Republic.ru, July 19, 2021, https://republic.ru/posts/101069. Complete text:
Russian Defense Minister Sergei Shoigu has laid it on thick. Speaking in Rostov-on-Don to the employees of Rosvertol [sic; Rostvertol], a major Russian helicopter plant, the minister said something sensational: “Today, everyone – some with anger, some with approval – realizes and acknowledges that the share of modern hardware in the Russian Armed Forces is more than 70% (almost 71%, to be more accurate). This is the highest percentage among all of the world’s militaries.” With two months to go before the [State] Duma elections – and given that Shoigu is in the ruling party’s federal top five and may be planning to continue his career in a higher position – such boasting seems excusable. In the run-up to elections, [a candidate] lies almost like a trooper or a fisherman.
However, the claim that our Army is not only among the world’s most advanced (this has been stated more than once), but superior to the rest requires clarification, at the very least. First of all, it should be noted that Russia is confidently winning a competition with itself. A criterion such as the share of modern weapons exists only in the official documents of the Russian Defense Ministry. With regard to the US Armed Forces or the militaries of most other countries, it would look meaningless at best. Across the Atlantic, military equipment has a full and very long active life. Once put into service, a tank or an aircraft continues to undergo scheduled maintenance and upgrades, stage by stage, cycle after cycle, remaining in service for decades. Suffice it to recall the F‑15 [fighter jet] ([it] entered service in 1976 and will remain in service until 2025), the F‑16 (introduced in 1978 and will remain in service until 2025), the Abrams tank (it has been in service since 1980 and there are no plans to retire it) or the Patriot surface-to-air missile system (adopted in 1982 [sic; 1981 – Trans.] and still in service). If it occurred to anybody to calculate the percentage of “modern” weapons in the US Army, it would most likely remain constant.
Russia introduced this indicator due to some very peculiar circumstances. For 15 to 20 years (from the early 1990s to the mid- to late 2000s), weapons systems in service with the Russian Armed Forces were not replaced or modernized, and did not even undergo repairs and proper maintenance. In 2008, during the war with Georgia (a war that became a moment of truth for the Kremlin), nearly half the tanks and armored fighting vehicles deployed from storage depots on short notice simply broke down and did not make it to the border. It was no longer possible to fix most of that hardware. As a result, the concept of “modern hardware” was invented. At present, it conveniently includes recently developed Su‑57 [stealth multirole fifth-generation] fighter jets and Armata tanks, as well as upgraded Su‑24 [bombers] and T‑72 [tanks], which have been in service for almost half a century.
It should also be noted that the current system of secretiveness and monopolization of information by the Defense Ministry precludes any possibility of fact-checking Gen. Shoigu’s triumphant declarations. The only exception may be the strategic nuclear forces, since Moscow regularly provides data on their composition under the [New] START treaty (the highest share of “modern weapons” there – 83% – is due to the fact that according to expert estimates, Russia is spending more than 20% of its total military budget on nuclear weapons). As for general-purpose forces, Sergei Shoigu can claim any share he wants of modern weaponry – 70% or even 120%. It would be impossible to verify.
The defense industry is deep in debt.
However, if we take the minister’s words at face value, then it seems that Russia has achieved greater success in rearming its military than the US (whose military budget is more than 10 times larger than Russia’s) or China (which is spending at least four times more on defense programs than Russia). But if this is the case, then the military-industrial complex, which is doing such a great job implementing the state defense order, should be thriving. However, that isn’t the case at all. In 2019, well before all the coronavirus lockdowns and subsequent economic losses, [Russian] Deputy Prime Minister Yury Borisov, who oversees the defense industry, shocked the expert community by announcing that the military-industrial complex had accumulated roughly 2 trillion rubles in debt. What’s more, he said that “the principal will never be paid off.” As a matter of fact, [the military-industrial complex] was unable even to pay interest on that debt. According to Borisov, defense enterprises were spending roughly 200 billion rubles on interest payments. “Paradoxically, this figure cancels out defense companies’ planned profits. I keep citing this vivid example: We keep boiling water, drinking it and pouring in more. In other words, there is practically no chance to rely on domestic sources, the most effective sources, our own resources,” Borisov complained. Earlier, he compared the work of the military-industrial complex to riding a stationary bike: No matter how hard you pedal, you won’t get anywhere.
According to media reports, more than 10% of defense industry enterprises (140 out of 1,319) are now on the verge of bankruptcy. The only thing the state can offer is to pay off loans early with funds from the national budget. In 2016, 800 billion rubles from the budget was spent for that purpose; in 2017, another 200 billion. Amazingly, the debt burden has not reduced, but increased. In 2020, Yury Borisov proposed writing off as much as 600 billion to 700 billion rubles of defense companies’ debts. He managed to convince [Russian President Vladimir] Putin to do so. According to Borisov, in 2020, “350 billion rubles in ‘toxic’ loans were written off by boosting the companies’ capitalization. Approximately 260 billion rubles [in loans] have already been restructured and we have a 150 billion-ruble reserve.”
Thus, the state has twice financed the manufacturing of the “modern weapons” that Sergei Shoigu boasts about (first, by funding their production and then by writing off debts). Do you think that has finally resulted in financial well-being? Nothing of the kind. According to the [business] daily Vedomosti, in late 2020 it was once again decided to finance the fulfillment of the state defense order through bank loans, even though the original plan was to do so via the Treasury – i.e., by transferring funds directly from the national budget to defense industry enterprises. Most likely, the state does not want to abandon its ambitious rearmament programs, even though it lacks the resources for them. Plans call for granting 360 billion rubles in loans to fulfill the state defense order in three years. That is to say, we are seeing a continuation of the flawed practice of the past decade where enterprises failed to meet production targets on time, fell behind on loan payments and became bogged down in endlessly paying off interest.
The Russian defense industry with Soviet-era problems.
I will venture to suggest that the root cause of the problem is the archaic organization of the military-industrial complex. With Vladimir Putin’s blessing in the mid-2000s, [then-defense minister] Sergei Ivanov herded defense industry enterprises into a dozen or so vertically integrated industrial corporations, which were a caricature of the famous nine Soviet defense industry ministries. They managed to inherit all the flaws of Soviet bureaucracy, such as endless approval processes, corruption and reluctance to assume responsibility. However, for better or for worse, they did not inherit the [Soviet] production system, because it no longer existed. Only final assembly plants were considered defense industry enterprises in the Soviet Union. As for the numerous components (for example, the Su‑27 fighter jet has as many as 1,500), they were manufactured at civilian sector enterprises, each of which had its own so-called mobilization order. That had nothing to do with economics. After all, the cost of military production was included in the cost of civilian goods, which affected their quantity (suffice it to recall Soviet-era shortages) and quality. To create at least a semblance of cost-effectiveness, the all-powerful Gosplan [Soviet State Planning Commission] artificially balanced the prices of civilian goods and weapons systems. Not surprisingly, even now you can hear defense industry managers proposing to restore Gosplan.
So far, the state has failed to compel private company owners, even under threat of criminal punishment, to manufacture components for the defense industry complex at a loss. After all, to manufacture a limited quantity of certain components, it is necessary to maintain separate production lines (military quality and precision standards are entirely different [from civilian goods]) and an additional workforce. As a result, the military-industrial complex is doomed to have components manufactured at final assembly plants. That is the only explanation for the fact that the manufacturing of weapon systems that are claimed to be in full-scale production is crawling at a snail’s pace.
For example, series deliveries of the Su‑57 fifth-generation fighter jet were slated to start in 2016. In reality, the first jet was built in late 2019, but crashed during a test flight. It was not until a year later that the next fighter jet “in serial production” was delivered to the [Russian] Aerospace Forces. United Aircraft Corporation president Yury Slyusar has promised Vladimir Putin to deliver as many as four aircraft in 2021.
The same goes for full-scale production of the newest Armata tank. The plan was to build more than 2,000 tanks by 2020. Then [they] started talking about just 100 tanks. At present, [they] are promising to launch mass production in 2022, but are not disclosing the exact number [of tanks].
It is no secret that full-scale production is characterized by a sharp reduction in production costs. Roughly speaking, a product is assembled from a set of standard parts and components. There is no need to fine-tune or adjust anything. However, none of that is happening in the case of Armata production (as for the Su‑57, the price is clearly being lowballed). The tank’s estimated [production] costs have risen from 250 million rubles to 450 million apiece.
On July 20, the MAKS‑2021 international air show will open in Zhukovsky, just outside Moscow. Vladimir Putin has promised to visit it. On that day, we are bound to hear all kinds of praises being sung of the domestic defense industry’s successes, including of course in rearming the Armed Forces. However, it is important to remember that all these “modern weapons” that the authorities are so proud of are costing the country as much as if they were made of gold.