Russia in ‘Crisis’ Over $433 Billion Defense Revamp, Group Says

Henry Meyer, Ilya Arkhipov

Russia has reached a „crisis” as it struggles to maintain plans to spend 23 trillion rubles ($433 billion) on revamping its military at a time of economic contraction, a defense research group said.

Amid persistent calls from Finance Minister Anton Siluanov for Russia to scale back its biggest defense program since the Cold War, the country continues to use an outdated „Soviet” approach to rearmament, the Moscow-based Center for the Analysis of Strategies and Technologies, known as CAST, said.

President Vladimir Putin this year cut spending on most budget expenditures by 10 percent, with the exception of defense, pensions and agriculture. He defended the 10-year rearmament program last week in an annual call-in show, saying it would be implemented in full even if Russia may have to slow down its pace.

„The modern Russian economy just doesn’t generate enough resources to finance the current 2011-2020 rearmament program, ” CAST said in a report. „This seriously reduces the ability to efficiently renew the Russian armed forces’ equipment. ”

Defense spending accounts for a third of the overall budget expenditures in Russia. The country’s economy is forecast to contract by as much as 4 percent this year and 1.6 percent in 2016, according to the central bank, amid a slump in oil prices and U. S. and European Union sanctions over the conflict in Ukraine.

Russia is at risk of running its biggest budget deficit in five years as the economy slides into its first recession since 2009. The government unsealed one of its two sovereign wealth funds this year to cover a shortfall projected to reach almost 4 percent of gross domestic product.