GOR PROPOSES RECORD DEFENSE BUDGET AND CSTO'S

C O N F I D E N T I A L MOSCOW 002822

SIPDIS

E.O. 12958: DECL: 09/19/2018
TAGS: PREL PGOV RS MCAP ECON EFIN MARR
SUBJECT: GOR PROPOSES RECORD DEFENSE BUDGET AND CSTO'S
MILITARIZATION

REF: MOSCOW 2800

Classified By: Ambassador John R. Beyrle. Reasons 1.4 (b),(d).


1. (C) Summary. Criticism of the Russian military's
performance in the South Ossetian crisis factored into the
GOR's decision to propose a record defense budget for
2009-2011 (reftel). After the conflict in South Ossetia,
President Medvedev admitted that the Russian military was not
yet an effective, modern force, and claimed Georgia's
aggression and Western weapons supplies to Georgia made it
necessary for Russia to modernize its military. In a closed
Duma session on September 10, parliamentarians took Defense
Minister Anatoliy Serdyukov to task for the Armed Forces'
glaring weaknesses, with some calling for his resignation.
Russia may have to factor into the budget additional
resources for the Collective Security Treaty Organization
(CSTO),which announced September 12 that it would create a
Central Asian collective force to deal with threats from
Afghanistan. The wide-ranging endorsement of greater defense
funding is another signal of Russia's attempts to be a
regional and global military power, while the U.S. and NATO
may have to deal with an increasingly assertive CSTO that
potentially seeks a role in Afghanistan. End Summary.

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Record Russian Defense Budget in the Works
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2. (SBU) Approximately three weeks after Medvedev asked the
Ministry of Defense to improve Russian weapons to match the
quality of Western weapons, the GOR prepared a three-year
budget request that would allocate a record amount of
resources towards defense. Taking into account a budget
supplemental approved by the Duma September 10, the projected
defense expenditures for 2009 would increase to 1.5 trillion
rubles (nearly 60 billion dollars),or three percent of the
GDP, a half-percentage point increase from 2009. The
percentage of the total budget spent on defense would average
14 percent over the three-year period. Minster of Finance
Aleksey Kudrin stated that the government was prepared to
allocate even more money to the military if Medvedev
instructed it to do so. As part of its budget proposal, the
GOR plans to invest heavily in strategic missile systems and
space technology. Press reports indicate that part of the
defense expenditures will be spent on improving Russia's
"Topol'-M" intercontinental ballistic missile complex,
"C-400" surface-to-air missile system, "Iskander" theater
missile system, and early warning radar systems. In addition
to the proposed budget, last week Prime Minister Putin
directed the government to invest 67 billion rubles in the
development of Russia's troubled Global Navigation Satellite
System (GLONASS).


3. (SBU) Members of the Duma also endorsed a record increase
in the defense budget during a closed session with Minister
of Defense Anatoliy Serdyukov September 10. The Russian
Army's weaknesses, particularly the old weapons and outdated
technology employed during the South Ossetian conflict,
influenced Duma Deputies' decision. Chair of the Committee
on International Relations Konstantin Kosachev remarked that
the events in Georgia, including the preparedness of Russia's
Armed Forces, required "careful analysis." He added that the
current level of funding for the military was unsatisfactory,
and the "overwhelming majority of Duma Deputies supported the
MOD's requests" for more resources. Some Duma members may
appeal for more defense resources than is requested in the
three-year budget plan. Chair of the Committee on Security
Gennadiy Gudkov claimed 1.5 trillion rubles would be "the
most modest number" the Duma would approve, while Liberal
Democratic Party head Vladimir Zhirinovskiy asserted that his
party was ready to give the Armed Forces "as many additional
financial resources as will be necessary." United Russia
"reformer" and Chairman of the Constitutional Affairs
Committee Pligin told us he was concerned lest a bandwagoned
effort lead to an exorbitant allocation of resources not tied
to strategic objectives. The Duma will hold another closed
session September 19 to review the classified sections of the
budget proposal.

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Duma's Confidence in Defense Minister Wavering?
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4. (SBU) Serdyukov faced criticism and some calls for his
resignation from prominent Duma members during his "hour with
the Parliament." Vice-Speaker of the Duma and member of the
party of power United Russia, Lyudmila Sliska, asserted that
Georgia's intentions to attack South Ossetia were obvious,
and blamed the loss of Russian men and equipment on "a lack
of responsibility within the leadership of Russia's security
structures, the Ministry of Defense in the first place." She
added that Russia was unprepared to defend its citizens and
national security along its southern borders, and claimed
Russia would face complications in a potential military
conflict with NATO. For these reasons, she called on
Serdyukov to "collect his courage and resign." Communist
Party leader Gennadiy Zyuganov confirmed that his Party had
also demanded Serdyukov's removal during the closed sessions,
while Communist Duma Deputy Viktor Ilyukhin proclaimed,
"Everyone is just tired of this unprofessionalism and absence
of responsibility (in the MOD)."

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Experts Doubt Effectiveness of Budget Proposal
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5. (C) Several military experts doubted that the budget
increase would achieve its stated objectives. President of
the Center of Political Affairs Konstantin Simonov thought
corruption and the absence of an effective system of control
over expenditures would cause money to be siphoned off and
"stuffed into pockets." Aleksandr Khramchikhin, a director
at the Institute for Political and Military Analysis, noted
that the modernization of the military depended not on the
amount of money allocated, but on how that money was spent;
he agreed that if the control of the money flow was
ineffective, "then in the worst cases even a 200-percent
increase would not help." Even experts who supported the
funding increase, like Deputy Director of the U.S.A.-Canada
Institute and retired Major General Pavel Zolotarev, noted
that corruption must be eradicated, especially in military
procurement, for the budget increases to yield positive
results over the long-term. According to the Director of the
Center for Military Forecasting Anatoliy Tsyganok, Russia
needs to overhaul its approach to defense production and
military procurement. Russia exports far more weapons than
it produces for itself, a trend that has stunted the
modernization of its defense industry. Russia has relied
on, and gotten away with, producing and using old Soviet
equipment, but the South Ossetian conflict exposed these
military-technological weaknesses. To encourage the
development of modern weaponry and improve the readiness of
the Russian Armed Forces, Tsyganok proposed government
financing of fundamental weapons production programs and
reorienting the stock market away from the energy complex and
towards Russia's missile, air, and naval technology
complexes.

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CSTO to Strengthen Capabilities...with Eye on Afghanistan
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6. (SBU) On September 12, CSTO General Secretary Nikolai
Bordyuzha announced the organization would create a Central
Asian collective force with 10-11,000 soldiers from Russia,
Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. The
CSTO's existing Rapid Reaction Force would be incorporated
into the new force structure. Military expert Aleksandr
Pikaev of the Institute of International Economics and
International Relations posited that a joint CSTO command
would direct the collective forces. Bordyuzha stated that
the goal of the new force would be to react to regional
threats caused by instability in Afghanistan. Russia has
been pushing for a more active role for the CSTO in
stabilizing Afghanistan, and CSTO Heads of State expressed
readiness to cooperate with NATO on counternarcotics and
counterterrorism in Afghanistan in their September 5 Summit
Declaration.


7. (C) Experts told us that Russia was pushing to strengthen
the CSTO's military components in order to bolster its own
regional dominance and to revive its efforts to create an
organizational counterweight to NATO. Russia will likely
contribute the majority of funds and soldiers to the military
command, and could use it to grab more control over the
organization. Moscow Heritage Foundation Head Yevgeniy Volk,
a vocal opponent of Russian authoritarianism, suspected that

as the CSTO transitioned, Russia would attempt more and more
to dominate the organization. Eventually, he charged, it
could resemble the Warsaw Pact, with Moscow making the
important decisions and all the other member states having
weak armies. He also thought Russia wanted to show the West
that the CSTO was an active and effective organization that
should be taken seriously. Volk claimed that as the GOR
felt increasingly surrounded by NATO, it would seek closer
ties with its CSTO partners, including increasing the number
of joint military exercises member states conducted. Pavel
Zolotarev said that the CSTO reorganization was a sign that
U.S.-Russia, and by extension NATO-Russia, political-military
relations would worsen.

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Comment
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8. (C) A mediocre assessment of the Russian military's
performance in South Ossetia, as well as Moscow's
"post-conflict" aspirations for overwhelming regional
superiority and global respect, were the catalysts for the
GOR's record defense budget. However, the reality is that
the modernization of the Russian military faces serious
obstacles, notably corruption. Russia's push to improve the
CSTO's military capabilities may also face difficulties, not
the least of which is the absence of desire among Russia's
neighbors for a return to blocpolitics, when almost all - to
greater or lesser degrees - enjoy and cultivate relations
with the U.S. and NATO. Try as it might to be a
counterbalance to NATO, the CSTO's military components have
yet to be tested and will face significant obstacles to
assuming a role in Afghanistan. We should continue to urge
Russia to cooperate in Afghanistan through existing channels
at NATO.
BEYRLE