Why is the Russian defense industry in such bad shape?

In recent weeks, I have been writing about how the Russian defense industry has shown itself to be incapable of providing the military with high quality weapons, platforms and systems, despite the relatively abundance of financing for military procurement over the last few years. But why hasn’t the money been spent on modernizing plants and hiring experienced workers?

An article in today’s NVO describes one source of problems for the industry. It argues that modernization of these kinds of plants can only be carried out with secure government funding. And it further notes that there is plenty of financing available for this. The problem is that while money for the coming calendar year is usually allocated in November, it doesn’t reach the intended recipient until the end of the third quarter (i.e. August-September). And not all recipients receive all of the sums they have been allocated.

This uncertainty means that they cannot order new equipment until the money arrives. At this point, they are faced with a legal requirement to spend all allocated money in the current fiscal year (i.e. before December, as the fiscal and calendar years in Russia match). Since the complex (and often unique) equipment that is required for real modernization to occur needs several months to be designed and built, it cannot be ordered in August-September.

But the money that is received must be spent on something, or else it will not only be lost, but the recipient is likely to receive a reduced allocation for the following year. So the money is spent on cheap standard equipment, which is not strictly needed for modernization, but at least the money isn’t going completely to waste. And the recipient can send in reports to the government stating that new technologies have been purchased, the percentage of new equipment at the factory has increased, etc. But in real terms, no actual modernization has occurred.

The question of what this money is doing from November to August is left unanswered, though two options strongly suggest themselves — either there is corruption and the money is used to accrue interest for private individuals or there is bureaucratic incompetence in the administration and it just takes a long time for money to be transferred to the intended recipient. Most likely, both of these factors are at play.

If this analysis is correct, the implication is that improvements in the state of the defense industry are impossible without changes in the financing process. The easiest path would be to relax the restriction that requires allocated financing to be used in the current year. That would allow recipients to order needed equipment whenever the money does arrive, without worrying about having their future allocations cut. This seems to be much more realistic than actually eliminating corruption or increasing administrative efficiency in the Russian government.

(NOTE: I will be traveling for the next couple of weeks. Updates will resume sometime in early January. Happy holidays!)

Why the Mistral?

I had thought I would be writing this week on what has been accomplished by the December 1 deadline for completing the reorganizational phase of the military reform. But since everyone else is still talking about the Mistral, I’ve inevitably been thinking more about the reasons for the possible purchase.

First of all, there is no reason for panic. This is something both supporters of Georgia and boosters of the Russian shipbuilding industry should keep in mind. American analysts such as Vlad Socor and David Smith are worried that the Mistral will be used to attack Georgia or the Crimea. Setting aside my doubts on whether there is any reason for Russia to undertake such an operation, we should remember that it will take several years after a purchase agreement is completed before any Mistral-class ships actually become part of the Russian fleet. And while we can expect the first one, built in France, to be built fairly expeditiously, the ones that will be built under license in Russia will take quite a while, given the need to refurbish shipyards before construction begins and the general slow pace of ship construction in Russia. I would guess that the political uncertainty surrounding Russia’s relations with these two countries will be resolved before the Mistral comes online.

Russian opponents of the purchase frequently note how this purchase will spell the final doom of domestic military shipbuilding, if not of the entire Russian defense industry. Comments about how this purchase is taking work away from domestic shipbuilding are, oddly enough, immediately followed by statements by the same person arguing that Russia does not have facilities to build Mistrals under French license. If there are no facilities capable of building the Mistral, how can there be facilities capable of building a domestic equivalent?

I would argue that the Russian military shipbuilding industry is more likely to be doomed without such a purchase. Russia’s shipyards have proven themselves virtually incapable of building new military surface ships of any size. (They seem to still be able to build submarines for some reason) Only one new ship larger than a corvette has been completed since 1993. The Admiral Gorshkov frigate keeps getting delayed. The initially highly publicized Ivan Gren LST project has disappeared completely — it may be that it’s failure is the proximate cause for the RFN looking to France for an alternative.

It used to be that everyone blamed lack of financing. But when financing became readily available in the middle of this decade, the rate of ships being completed didn’t increase. By this point, it seems pretty clear that primary blame must be cast on problems at the shipyards themselves, rather than on the government or the Navy. So a license to build a foreign-designed ship may be just the thing to revitalize the Admiralty shipyard in St. Petersburg or Sevmash in Severodvinsk.

Whether this is the ship that should be built is another matter entirely. Various authors have made the case that the Mistral is not the ship that the Russian Navy needs. It may be that at least part of the reason for its purchase has to do with political factors, such as improving Russian-French relations. Or it may be that the Navy wants a versatile ship that can be used in many different ways.

While because of its versatility I don’t think it would be wasted in the Russian Navy, it’s probably not the best use of the limited procurement budget. It might make a good utility ship, good for “conducting independent amphibious operations in distant locales” but is that really going to be a primary mission for the Russian Navy in coming years? It seems to me that for the foreseeable future, the Navy’s main missions will consist of protecting sea lanes and showing the flag. The Mistral could be used for these kinds of operations, but they are not its primary purpose. Given the money that would be spent on this ship, it seems that the RFN might as well get exactly what it needs.

To the extent that Russia needs new ships, it seems that a large frigate or even a destroyer would be more useful than an amphibious assault ship. For the moment, the Udaloys are doing their jobs, and may be considered the workhorses of the Russian fleet. But with one exception (Admiral Chabanenko), they are now all 20-25 years old. It’s time to start thinking about what comes next, especially since the remaining Sovremennyi destroyers are extremely unreliable and hardly ever go far from their home ports. Given the speed with which Russian ships are being built (such as the Admiral Gorshkov frigate, now approaching its fifth year of construction), it may be time to start thinking about building a replacement, so that they are ready in ten years when the Udaloys start to retire.