Saturday, April 09, 2016

Has the Oil Price Drop & Economic Sanctions Impacted Russian Military Modernization?

The drop in Russian state revenues has affected Russian military modernization to some extent, though the Russian government has made an effort to insulate the military from budget cuts. Although the 2015 military budget was cut by five percent mid-year, the total allocation was still 25 percent higher than the previous year’s budget. This allowed the military to continue its modernization process, conduct operations in Syria, and fulfill its training and exercise programs.

With oil prices remaining low, the military is facing a more difficult financial picture in 2016. In November, the Finance Ministry announced that the total 2016 defense budget would be largely the same as in 2015. However, last month, an additional five percent cut was announced, which will result in the first annual net decline in Russian defense spending since Vladimir Putin became president in 2000.

As a result of the deteriorating financial outlook, the fulfillment of the 2011-2020 State Armament Program is now in question. The Russian military continues to develop new designs and receive new hardware but has been forced to reduce the quantities purchased of some items and to defer some big ticket items. For example, completion of the Yasen and Borei nuclear submarine construction programs has been pushed back from 2020 to no earlier than 2023 for the Yasen class and 2021 for the Borei class. Whereas Uralvagonzavod has previously announced that it will provide 2300 Armata T-14 main battle tanks to the Russian army by 2020, experts believe that only 200-300 will actually be procured over the next five years, with 2300 remaining a goal for 2030. Completion of the Barguzin railroad-based ICBM system was initially delayed by a over a year and then canceled due to financial problems. Finally, orders of the T-50 fifth generation fighter aircraft were reduced in 2015 from 55 to 12 because of the country’s deteriorating financial situation.

Longer term projects have also faced delays, with procurement of a new long range strategic bomber being postponed in favor of modernization of existing bombers. Plans for building large naval ships have been particularly affected. Construction of a new 14 thousand ton nuclear-powered destroyer, once intended to start in 2016, appears to no longer be under discussion, while plans for large amphibious assault ships, meant to replace the Mistral project that was canceled due to Western sanctions, remain amorphous and may have been quietly put on the back burner.

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