95 66.41 64.43 75.49 92.enforcement activity 0314 Other matters in the area of national security and law en- n/a n/a 8.26 50.71 39.95 56.32 67.forcement activity 0400 NATIONAL ECONOMY n/a n/a 0.05 0.02 0.44 0.64 1.0411 Applied economic research n/a n/a 5.23 5.84 5.0412 Other matters in the national economy area n/a n/a 0.12 0.06 < 0.01 0.31 4.0500 HOUSING AND UTILITIES SECTOR n/a n/a 3.42 0.85 6.96 19.0501 Housing n/a n/a 4.22 5.69 15.97 20.0700 EDUCATION 2.76 2.69 2.39 2.55 3.0701 Preschool education 2.03 2.17 2.44 2.48 3.0702 General education 1.51 1.91 2.14 2.00 3.0704 Secondary vocational training 1.06 1.03 1.02 0.86 0705 Professional training and retraining 16.85 15.78 17.22 1.80 9.0706 University and post-graduate professional education 3.15 2.93 2.53 3.08 4.0709 Other matters in the sphere of education 0.30 0.33 0.28 0.29 0. Not applicable due the change of the structure of the budget classification.

RUSSIAN ECONOMY IN trends and outlooks (continued) table 1 2 3 4 5 6 7 0800 CULTURE, MOTION PICTURE INDUSTRY, MASS 0.17 0.17 0.21 0.17 0.MEDIA 0801 Culture 0.14 0.10 0.16 0.10 0.0804 Periodical media and publishing 13.46 7.45 2.57 2.62 3.0806 Other matters in the sphere of culture, motion picture indus- 0.02 0.15 try and mass media 0900 HEALTH CARE, PHYSICAL CULTURE AND SPORTS 4.30 3.99 2.57 4.14 3.0901 Stationary medical assistance 5.61 4.66 2.94 3.24 2.0902 Outpatient medical assistance n/a n/a n/a n/a n/a 13.94 3.0905 Rehabilitation n/a n/a n/a n/a n/a 14.07 10.0907 Sanatorium-epidemiological well-being n/a n/a n/a n/a n/a 2.09 0.0908 Physical culture and sports 0.28 0.26 0.24 0.42 0.0910 Other matters in the sphere of health care, physical culture 1.74 1.and sports 1000 SOCIAL POLICY 0.01 1003 Social security of the population 0.02 1100 INTERBUDGETARY TTRANSFERS 0.16 1101 Subsidies to budgets of the RF Subjects and municipal enti- 0.50 ties Source: the IET calculations by the 2003-2010 federal budget data (the 2003-2007 data have been adjusted to the respective sections and subsections of the budget classification that took effect as of January 2008). Estimates made on the basis of Federal Act 185-FZ of 23.07.2010 are given in italics.

The lowering of the transparency rate of the federal budget over the past three years makes it possible to estimate it only using complementary sources. In this particular case, we used materials of a Ministry of Finances memorandum to the bill. The document enable us to restore a structure of expenditures across sections and subsections of the classification for the previous, July, variant of the federal budget Act1, and a conclusion of the Committee of Defense and Security of the Federation Council on the October version of the bill2. This way of data aggregation undoubtedly affects the accuracy of the estimates.

Absolute and relative values of main components of direct military appropriations of RF in the federal budget and their change relative to the final variant of the 2010 federal budget Act are given in Table. 36 (the re-calculation into the 2009 prices was made with the use of the Rosstats first estimate of the index-deflator of GDP for 20103).

Table Direct Military Appropriations in the Federal Budget on Section 02 National Defense 2010, as Rb Allocated proportion, as % / change vs.

mln / the Change 2010/2009 as 2009, as p.p.

Section and subsections same in the Rb. mln./ increase as % In the 2010 federal In GDP 2009 prices budget 1 2 3 4 NATIONAL DEFENSE 1 278 027 34 184 12,46 2,1 158 682 2,87 0,34 0,The Armed Forces of the Russian Federation 959 563 17 959 9,36 2,869 958 2,02 0,34 0,Mobilization and out-base training 2 607 1 260 0,03 0,2 363 34,78 0,01 On introduction of amendments to the Federal Act On the federal budget for 2009 and the planned period of 2010 and 2011: Federal Act 185-FZ: passed by the State Duma on 07 July 2010.

Conclusion of the Defense and Security Committee of the Federation Council 3.5-07/1466 of 26 october 2010.

On production and use of the gross domestic product (GDP) for 2010. .: Rosstat, 31 January 2011. See:

http://www.gks.ru/bgd/free/B04_03/IssWWW.exe/Stg/d01/17vvp31.htm.

Section 6.

Institutional Problems (continued) table 1 2 3 4 Mobilization preparation of the economy 4 895 1 057 0,05 0,4 438 31,27 0,01 Preparation for and contribution to provision of 11 087 9 788 0,11 0,collective security and peacekeeping operations 10 051 3 713,09 0,11 0,Nuclear weapons complex 18 755 2 077 0,18 0,17 003 10,89 0,01 0,Implementation of international obligations in 4 210 638 0,04 0,the military-technical cooperation area 3 817 14,32 0,01 Applied research in the national defense area 148 680 28 100 1,45 0,134 797 17,25 0,20 0,Other issues in the national defense area 128 229 5 004 1,25 0,116 255 4,50 0,12 Source: the IEP calculations Military appropriations out of other sections of the federal budget are presented in Table 37 (with estimates made on the basis of the July version of the federal budget Act given in italics). It should be noted that rather an impromtu novelty in the form of Rb. 2bln. that popped up in the summer in Section 01 General public administration matters on construction of new production capacities of JSC Concern PVO Almaz-Antey on manufacturing perspective next-gen ADMS1 is not presented in the Table, albeit it was factored into subsequent calculations.

Appropriations on housing construction by the Ministry of Defense by Section 02 National defense increased by 37% in real terms on a year-on-year basis, and by another 34% - by Section 05 The Housing and utility, which nonetheless, did not ensure attainment of the declared goal of provision of the military with permanent housing by 2010. The federal budget appropriations on the so called housing certificates increased by 54% (see Table 37), and the ones on the mortgage system for the military by 47%.

Table Direct and Indirect Military Expenditures across Other Sections of the Federal Budget 2010, as Rb Allocated proportion, as % / change vs.

Name of subsection Change 2010/2009 as mln / the 2009, as p.p.

Or nature of appropriations same in the Rb. mln./ increase as % In the 2010 federal In GDP 2009 prices budget 1 2 3 4 In Section 03 National security and law enforcement activity Law enforcement forces 66 433 2 578 0,65 0,60 230 4,47 0,06 Security agencies 201 507 2 936 1,96 0,182 691 1,63 0,14 0,The border guard structures 77 427 9 937 0,75 0,70 196 12,40 0,06 0,The RF MES forces and civil defense 46 140 323 0,45 0,41 831 0,78 0,03 In Section National economy Organization of the alternative civil service 6 1 <0,01 <0,5 9,34 Subsidies to transportation organizations that 1 069 112 0,01 <0,exercise procurements of motor vehicles for 970 10,33 completion of the mobile component of motor columns.

Subsidies to the functioning of the Russia- 55 30 <0,01 <0,NATO coordination center 50 37,65 Memorandum of the RF Ministry of Finance to bill 389589-5, submitted to the State Duma on 11 June 2010, p 40.

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