Editor's Note: This is the final installment in a five-part series on Russia's military modernization. This installment examines the constraints the Kremlin faces in its efforts to reform and modernize the Russian military. Click to read Part 1, Part 2, Part 3 and Part 4.
For the first time in nearly three decades, the Kremlin seems to have a viable plan for ensuring its own domestic security and maintaining its power in the region.
One challenge facing the Kremlin is recruitment. Several factors, including negative demographic trends, have undermined the military's ability to recruit and retain a sufficient number of quality personnel.
According to official numbers from the Russian armed forces, the military can currently build an estimated maximum force of 800,000 personnel — a smaller figure than the 1 million personnel target usually given. In April 2012, the military comprised 160,100 officers, 189,700 contract soldiers and 317,200 conscripts. Taking retention rates and general attrition levels into account, the Russian military needs to conscript around 300,000 people during each of its drafts to maintain target troop levels of 1 million.
However, the military has reportedly fallen short of its conscription goals in recent years, with 280,000 Russians inducted in the fall 2010 draft, 218,720 in spring 2011, 135,850 in fall 2011 and 132,000 in spring 2012. An increasing number of violations associated with the draft is thus unsurprising. During the fall 2011 draft, officials who were under pressure to meet even the lowered targets committed some 6,000 violations in the conscription of Russians considered unfit to serve.
The conscription problems have forced the military to attempt to recruit higher numbers of contract soldiers by raising salaries and improving living conditions. These efforts require considerable funding, but they will be central to the modernization of the Russian military moving forward.
Defense Industry Constraints
Russia also faces major constraints in modernizing its military equipment. Currently, only between 20-30 percent of the country's military equipment is considered modern. The military's goal, per a December 2010 announcement by then-Russian Prime Minister Vladimir Putin, is to increase this number to 70 percent by 2020, or 11 percent annually. Despite Russia's considerable fiscal resources, it might be impossible for its military to update that much equipment in such a time frame.
The Russian defense industry consists of approximately 1,500 institutions that are partially or wholly owned by the state. Estimates suggest that the industry employs as much as 4 percent of the Russian population. But in 2010, even before Russia began its modernization push, the defense industry was experiencing production shortfalls. That year, the industry failed to deliver around 30 percent of its orders, despite full funding from the government. The industry blamed the government procurement process, while the government blamed the industry. Regardless, shortfalls and cost overruns in production were systemic even before the modernization program began, and defense industry producers reportedly have already been falling behind their current benchmarks.
Many defense industry sectors lost nearly a decade (or nearly two decades, in some cases) of technological advancement following the collapse of the Soviet Union. Still, Russia sees domestic defense production as an imperative due to the large employment base the industry creates, the potential for arms sales profits and a desire to remain self-sufficient for its defense supplies.
This imperative constrains Russia's ability to purchase large quantities of high-end, off-the-shelf defense technology from other countries. The Russia military has made a small number of such purchases, including unmanned aerial vehicles from Israel, thermal imaging systems, wheeled infantry fighting vehicles and, most notably, Mistral warships from France. While some of these purchases have provided new military capabilities, their limited scale has kept them from fundamentally improving Russian military capabilities. In reality, the desired goal of such purchases has been to gain ground in technology transferred by these weapon systems. Russia has also launched certain joint development ventures, including the fifth-generation fighter aircraft and the BrahMos supersonic cruise missile, to stay competitive in top-end technology weapons systems.
The single largest constraint hindering the military development goals is the sheer scale of modernization that is required. Even if Russia could update 70 percent of its equipment by 2020, the military would still face obstacles posed by support constraints such as network infrastructure, satellite capabilities and technology interoperability. The military would also require a significant amount of institutional knowledge to effectively train its personnel to operate within war-fighting systems — expertise that is best garnered through experience, not purchase.
Another major obstacle facing the Russian military is the government's ability to finance it. Russia's gross domestic product has vastly expanded in the past decade, rising from $313 billion in 1995 to $1.7 trillion in 2011. The Russian military budget has steadily increased as well, rising between 4 percent and 24 percent annually. But the growth in military spending has been fueled by a prolonged run of high energy prices; energy revenues fund nearly half of the Russian budget.
For Russia to maintain its current military spending levels and implement Putin's vast rearmament program, the Kremlin would need to increase defense outlays by 25 percent starting in 2013 and spend an extra $77 billion each year for the next decade. To finance this, Russia would need oil prices to remain above $100 per barrel. Currently, the Russian budget is based on oil costing $117 per barrel, a price which would allow the government maintain its current spending levels without running up a deficit and even grow its rainy day funds. Should oil prices dip, Russia would not be able to fund its current budget, let alone a 25 percent expansion.
This issue is the subject of fierce discussion within the Kremlin. Putin and other security hawks want to ensure that the Russian military can fulfill plans laid out for the next decade. However, the more fiscally minded leaders understand that the Russian budget as a whole — not just in defense — must be slimmed down in preparation for a decline in oil prices.
The Kremlin could finance its ambitious military expansion without increasing the military budget. Russia holds more than $550 billion in currency reserves and more than $150 billion in a rainy day fund. However, these reserves are meant to ensure the country's stability during financial crises — an evident threat considering Europe's ongoing financial instability. The funds are not intended to fuel a military spending spree. So the Kremlin must decide which is more important: financial stability or a robust military. In the past, the Kremlin has chosen the latter, contributing to bigger issues for Russia down the line.
Editor's note: An earlier version of this analysis misstated Russia's gross domestic product in 1995. It was $313 billion.