How to save money on the military

In last Friday’s NVO, Ruslan Pukhov takes on the always controversial topic of how to reduce military expenditures. He notes that the plans set out by President Putin in his article on security issues require a high level of financing, which may not be available if the price for oil and natural gas declines or if Russian economic growth slows down. He mentions that the Ministry of Finance is discussing the option of reducing defense expenditures by as much as 0.5 percent of GDP. If that plan comes to fruition, how would the savings come about?

Pukhov proposes two primary areas for cost reductions. First, he points out that no one has ever explained why Russia needs a one million man army. That level of manpower is excessive for dealing with local and regional conflicts, while more serious conflicts with NATO or China can be deterred with nuclear weapons. Russia’s poor demographic situation means that even without the cost considerations, Russia will not be able to maintain a million man army in the next decade. I have previously noted that even now there are only 750,000-800,000 personnel serving in the military, while 20-25 percent of billets are vacant.

But Pukhov goes farther, arguing that military manpower could be cut to 700,000 or even 600,000 by way of eliminating 6-8 brigades in the ground forces. This would result in significant savings on staffing and training, with little negative effect on overall combat readiness.

The second area for savings is in procurement of equipment and weaponry. Here, Pukhov makes the argument that given Russia’s geography and the nature of the potential threats it faces, the navy provides the least value for the price. Ships and submarines are of course notoriously expensive items and it is true that the most likely source of conflict for Russia will come from across its southern border, where naval forces can play no more than an auxiliary role. At the same time, the Russian Navy is likely to play an important role in protecting sea lanes in the Arctic and in guarding offshore oil and gas extraction facilities in the Pacific. It would also play a crucial role in any potential future conflict in East Asia. So I was initially dubious about Pukhov’s call for downsizing the fleet.

However, if you look at the details of his recommendations, they primarily concern the ongoing shift from a blue water navy to a coastal protection force. While this has been the de facto strategy for Russian naval development for the better part of the last decade, recently the MOD has made statements indicating that it will seek to restore the RFN as a global force. Pukhov rejects this initiative, specifically by calling for the cancellation of the pointless project to restore the Soviet-era nuclear cruisers. This is a recommendation I fully support. I know that boosters of the RFN will respond with data about how powerful these ships can be. My response is that power is one thing, but usefulness is a different matter. There is simply no way that the project’s cost can be justified given the lack of missions for such ships in current Russian military strategy.

Pukhov’s second recommendation is to cancel the purchase of Mistral ships. Here I am a bit more skeptical. These are very expensive ships, no doubt. But they will provide value for the RFN in three ways. First, they can serve as a helo-carrying amphibious assault ship, a capability largely lacking in the current RFN. Second, they can serve as command ships for specific fleets. And third (and still the main reason for the deal), by building two ships in Russia, the deal will contribute to the ability of Russian shipbuilders to construct modern ships of various types in the future. So there may be value here. But if the budget axe does fall on the Russian Navy, then it would no doubt be more effective to cancel this project than the new frigates and corvettes that are to form the core of the Russian Navy for the next 20-30 years.

Whether or not one accepts Pukhov’s specific recommendations, his article serves a useful purpose in calling our attention to the kinds of hard choices that the Russian military will have to make should the rumors of impending budget cuts come true.

 

 

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The death of Tupolev

To continue the aircraft theme of the last few weeks, I just read a very informative article by Ruslan Pukhov that appeared in last week’s NVO. In this article, Pukhov contrasts the state of Russian aircraft design bureaus that have successfully made the transition to the post-Soviet economic environment, such as Sukhoi and (to a lesser extent) MiG, with those that haven’t, such as Ilyushin and (especially) Tupolev.

One might have expected quite the opposite situation, as MiG and Sukhoi designed aircraft exclusively for the military during the Soviet period, while Ilyushin and Tupolev combined military and commercial aviation. Given the complete lack of government financing for military procurement during the 1990s, one might have thought that a greater diversity of projects and clientele might have helped the latter two companies to come out of the 1990s in better shape than the purely military design bureaus.

Pukhov describes the many false starts made by Tupolev in its efforts to remain competitive in the commercial aircraft industry, including such recent howlers as a proposal for in-flight refueling of passenger aircraft. But the main source of its problems resulted from an inability to launch full serial production of its Tu-204/214 medium-range passenger airliner, which was designed in the late 1980s and has now become somewhat outdated. The situation was made worse by Tupolev’s difficulties in servicing these aircraft. Other potential projects, such as the Tu-334 regional jet and the supersonic Tu-444 business jet have fared even worse. The Tu-334 was recently canceled with only two prototypes built after two decades of effort, while the Tu-444 is unlikely to ever move beyond the concept stage. As a result, Tupolev seems poised to be completely shut out of the commercial airliner market in the very near future

Tupolev’s position in military procurement is not much better. Tupolev’s core military business was in long range and strategic bombers. While there are ongoing plans to modernize existing aircraft, these programs are proceeding very slowly. Pukhov believes that if the military ever decides to develop a new long range bomber, it is unlikely that Tupolev would get the contract for this work. Tupolev’s Soviet-era efforts to develop UAVs is largely useless for the types of missions required of 21st century UAVs. There is no chance that Russian efforts to design UAVs would be based on Tupolev’s experience in this field.

By contrast, Sukhoi in the last decade has not only developed a number of successful new combat aircraft, but has also entered the commercial aircraft market with the SSJ-100. The difference between these manufacturers goes a long way toward explaining the differences in the Russian military’s ability to relatively quickly restore the potential of its combat aircraft, versus the problems it is having in modernizing its transport aviation and developing an indigenous UAV capability. As Pukhov argues in his conclusion, the failure of companies such as Tupolev and Ilyushin to adapt has opened the door for new entrants to take over the commercial and military transport aircraft sectors. In addition to Sukhoi, the leading candidate for this role is Irkut, formerly just a manufacturing concern, which has now entered the design field with a new mid-range commercial airliner currently in developed and expected to enter production in 3-4 years. Tupolev, for its part, is likely to face closure in the next few years as United Aircraft Corporation consolidates its holdings.

 

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Valdai Club 6: Missile Defense

The conference took place at the same time as the G8 summit in Deauxville, which included a statement on possibilities for missile defense cooperation between Russia and the US/Europe. The discussions on this topic at Valdai, however, left me very much pessimistic about the likelihood for such cooperation. There were two events directly related to missile defense. The first was a panel discussion on May 26th, with presentations by Oksana Antonenko of IISS, Mesut Hakki Casin of Yeditepe University in Istanbul, and Aleksandr Stukalin of Kommersant-Daily, followed by a discussion. The second was a meeting that same evening with a senior MOD official who has some responsibility for missile defense. As you will see from the report, the tone of these two meetings could not have been more different. (Note: I don’t have detailed notes on the presentation by Casin — it focused on how important missile defense cooperation would be for international security)

Panel on building a European missile defense system

Oksana Antonenko — Prospects for NATO-Russia missile defense cooperation

Antonenko provided a very optimistic assessment of the possibilities for including meaningful Russian participation in a European missile defense system. She began by reviewing the history of international cooperation on missile defense, noting several promising initiatives dating back to the Clinton presidency have been signed but never fully implemented, including the RAMOS program and the JDEC program to exchange early warning data on launches. Theater missile defense cooperation within the NATO-Russia Council was thus the 3^rd stage of cooperation. This allowed for significant progress, including joint exercises. A live fire exercise that was to be held in 2008 in Germany would have brought cooperation to a new level, but it was canceled because of the Georgia war and the entire program was suspended. As a result, many of the experienced people involved in that cooperation left.

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Valdai Club 1: Panel on Russian Military Reform

I spent last week in Moscow at the inaugural meeting of the Valdai Club’s military section. I will have a number of posts this week with my impressions of the meetings. I’ll start today with a brief summary of the overall schedule and a discussion of the first substantive panel, which was on developments in Russia’s military reform.

Altogether, there were three panels during the conference. In addition to the panel on military reform, the topics covered included cooperation on building a European missile defense system and possibilities for new alliances that could include Russia.

We also visited the base of the 5th Guards Independent Motor Rifle Brigade (former Tamanskaya Division) and the Don-2N multifunctional radar station. We were scheduled to meet with Defense Minister Serdyukov and Chief of the General Staff Makarov, but neither was available, so we met with Andrey Tretyak, the chief of the Main Operations Directorate of the Defense Ministry. We also had some off the record meeting with other MOD and defense industry officials.

Foreign participants included a number of specialists on military and security issues from the US, Turkey, France, Norway, Japan, Belarus, Germany, the UK, and Poland. Of course, there was also a large contingent of Russian analysts and journalists.

So with that overview out of the way, let me focus on the first panel, which took place on Wednesday, May 25. (Other descriptions of this panel may be found here and here.)

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Ruslan Pukhov — Reform of the Armed Forces

The panel was officially entitled “Reform of the Russian Armed Forces,” and featured three speakers. Ruslan Pukhov, the director of the Center for the Analysis of Strategies and Technologies (CAST), began with an overview of the problems that forced the Russian government to begin the radical transformation of the armed forces.

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Is the Mistral deal in danger of collapse?

In today’s Moscow Times, Ruslan Pukhov (the director of the Center for Analysis of Strategies and Technologies in Moscow and the publisher of the Moscow Defense Brief journal) has an excellent analysis of the problems that may stymie the Russian purchase of the Mistral ships from France. He argues that the disagreement is primarily about the transfer of sensitive technologies, especially the SIC-21 command and control system, and the total price of the ships. I have written about the price disagreement already, and it seems that little has changed on that front since early March.

I imagine that if price were the only problem, it could be resolved through negotiations. French backtracking on the extent of tech transfer is potentially a much bigger problem for the deal. Pukhov argues, and I wholeheartedly agree, that the reason Russia wants these ships is to get the advanced control systems. It doesn’t really need the ships’ “modest force projection potential.” So if France refuses to transfer the systems, Russia may well call off the deal.

Pukhov’s analysis of the root causes of the crisis is particularly interesting, so I’m going to quote it in full:

As usual, both sides have contributed to the problem. Russia has not yet built up experience in purchasing big-ticket foreign military equipment for import. Despite the popular notion that Russia is planning to re-equip its military with foreign weapons systems, the reality is that such imports total less than $100 million per year. By contrast, Russia exported $10 billion in arms in 2010, with another $16 billion in equipment purchased for domestic use. What’s more, the lion’s share of those so-called “imports” are actually systems and components that foreign clients wanted installed in Russian equipment for export, meaning that they were never intended for domestic use.

Without experience in foreign procurement deals, Russia also lacks the necessary legislation and history of cooperation between the relevant institutions. This has resulted in a less than perfect level of cooperation between the Russian military; Rosoboronexport, the country’s weapons export and import monopoly; and the defense industry.

In addition, there are powerful opponents to the deal on the Russian side, especially the domestic shipbuilding industry and its patron, Deputy Prime Minister Igor Sechin. In summer 2008, Sechin halted the ill-advised purchase of the dilapidated and unfinished Ukrainian cruiser Ukraine for 20 billion rubles (more than $670 million). The influence of the gray eminence has declined since then, but it remains strong enough to stop the Mistral purchase in one way or another. Political opponents to Defense Minister Anatoly Serdyukov and his reforms have also used the disagreements over the Mistral to boost their cause.

Pukhov goes on to note that the French Saint-Nazaire shipyard’s economic position has improved significantly since discussions about the deal began, so that France does not need the work as badly and can stand firm in the negotiations.

Pukhov also considers the role of Russian opposition to the European intervention in Libya and France’s leading role in it as a potential factor in the hardening of Moscow’s stand in the negotiation. I don’t think this is particularly relevant, especially as the timing is all wrong. Negotiations began to bog down in late February, some weeks before the start of the intervention in Libya. And the other factors Pukhov lists are more than sufficient to explain the problems.

Pukhov argues that the chances of signing a contract are becoming increasingly remote. I’m not sure I would go that far yet. Both sides have invested a lot in the deal and I think they have very strong incentives to find a way to work it out. But it certainly won’t be smooth sailing.

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Mistral negotiations claim an admiral

Despite my best efforts, I can’t seem to get away from the Russian Navy these last couple of weeks. Just when I was about to move on to the air force, I got an email from a colleague doing a study of the Mistral sale who points out that negotiations have hit a snag over price disagreements. More specifically, the issue is that the Russian side expected to get the two ships for 980 million euros, while the signed agreement is actually for 1.15 billion euros. The difference consists of 131 million for logistics and 39 million for crew training.

The hangup is that Vice Admiral Borisov, the deputy commander in chief of the navy for armaments and one of the lead negotiators for the Mistral contract, signed a protocol back in December that included these two extra items, without clearing the price increase with Rosoboronexport back home. Doing so very much exceeded his authority. As a result, Borisov is now facing an early retirement (4 years ahead of schedule).

Gazeta.ru cites Ruslan Pukhov’s argument that Borisov’s removal will allow both sides to return to the negotiating table to settle the price difference issue.  My guess is that this is just a minor roadblock that will be resolved in fairly short order, as both sides have too much invested in the deal to get hung up on a 15 percent price difference. There may be a delay of a month or two in the signing of the final contract, but in the end some compromise will be made and things will get back on track.

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