RUSSIAN DEFENSE REFORM:

CURRENT TRENDS

Irina Isakova

November 2006

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This article is a revised text of the author’s presentation at the 

conference entitled “The U.S. and Russia: Regional Security Issues 

and Interests,” held in Washington, DC, on April 24-26, 2006.

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iii

FOREWORD

This monograph is another in the series of studies 

on aspects of Russian defense and foreign policy being 

published by the Strategic Studies Institute (SSI). These 

monographs derive from a conference that was jointly 

sponsored by the Strategic Studies Institute; the Ellison 

Center for Russian, East European, and Central Asian 

Studies at the Jackson School of International Studies 

at the University of Washington; the Pacific Northwest 

National Laboratory’s Pacific Northwest Center for 

Global Studies; and the Institute for Global and Regional 

Security Studies. This conference, titled “The U.S. and 

Russia: Regional Security Issues and Interests,” was 

held in Washington, DC, on April 24-26, 2006, and 

examined many different regional dimensions of this 

bilateral relationship.

Since the fall of the Soviet Union, the topic of Russian 

defense policy has not received great attention. Clearly, 

the rebuilding of Russian military strength is a high 

priority of President Vladimir Putin, and one to which 

he and his subordinates have devoted considerable 

time and resources. Therefore, inattention to Russian 

defense policy is unwise and even dangerous because 

it causes us to overlook potentially major changes not 

only in Russian policy, but in international affairs more 

generally. Dr. Irina Isakova’s monograph represents an 

effort to overcome our neglect and provide readers a 

comprehensive account of the defense reform, or what 

Moscow calls optimization. It encompasses virtually all 

aspects of the reform of the forces, their organizational 

structure, the financing of the military, reform of the 

defense industrial sector, etc. This topic is both timely 
iv

and particularly relevant and provides a significant 

addition to the series.

DOUGLAS C. LOVELACE, JR.

Director

Strategic Studies Institute 
v

BIOGRAPHICAL SKETCH OF THE AUTHOR

IRINA ISAKOVA is a freelance analyst and an 

Associate Fellow at the Royal United Services Institute 

for Defence and Security Studies (RUSI), London; 

monthly contributor to the business consultancy Oxford 

Analytica, Ltd.; member of the International Institute 

for Strategic Studies (IISS) and Chatham House; and a 

Salzburg Seminar Alumna. She served as a Specialist 

Adviser on Russia and the former Soviet Union to the 

House of Commons Defence Committee (2000-05) 

and as a foreign policy expert at the Foreign Affairs 

Committee, Russian Federation Council (1994-99). 

Before conducting research at RUSI, Dr. Isakova was 

a Research Fellow at King’s College, London; Research 

Associate at the IISS, London; Head of Section at the 

Institute of the USA and Canada Studies, Russian 

Academy of Science (RAS), Moscow; and Director 

of International Programs at the Russian Science 

Foundation. She was a Guest Scholar at the Brookings 

Institution, Washington, DC; Visiting Scholar at the 

London School of Economics; and member of the 

Aspen Institute (Berlin) working group on East-West 

relations (1989-93). She held the UK Defence Diplomacy 

Fellowship (1999-2002); the NATO-EAPC Fellowship 

(1998-2000), and a Ford Foundation grant (2000-01). 

Dr. Isakova testified at the Helsinki Commission on 

Security and Cooperation in Europe and before the 

U.S. Congress, May 1994; at the Joint Hearings of the 

Committees on Foreign Affairs of the State Duma and 

Federal Council on Russian–Ukrainian relations (July 

1994), and on Belarus-Russian relations (January 1995). 

She was a member of the inter-Parliamentary working 

group, RF Parliament, on the evaluation of the Russian 
vi

national security concept (1995). Dr. Isakova has 

written widely on a range of topics related to Russia, 

the Commonwealth of Independent States and Baltic 

States, NATO, and EU enlargement; U.S. foreign policy; 

and European and regional security issues. Among 

her numerous publications are Russian Governance in 

the Twenty-First Century: Geo-strategy, Geopolitics, and 

Governance (Frank Cass: London & New York, 2005) 

and Regionalization of Security in Russia (Whitehall Paper 

No. 53, RUSI, 2001). Dr. Isakova received an M.A. from 

Moscow State University and a Ph.D. in History from 

ISKRAN, Russian Academy of Sciences.
vii

SUMMARY

The Russian government has demonstrated a 

serious intention to address the issue of defense reform 

and modernize the military. Russia’s defense reform 

is being implemented now, though it is far from being 

complete. The pace of the reforms and the sequence of 

measures needing to be taken have been adjusted to 

the fast-moving political and economic environment. 

The present stage of the reform process is a transitional 

phase to radical systemic changes in defense posture 

planned for 2011-15. It also reflects the political 

dynamics of the forthcoming elections in Russia. The 

key new developments are:

• Setting clear parameters and timing for radical 

Command and Control (C&C) transformation, 

including abandoning the Military Districts, 

transferring control to the operational commands and strategic “directions” (i.e., strategic 

areas) in 2010-15;

• Establishing a joint headquarters for special 

purpose forces; 

• Reforming military intelligence;

• Adjusting Russia’s new nuclear posture;

• Reforming the defense industry and opening 

doors for private investments; and,

• Establishing new forms of civil control over the 

military (increasing presidential influence). 

Russia’s political establishment, in setting a goal 

of reforming the defense system by introducing 

transparency, accountability, and civilian control over 
viii

the military, is concentrating its efforts on sustaining 

and modernizing nuclear strategic forces and creating 

robust counterterrorist special-purpose forces. These 

are judged to be the initial and essential tools for 

responding to both global and regional/local security 

challenges. Training is increasing, changes are being 

introduced to command and control and mobilization 

policy across the defense and security sectors, and new 

weapons systems are coming on line. Modernization 

of Russia’s defense and security establishment 

is considered to be one of the primary national 

development programs. The business community is 

expected to join the government’s efforts in funding 

this process, especially the procurement programs. 

This monograph attempts to describe the framework 

and current patterns of Russia’s defense reform.
1

RUSSIAN DEFENSE REFORM:

CURRENT TRENDS

INTRODUCTION

The Russian Federation’s (RF) defense reform has 

proceeded through different cycles and stages, almost 

always under both internal and foreign criticism. Even 

in 2006 the debate continues, not only about whether 

it has been successful, but also about whether there 

is some sort of “road map” in reforming the Russian 

military and security services. In the recent past, defense 

reform in Russia has lacked the attention it deserves. 

Rather, the acute financial and structural problems 

that the Russian military was facing—deterioration of 

its potential and capabilities, growing crime rates, and 

hazing in the military—served as the focus of analysis 

and research. Many defense analysts therefore saw the 

declared goals and tasks of defense reform as mere 

wishful thinking or theoretical exercises. As a result,

new trends in implementing defense reform went 

almost unnoticed except for the assessments of a few 

military experts.1

Today an assessment of current developments in 

Russia’s defense reform once again has become 

essential for several reasons. First is the increasing 

probability of Russian energy supplies becoming an 

integral element of the U.S. energy supply system. As 

was revealed in March-April 2006, the U.S. market 

is ready to receive up to 10 percent of its supplies of 

liquefied natural gas (LNG) from Russia. There is even 

a possibility of increased LNG deliveries to a level of 

30 percent of the U.S. market. The security of energy 

supplies thus becomes an important issue for both the 

U.S. and Russian defense and security establishments. 
2

The Russian military services, especially the navy,2

have been given new missions in providing security 

to offshore installations, platform infrastructure, and 

maritime transport routes. Their ability to provide 

security in these fields thus becomes important for 

their U.S. counterparts. Moreover, the procedures 

and rules of engagement (ROE) that could allow joint 

U.S.-Russian actions also become part of both states’ 

security agendas. 

Second, the state of Russia’s nuclear posture raises 

additional questions about the nature of the strategic 

relationship between Russia and the United States. The 

article “The Rise of the U.S. Nuclear Primacy” by Keir 

A. Lieber and Duryl G. Press in the March 2006 issue of 

Foreign Affairs questioned the capability of the Russian 

nuclear triad to continue a policy of deterrence, or to 

withstand and respond to a U.S. preventive nuclear 

strike.3 This article triggered a strong political reaction 

in Russia. It inspired a debate among policymakers 

and defense experts about the state of Russian nuclear 

forces and the nature of the future strategic and nuclear 

relationship between the United States and Russia. 

Third, the success of Russian defense reforms 

will have a direct impact on the results of the 2007 

parliamentary and 2008 presidential elections in 

Russia. Defense reform affects up to 30-40 percent of 

the voting constituency. The decisions taken as part 

of its implementation touch those who serve, their 

families, and veterans of the Ministry of Defense (MoD) 

and other services, not to mention those who consider 

themselves to be potential conscripts. Such groups 

have a huge stake in the decisions taken in reforming 

the mobilization base of the defense establishment. 

The preferences of this 30-40 percent of voters could be 

crucial in determining the results of the next elections 
3

and the choices the nation will make in defining its 

defense direction over the next decade.

Fourth, a restructuring of Russia’s militaryindustrial complex is considered to be an essential 

element of defense reform. The creation of vertical 

integrated holdings in specialized sectors (aviation, 

shipbuilding, information technology, etc.) is regarded 

as one of the essential tools for restructuring the defense 

industry and for channelling private, including foreign, 

investments into the defense sector. The creation of 

such holdings presents a dilemma for western and U.S. 

companies, i.e., whether to consider the new Russian 

corporations as potential partners or competitors. For 

instance, United Aviation Construction Corporation 

(UACC), one of the proposed aviation holdings 

currently being organized, is going to consolidate the 

majority of Russian aviation firms and related research 

and development (R&D) bureaus in the field. The 

product line of Russian Region Jet (RRJ) is going to 

be its main core civil project, in which the U.S. Boeing 

Corporation is represented substantially. Irkut, one of 

the Russian firms that is to participate in the merger, 

offered to sell 10-25 percent of its shares to the European 

Air Defense System (EADS) prior to completion of the 

merger, potentially making EADS an active participant 

in the giant Russian aircraft firm UACC. Fulfillment of 

such defense reforms, which tend to entangle Russian 

defense-related industries with those of the West, have 

enormous political, economic, defense, and strategic 

implications for U.S. companies. The implementation 

of new regulations for investment in the defense 

sector in Russia thus creates additional challenges and 

opportunities for the U.S. firms. 

Fifth, implementation of defense reform creates 

new patterns of civil-military control, revealing the 
4

patterns of Russia’s understandings of transparency, 

accountability, etc. Sixth, and finally, the proposed 

patterns of the modernization of the armed forces and 

defense reform in general demonstrate with whom 

and how the U.S. military can better communicate and 

cooperate with the Russian armed forces in order to 

address jointly new security challenges. 

The basis of the current reform effort was 

established in the late 1990s. By the end of 2003, there 

was an increasing number of reports that the Russian 

military had emerged from the “crisis of survival” 

and was entering a stage of systemic development. 

The latest version of military reform (2004-08) is being 

implemented now, at least in part. Professionalization 

of the military continues, although at a slow pace and 

with some setbacks; and the goal to provide the armed 

forces with high-tech equipment and the capability to 

use it has begun to be realized.

Military reform is supposed to touch the structural 

elements of the military (reorganization of the General 

Staff in the Ministry of Defense and introduction of new 

principles of military command and control); reduction 

in numerical strength; initiation of a transfer from 

reservist mobilization principles to a system of contract 

service;4 implementation of security sector reform, 

with emphasis on counterterrorism; and achievement 

of an overall modernization of the defense technical 

base. Despite inconsistencies in implementation of its 

original designs, Russian military reform has a road 

map. Its goal is to realize the transition of archaic, 

inefficient defense machinery to a new-generation 

defense posture, capable of addressing the whole 

complex of contemporary challenges. Neither of these 

goals has been reached, but in each area a number of 

steps to introduce systemic changes have taken place.
5

Currently the focus of defense reform is:

• New command and control principles; 

• Mobilization system;

• Modernization and rearmament;

• Security sector reform (with special focus on 

counterterrorism measures); and,

• New forms of civil control over the military.

Preservation of nuclear deterrence is also considered 

to be an essential element of—in fact, an absolute 

requisite for—defense reform. 

Defense reform in the RF was a long-awaited 

necessity. It was needed to deal with the internal 

requirements of military organizations, to address 

needed changes in response to internal strategic 

transformations of society and its administrative 

management system, as well as to current challenges 

posed by the spread of international terrorist threats.5

DEFENSE MANAGEMENT: 

COMMAND AND CONTROL

The Russian military is undergoing radical 

changes in command and control procedures and 

structures. Present innovations could be considered 

as a provisional phase, testing the best mechanisms 

for transferring defense machinery from the Military 

District structures to regional commands and strategic 

“directions” or areas. The process is to be completed in 

2011-15.6

Initial Design.

The federal program, embodied in a document 

titled “On operational readiness of the territory of 
6

the Russian Federation for the purposes of defense 

until 2025,” prepared by the General Staff, received 

the support of the Ministry of Finance, the State Legal 

Department of the Presidential Administration, and all 

subjects of the Russian Federation. It also was certified 

by the RF Ministry of Justice and was submitted to the 

Government for its approval.7 This document brought 

together military planning within Russia’s Federal 

Districts (FD) and programs of social-economic 

developments in the regions.

The new administrative structure of the state is 

linked directly with the future of military reform, which 

is to be implemented on the basis of the universally 

integrated “effectiveness-cost-feasibility” model. It is 

also linked to the reform of the established strategic 

commands, operational task forces (OTF), and joint 

logistics, which are considered essential elements of 

new cost-effective approaches to defense and security.

Two types of conflicts are envisioned:

• Local/regional/global conflicts with regular 

armies (international interstate conflicts).

• Local/regional conflicts with irregular military 

formations (intrastate conflicts), separatist 

movements, and criminal groups, bandit 

formations, and terrorist insurgencies. These 

types of conflicts could be purely internal and 

focused on anticrime, antiterrorism, and actions 

to reestablish a constitutional order. They could 

also occur outside the borders of the state (on the 

territory of the Commonwealth of Independent 

States [CIS]) or be classified as cross-border 

conflicts. 

Depending on the type and nature of the conflict, 

the objectives assigned to these task forces differ 
7

among themselves. The task forces’ goals and mission 

determine the structure of the unit and its functions. 

The concept of the “task force” was legitimized in the 

Federal Law, On Defense (1996), where it was stressed 

that joint efforts and coordination among different 

forces such as those of the Ministry of Defense (MoD), 

Ministry of Interior (MoI), Ministry of Emergency 

Situations and Civil Defense (MChS), Federal 

Border Troop Service (FBTS), Russian Electronic and 

Communications Intelligence (FAPSI), and the Federal 

Security Service (FSB) would be essential in fighting 

against enemy special forces, airborne troops, and 

criminal elements, and in guarding and defending 

communications, military installations, and vital 

economic and state facilities. The task force concept 

was confirmed in the RF Military Doctrine (2000) as a 

basic organizational and combat formation design to 

be used in an internal conflict (Article 5, No. 6) and in 

national defense against external threats (Article 13).

Cooperation and coordination of the task forces 

depend on harmonizing the demarcation zones between the military and other force structures. Before the

Concept of State Policy on Military Development of Russia 

until the Year 2005 was approved in early August 1998, 

there were different types of overlapping demarcation 

zones for the MoD and other force structures. In 1998 

there were eight military districts and four fleets, seven 

districts of the MoI, six FBTS districts and nine regional 

centers of the MChS. The Concept of Military Reform

established a single system of military-administrative 

division of Russian territory into strategic directions.

8

This harmonization of security space was aimed at 

overcoming the disunity of the various defense-related 

entities operating in a common area. In a situation 

of grave financial shortages, it was also designed to 
8

unify the mobilization reserves, technical support, 

procurement policies, and logistics, and to coordinate 

command and control functions within the mentioned 

strategic directions.

Abandoning the duplicative functions of services 

and infrastructures was also considered to be a prime 

task of defense reform. As was stated by President 

Putin at the RF Security Council meeting in November 

2000, “Keeping duplicating military structures does 

not help the country’s defense and damages the armed 

forces.”9

The RF Military Doctrine of 2000 (Article 22) defines 

the functions of the Operational Strategic Commands 

as follows: Command and control by the on-scene 

commander includes command over the interservice 

groups of general purpose forces, as well as planning 

and organizing joint activities with other military units, 

formations, and institutions responsible for military 

security within the boundaries of their responsibilities 

and the unified system of military-administrative 

demarcation of the territory of the RF.10

Setting the Parameters.

On January 25, 2006, the Defense Ministry’s 

newspaper, Krasnaya Zvezda, published an article on 

Russia’s military policy by Chief of Staff of the Russian 

Armed Forces Army General Yury Baluyevsky, who 

reported on the dramatic upcoming changes in the 

military structure of the army and navy. These include 

the transformation of current military districts into 

“operational and strategic directions”; restructuring 

of divisions and armies into more flexible military 

units with enhanced maneuverability; and formation 

of task forces. Task forces already are operating in the 
9

Kaliningrad Region, now a “special district,” and on 

the Kamchatka Peninsula.

Moreover, the General Staff has been testing the 

operation of task forces at the brigade-to-corps levels 

in the Leningrad Military District since January 2006. 

In 2005-07, an experiment on practical implementation 

of the transfer of the command and control functions 

to strategic directions and establishment of functioning 

regional headquarters task forces of the united services 

began. The experiment is to be completed by 2007, 

with recommendations on the best practices for the 

subsequent transition period.11

It was reported that the transition to the strategic 

directions and task forces is to start only after the 

results of the experiments are obtained and analyzed, 

sometime between 2008 and 2010. The political 

decision on the transfer was made, according to the 

Nezavisimoye Voennoye Obozrenie, at the RF Security 

Council meeting on July 9, 2005.12 After the institutional 

status of the General Staff was downgraded in 2004, 

its main attention was focused primarily on such 

traditional functions as threat evaluation, development 

of theoretical doctrinal concepts, planning, and 

strategy. Any public statements coming from the Chief 

of the General Staff therefore should now be seen as 

a declaration of policy adopted and approved by the 

political-military authorities at the highest levels. 

In addition, Minister of Defense Sergei Ivanov said, 

on the record, that there were no plans to make any 

serious changes in Russia’s military structure until the 

year 2010. This statement was intended to set a proper 

time schedule for transition. Instead, it confused some 

defense experts, who assumed that current Russian 

defense reform was only a minor adjustment13 rather 

than a radical transformation of the entire Russian 

defense establishment.14
10

The Presidential address to the Federal Assembly 

on May 10, 2006, confirmed the plans for radical 

transformation of the defense posture. News media 

sources connected with the government went further by 

citing the decisions of the MoD Collegium (April 2006) 

and explaining the main parameters for command and 

control reform:15

• The existing six Military Districts and four 

fleets are to be transformed into three Regional 

Commands—West European (West), Central 

Asian (South), and Far Eastern (East)—based 

on integrated command and control of ground 

and naval forces located in the current Military 

Districts.

• As part of the reform, the commanding officer 

will be in charge of all services and military 

defense formations, with the exception 

of Strategic Nuclear Missile Forces. The 

commanding officer is to be responsible for 

territorial defense in cases of terrorist attacks 

and/or local/regional conflicts. 

• The Air Force is to merge with the Strategic 

Missile Forces and Space Forces. 

• Airborne troops are to be subordinated to the 

Main Ground Forces HQ.

• A joint logistic and procurement system is to be 

established for all defense/security services.

The MoD Collegium approved a plan of transformation 

of the command and control structure proposed by 

the General Staff. The transformation is expected 

to be completed between 2011 and 2015. It has been 

suggested by some defense experts that the proposed 
11

command and control system partly resembles that of 

the United States.

JOINT LOGISTICS

Setting up a unified logistic system is also an 

essential part of the optimization or reform of the 

defense/security infrastructure. The Armed Forces 

Logistic Support Service is being streamlined so as to 

better accord with the country’s economic capabilities.16

Ivanov, soon after being appointed Minister of Defense 

in 2001, wrote in Krasnaya Zvezda that there would 

be a “rationalization of logistics” as part of military 

reform.17 Services such as warehousing, transport, 

and healthcare for both the army and the paramilitary 

forces answerable to the Interior Ministry would be 

integrated under a single command in each military 

district.18 As was stated in the Ministry’s White Paper 

on Defense presented in October 2003, among the goals 

and tasks of military reform was to speed up the 

unification of logistic support and technical assistance 

of the military and other services.19

This process meant establishment of a unified 

logistic system for the military and other services within 

seven federal districts. The system was an essential and 

basic element of the optimization of the Armed Forces 

and became a principal plank in reforming the military 

system. The unified logistics system presupposed 

certain changes in the military system itself: 

• Optimization of the command and control 

system and elimination of duplication of 

command structures in the regions. 

• Unification of procurement orders for the 

military and other forces. 
12

• Merger of medical, infrastructure support, 

and transportation systems that would lead to 

significant reductions in personnel. 

• Introduction of a territorial system of recruit induction within the boundaries of the administrative districts.

Among the goals and tasks of military reform was 

that of speeding up unification of the logistics support 

and technical assistance facilities of the military and 

other services. Some of these goals now are being 

addressed.

UNIFICATION OF THE PROCUREMENT REGIME

In 2005-06 a new mechanism for commissioning 

procurement projects and monitoring their delivery 

was introduced. In order to make more efficient use of 

funds, members of Parliament recommended in 2004 

that the government re-create a Ministry of Defense 

Industries. In 2005 some steps were taken in this 

direction by the RF executive branch when the Federal 

Service on State Order and Federal Military Technical 

Service were created within the RF MoD. In March 2006, 

a decision was made to create a Military-Industrial 

Commission (MIC) to centralize and strengthen the 

operational management of the military-industrial 

complex and act as a new state institution for unified 

supply and equipment procurement for all “power 

ministries,” with the MoD having the leading role.20

The MIC was established formally as a permanently 

functioning institution within the RF government 

on March 20, 2006. Minister of Defense Ivanov was 

appointed immediately to lead the MIC.

On March 21, 2006, President Putin named 

Vladislav Putilin, former director of the Defense and 
13

Security Programs Department at the Ministry of 

Economic Development and Trade, as deputy head of 

the Military-Industrial Commission with ministerial 

status.21 The MIC’s status, parameters, and duties were 

not defined and announced by the government until 

late April 2006. It was given responsibility for overseeing long-term strategy and planning and performing 

operational management of R&D procurement 

projects; introducing a strict monitoring mechanism on 

pricing of defense projects; and monitoring the overall 

restructuring of the military-industrial complex.

In the RF 80 percent of the arms and defense 

systems are produced by monopoly producers. The 

MIC is authorized to prevent creation of monopolies 

of producers and R&D in the internal market by 

stimulating competition between the enterprises in 

production of spare parts, but eliminating competition 

during the production stage of the completed item.22 The 

MIC also defines the main parameters for state defense 

orders, including timing, pricing, and personnel policy 

in the defense enterprises. 

Other officials assigned to the Commission besides 

Ivanov and Putilin are the head of the General Staff 

Army General Yury Baluevsky; Minister of Economic 

Development and Trade German Gref; Minister of 

Finances Alexei Kudrin; Minister of Industry and 

Energy Victor Khristenko; head of Rosprom Boris 

Aleshin; head of Rosatom Sergei Kirienko; head of 

Roscosmos Anatoly Perminov; General Director of 

Rosoboronexport Sergei Chemezov; and Director of the 

Administrative Department in the RF Government 

Mikhail Lychagin. Igor Borovkov, the first deputy 

Minister of Atomic Energy and director of the 

Department of Defense Industry and Information 

Technology in the RF Government, was appointed 
14

as the Chief of Staff of the Commission, with wide 

responsibilities for framing the Commission’s decisions 

and monitoring their implementation. In addition, 

there are several permanent staff members assigned 

to monitor and oversee specific sectors of the defense 

industry. These members of the staff were ordered to 

leave their previous posts and concentrate full time on 

their new responsibilities. They are: 

• Alexander Goev, Director of the Krasnogorsk 

Optical Mechanical Plant, who was made 

responsible for weapons/weapon systems and 

platforms for the Ground Forces; 

• Vladimir Pospelov, Vice president of the State 

Center of Nuclear Shipbuilding (Severodvinsk) 

and former head of the Rossudostroeniye (Russian 

vessel building), who was made responsible for 

the navy procurement programs.23

• Alexander Bobryshev, General Director of Novosibirsk Chkalov Aviaproduction Corporation, 

who monitors aviation and space programs.24

Joint Logistics and Command and Control 

in Procurement Policies.

A joint approach for logistic support and procurement is to be implemented with the help of a joint 

civil agency dealing with the procurement programs 

for all defense and security services and agencies. 

The Civil Agency for procurement and outsourcing 

of arms and military equipment is scheduled to 

become operational in 2007. By the end of this year, 

the government promised to establish a joint system 

of procurement for all state defense orders and for all 

services.25 In November 2005, in order to stimulate this 
15

process, Ivanov was appointed First Deputy Prime 

Minister with an expanding portfolio, which included 

implementation of the military-technical policy, 

as well as formulation and execution of the State 

Defense Order; restructuring the military-industrial 

complex; overseeing the nuclear, space, and missile 

industries; and exercising responsibility over the 

export control regime and dual-use technologies with 

a view to preventing proliferation of weapons of mass 

destruction (WMD). 

Some Russian experts have suggested that the Federal Defense Order Service26 could well be removed 

from the MoD and placed under Ivanov’s direct 

supervision as first deputy prime minister. The main 

purpose would be more complete and energetic 

compliance with the transformation of the defense 

industry and establishment of a civilian joint 

procurement agency, which would act on behalf of all 

services/defense communities.27 However, the leading 

role of the MoD in the oversight of procurement policies 

is apparently to remain unchallenged.

Special Forces and Intelligence.

Streamlining command and control procedures 

has affected the highly sensitive spheres of defense 

organization as much as it did the intelligence 

networks and special purpose forces. In accordance 

with the “Plan of Military Construction for 2006-10” 

and in line with a decision of the RF Security Council 

(March 2005), a unified command headquarters for 

Special Purpose Forces is to be established, directly 

subordinated to the President. This arrangement 

allows the Russian President to make decisions on their 

deployment (outside the country, in case of necessity, 
16

to counteract terrorist threats) without approval of 

the RF parliament. The state budget, according to the 

news media, has a separate provision in the 2006 fiscal 

year to cover such measures. These developments 

can be considered revolutionary. The main principle 

for establishing a new military service takes into 

consideration not only the technical characteristics 

of any military hardware used, but also the possible 

missions, particularly those involving worldwide 

special operations such as antiterrorist operations. The 

overall training and monitoring of all special forces, 

it was reported, are to be transferred to the Main 

Intelligence Directorate (General Staff) by June 2006.28

These units are going to be engaged mostly with the 

Western Combined Joint Task Forces (CJTFs) in North 

Atlantic Treaty Organization (NATO)/European 

Union (EU) operations, together with peacekeeping 

units serving under other international organizations. 

This measure was advertised as a step to allow the 

Russian MoD to respond more directly and efficiently 

to small-scale conflicts, to neutralize nonstate actors, 

and to counter nonmilitary threats in cooperation with 

security services and police units. 

The centralization drive and optimization process 

is also affecting military intelligence, as widely 

reported in the Russian press in early April 2006. 

According to General Baluevsky, the goal of such 

reform was “making a more efficient system of military 

intelligence, better equipping intelligence units in the 

services, and stepping up the process of centralization 

and planning under the General Staff.”29 The changes 

mean that the Intelligence Directorates of the Air 

Force, Navy, and Ground forces are to be dissolved, 

with army intelligence units subordinate to the Main 

Intelligence Directorate and responding directly to 
17

it. The Intelligence Directorates of the services are 

to be transformed into departments with less staff, 

allowing the ministry to cut personnel from 20 to 6 

persons; new units are to be headed by officers at the 

rank of colonel instead of lieutenant general as was 

formerly the case.30 Under the previous system, the 

regional directorates were responsible for the training 

of special forces units.31 Thus, according to Russian 

Duma member and ex-Deputy Minister of Defense 

Andrey Kokoshin, Russia is in the process of forming 

a completely different military triad: strategic forces 

(with traditional elements of strategic missile, navy, 

and aviation forces); conventional forces (consisting of 

ground and nonstrategic navy and air components); 

and special antiterrorist forces.32

Antiterrorist Network/Security Sector Reform.

Command and control reform entails the introduction of “changes not only in the armed forces, 

but in all elements of the defense organization of the 

state that should be capable of effectively providing 

self-defense in any developing circumstances of the 

international situation.”33 On December 15, 2002, 

it was announced that the Russian Prime Minister 

approved appointments to the Federal Antiterrorist 

Commission and signed the order on the Status of 

the Commission. The nominations confirmed the 

establishment of a permanent institutional body that 

was to act as a center for coordination of the security, 

border guard services, and militia (police) on a 

regular basis, including emergencies. This decision 

entailed establishment of a new coordination system 

for antiterrorist security. The Commission was made 

responsible for formulating the RF antiterrorist strategy 

and tactics; coordinating the actions of the ministries, 
18

services, and executive authorities at all levels aimed 

at neutralization and prevention of terrorist attacks, 

as well as for addressing the conditions that promote 

them. The Commission was also made responsible for 

initiating and introducing antiterrorist legislation. The 

decisions made by the Commission are binding on all 

federal executive institutions, executive authorities 

of all subjects of the Russian Federation, regional 

antiterrorist commissions, and all organizations of the 

RF. 

The Federal Security Service (FSB) provides operational management and logistic support. Information 

support and policy assessments are provided by all 

federal ministries, agencies, and services represented 

on the Commission and the authorities involved 

in any potential terrorist incident on a case-bycase basis. As former Minister of Interior General 

Kulikov pointed out, the difference between the new 

system and the 2002 arrangement so far as security 

counterintelligence operations were concerned lay in 

more efficient procedures and a clearer division of 

functions. Both the President and Prime Minister are 

the approval authorities for overall operational plans, 

but operational implementation is left to the specific 

services.34 The roles of the FSB and Ministry of Interior 

as the main players in the Commission were confirmed 

by the then Prime Minister’s decision No. 2149. The 

urgent need to address the terrorist threat brought 

about the increasing influence of the security services. 

The trend has intensified since 2003, as the FSB became 

de facto a leading “senior service,” as it was called by 

Dmitri Trenin, senior defense and security expert from 

Carnegie Center, Moscow. As a result, the hierarchy 

of responsibilities and subordination was adjusted to 

reflect the growing importance and prominence of the 

antiterrorist apparatus. 
19

The National Antiterrorist Committee (the NAC, 

functioning under the FSB directorship) was created 

by Presidential decree in February 2006. A Federal 

Operational Headquarters for the NAC is headed by 

Nikolay Patrushev, double-hatted as chairman of the 

NAC and head of the FSB. Parallel headquarters for 

NAC activities were established at lower echelons of 

the Russian Federation. Heads of all headquarters and 

staff appointments were nominated. The staff of the 

NAC is part of the FSB. Other officials assigned to the 

Federal Headquarters are Minister of Interior Rashid 

Nurgaliev (deputy head of the Federal Headquarters); 

Deputy Minister of the Federal Security Service and 

Chief of Staff of NAC Vladimir Bulavin (deputy head 

of the Federal Headquarters); First Deputy Prime 

Minister Sergei Ivanov; Head of the Ministry of 

Emergencies and Civil Defense Sergei Shoigu; Minister 

of Foreign Affairs Sergei Lavrov; Director of the Foreign 

Intelligence Service Sergei Lebedev; Director of the 

Federal Protection Service of Russia Yevgeny Murov; 

Head of Rosfinmonitoring Viktor Zubkov; Deputy 

Head of the Security Council R. F. Valentin Sobolev, 

etc.35

According to the International Institute of 

Strategic Studies publication, Military Balance 2005-

06, among members of the NAC are also the Deputy 

Head of the Presidential Administration; the Deputy 

Chairman of the Federation Council; one member of 

the State Duma; the Minister for Health and Social 

Development; the Minister for Information Technology 

and Communications; the Minister for Transport; the 

Minister of Justice; the Director of the Federal Guard 

Service; and the Head of the Federal Monitoring 

Service.36

The NAC focuses on coordinating the work 

of emergency forces in the seven federal districts, 
20

which are responsible for monitoring all elements of 

the executive institutions in case of an emergency. 

For instance, the NAC is in charge of coordinating 

the territorial organizations of the federal executive 

power institutions, regional power structures of 

the RF subjects, and local authorities in preventive 

measures against terrorism. It is expected to minimize 

the impact of terrorist actions and coordinate activities 

of the civil institutions after any terrorist attack. 

Practical planning, coordination, and execution of the 

operations in post-attack periods are under the direct 

supervision of the NAC.37 At the first NAC meeting, the 

following organizations were represented: the National 

Antiterrorist Committee; seven Federal Districts (at the 

status of Presidental Envoy); the Military Districts; the 

Directorates of the MoI in the Federal Districts; and the 

Security Services in the Federal Districts. In cases where 

emergency rule is invoked, the NAC has a network that 

could be used effectively for direct governance of any 

region or group of the Federation and for coordination 

and monitoring of political and economic activities.38

In addition, the presidential team took steps to 

tighten control over personnel policies in the security 

services. On December 27, 2005, President Putin signed 

amendments to Articles 4 and 6 of the Federal Law, 

On Defense, intended to harmonize the main document 

with the changes introduced to the federal laws On 

the FSS (FSB) (Article 16) and On the Federal Protection 

Service (Article 18), which expanded the authority of the 

President. These amendments granted sole authority 

to the President for deciding the numerical strength 

of military personnel and civilian employees of both 

the FSB and Federal Protection Service. An affirmative 

decision on the amendments was voted by the State 

Duma on December 9, 2005, and by the Federation 

Council on December 14, 2005.39
21

MOBILIZATION/PROFESSIONALIZATION 

Resolution of personnel issues also continues to be 

among the priorities of defense reform. Presently there 

are 1,134,000 servicemen in the RF armed forces. During 

the last 5 years, as part of the optimization process, 

200,000 servicemen became excess. By January 1, 2011, 

another 34,000 servicemen are expected to retire or be 

dismissed. The stated official goal is to have 1,013,000 

servicemen by 2011. However, it was promised by the 

Minister of Defense that no personnel from combat 

units will be declared excess. Only the supporting staff, 

together with posts in the high-ranking officers’ levels 

(generals), are to face personnel cuts.40

The mobilization base for defense is shrinking, and 

the quality of draftees has declined considerably. The 

dynamic is striking: in 1994 about 25 out of 100 young 

men were drafted; in 2005-06, only 9 out of 100 young 

men of eligible age have been drafted into service. 

According to the Military Balance 2005-06, in 2004 and 

2005, an increasing percentage of eligible conscripts 

were found to be physically or mentally unfit for 

service and had to be discharged. From 2006, Russia 

will be entering a stage of “considerable reduction 

in the working population.” In 2006, Russia’s labor 

resources could be reduced by 30,000 people; in 2007, 

the number is expected to go down by 370,000, and by 

538,000 in 2008.41

These are going to be gap years for induction, as the 

percentage of those eligible to be drafted is expected to 

drop considerably as well. The analysis demonstrated 

that there was no intention to replace the conscriptionbased forces totally with a professional army in the 

immediate future. However, plans were made to 

proceed with the introduction of service by contract, 
22

making it more manageable and legally binding, with 

a step-by-step introduction of service by contract of 

additional specialized categories of servicemen and 

draftees. 

Professional Armed Forces.

Formally, the professionalization experiment 

started in 2004 and is supposed to produce results by 

the end of 2007. Full professionalization at unit level 

remains a target which will apply first to the airborne 

forces and formations designated for operations in the 

areas of conflict. Main contingents of the airborne forces 

are to be transferred to service by contract by 2007. 

According to the official statistics, there are several 

units that already have become fully professional, 

such as the 76th Airborne Division in Pskov and the 

31st Airborne Brigade and 42nd Motor Rifle Division 

deployed in Chechnya. The 98th Airborne Division in 

Ivanovo is to become fully professional by June 1, 2006 

(more than 6 months ahead of schedule). The 106th 

Airborne Division is to become partly professionalized, 

with draftees and volunteer servicemen combined. 

The 21st Airborne Battalion in Ulyanovsk is waiting 

to start transformation by 2007.42 Naval crews were 

named as the second tier priority of forces selected to 

be transferred to contracts.43 The drive to transfer the 

majority of the services to contracts also has affected 

the MoI, Border Guards, etc. There are comprehensive 

transformations now taking place in the MoI’s units 

and the special forces. 

However, there already are several emergent 

problems with the process of professionalization 

of the armed forces and other services. First is the 

difficulty in adhering to the time schedule or annual 
23

targets for getting young men to enroll in military 

service on contract. There is an unresolved dispute 

between the Minister of Defense and MoD staff in their 

assessments of the time frame needed to achieve the 

proclaimed goals. According to the public statement 

of the Minister of Defense, the MoD has to have 130-

140 thousand contracted servicemen, or 50 percent 

of all army personnel, as professional forces by 2007. 

Judging by the MoD’s assessment, however, it would 

be difficult to reach this target by 2007. By the year 

2007, it is intended to have cut conscription from a 2-

year to 1-year period of service and to have reduced 

the period of alternative service from 42 months to 

18. But the number of those volunteering for contract 

service is not meeting annual targets. For instance, in 

2004 the number of those registered for contract service 

in the Moscow Military District was only 17 percent of 

the targeted figure; in the North Caucasus, 45 percent; 

in the Volga-Urals, 25 percent.44 Presently there are 

109,000 sergeants serving under the MoD, but only 

23,000 are under contract.

Second, the MoD is faced with the problem of 

keeping up to numerical strength those regiments 

that already have been transferred to contract service. 

Moreover, according to the Military Prosecution Office, 

an increasing number of contracted servicemen from 

the aforementioned units have been relieved of duties 

for drunkenness and violence. Also, there has been an 

increasing tendency for soldiers serving under contract 

to fail to return for duty after vacation.

Third, double-booking has been occurring, as when 

contracted servicemen were induced to re-register in 

particular other regiments or units in order to serve 

the government’s ulterior purposes. For instance, 

1,000 servicemen from the 42nd Motor Rifle Division 

deployed in Chechnya were induced to re-register 
24

with the 46th Motor Rifle Division slated to take over 

in Chechnya from the 42nd, thus conveniently keeping 

them deployed in the region.45

Financial and organizational difficulties are 

allegedly among the reasons for these problems. There 

are almost no financial incentives to join the service 

by contract. Irregular payment and low salaries in 

comparison with the civilian sector are the rule. (The 

contracted soldier’s monthly salary is about 5,000-6,000 

rubles if he serves locally, and about 15,000 rubles if 

he is sent to a conflict area.) The low pay was among 

the reasons named for why over 2,000 volunteers 

quit the 76th Pskov Airborne Division, according to 

Komsomolskaya pravda.46 In addition, the standard of 

living of servicemen deteriorated considerably with the 

cancellation of the traditional social benefits to them as 

part of the national social and economic reforms that 

were introduced in 2004-05. 

The absence of professionally trained noncommissioned and junior officers, who are most responsible 

for the educational development, morale, and ethnic 

assimilation of servicemen, also contributed to 

deteriorating professionalism in the units. Failure 

to make sufficient provision for a professional corps 

of noncommissioned officers is considered a huge 

deficiency of the reform process, one which could in 

the long term result in the de facto metamorphosis of 

the enlisted ranks into a band of unreliable mercenaries 

rather than a professional army. In 2005-06, the MoD 

tried to improve the situation through several policy 

decisions: 

• The MoD sought legislation to introduce 

stricter rules for application to those who fail to 

comply with the terms of contracts. Presently 

the amendments to the federal laws regulating 
25

this issue are being debated in the Russian 

parliament. 

• The Ministry is supporting creation of military 

centers in civil universities and colleges for 

promotion of professional military service.

• The MoD has introduced a new clause in the 

contract for those receiving military education. 

If, after graduation from a military college or 

institute, the serviceman decides to leave the 

armed forces and work in the civilian sector, 

the graduate has to pay the full cost for his/her 

education after discharge. 

• As an indirect financial incentive to boost service 

by contract as well as to increase the number 

of serving officers, the MoD has introduced a 

program of liberal home mortgage benefits. 

They are given to those who join the service in 

or after 2005 and are planning to serve in the 

military for no less than 20 years. 

• The MoD has decided to introduce contracted 

sergeants in the RF army as the intermediate 

leaders between soldiers and commissioned 

officers. They are to be responsible for training 

and education of the conscripts. On May 26, 

2006, at the session of the State Duma on defense 

reform implementation, Minister of Defense 

Ivanov confirmed that the MoD was working on 

transferring the positions of sergeants and petty 

officers, as well as aircraft and ship crewmen, to 

contract service. If the present plans for military 

modernization are to succeed, an additional 

26,000 sergeants on contract could be serving in 

the RF armed forces eventually. The changes are 

intended not only to combat hazing and crime 
26

within military ranks, but also to provide the 

necessary conditions for professionalizing the 

military. Thus, the sergeant augmentation was 

not just a reaction to public condemnation of the 

publicized hazing incidents, but rather a reasoned necessity for that aspect of defense reform 

calling for true military professionalism.

Enhancing the Draft System.

On May 10, 2006, President Putin confirmed that no 

shift to an all-volunteer force was envisaged. Thus the 

draft system, strongly defended by the top brass, will 

remain in place despite mounting public objections. In 

order to deal with the numerous challenges to effective 

mobilization, the MoD undertook measures, on the one 

hand, to increase the mobilization base for conscription, 

and on the other to upgrade the quality of those called 

to join the armed forces. In 2005-06, several new policies 

were tested. For example, the MoD is taking steps to 

improve the draft registration process, one aim being 

to reverse the decline in the annual harvest of draftees. 

Several measures were introduced:

• Until recently, there was a set of legal deferments 

allowing draftees to evade a draft call. The MoD 

has proposed, the Government supported, and 

the Parliament is in the process of approving, 

the suspension of nine types of deferment, 

leaving the remaining ones untouched. No 

longer will “delays” be given to young fathers, 

medical professionals working in rural areas 

and regions, graduates of naval colleges and 

academies, graduates of academies of art, civil 

servants (including those registered to run for 

the legislative bodies), and employees of defense 

enterprises. 
27

• At the same time, the MoD is promoting 

reduction of the term of mandatory military 

service. By 2007, the term of service is to be 

reduced from 2 years to 1.5 years; and by 2008 to 

1 year. Moreover, a new interpretation is being 

applied to “alternative service.” Previously 

those applying for alternative service in lieu of 

serving in active military units could invoke only 

their religious/pacifist beliefs as justification. 

However, if new amendments are adopted, 

any compelling explanation for such a request 

in written form, whether based on religious/

philosophical convictions or not, should be 

sufficient for consideration. However, the MoD 

opposes allowing service in the police (militia) or 

fire service to count as an alternative to military 

duty. The term of alternative military service is 

to be reduced as well, from 3 years to 1.5 years 

by 2008. This reduction is to be accomplished 

in parallel with the term reduction for active 

military duty. Another liberalization of 

alternative service being proposed is elimination 

of residency restrictions, thus permitting 

alternative duty in the part of the RF where the 

conscript permanently resides.

• Another point addressed was the alleged 

ineffective work of military district commissariats, as reflected in their inability to enforce 

a call-up of young men of draft age. The RF 

government therefore introduced plans to 

reform the national system of military district 

commissariats, with the officers in charge 

now to be rotated after 3-year terms. Over 600 

commissariats, generally those covering larger 

territories, are to be closed or merged. The 3-year 

rotation in the recruitment centers is intended 
28

to reduce corruption among the officers (e.g., 

bribes in exchange for deferments) and thus 

increase the number of those inducted into the 

service.

• The officers from the reserve centers are to be 

either placed within the regular mobilization 

orbit or transferred to active military units. 

These innovations are to be introduced in 2006. 

In responding to military district commissariat 

complaints about the absence of financial 

assistance to promote contract service, the MoD 

initiated a 24-hour-a-day RV/TV service. The 

program “Star” (Zvezda) could be heard and 

viewed in 58 regions of the RF, thus hopefully 

covering the “propaganda” gap. Among its goals 

are enhancement of military service’s image 

and promoting the benefits of contract service. 

Patriotic education is becoming an important 

element of the public relations and news media 

work of the MoD and other services. 

• The MoD has proposed a series of programs 

to resolve health-related problems and low 

educational levels of draftee contingents. The 

MoD has introduced a system of rigorous 

medical screening of young men eligible for 

the service. Hospitals henceforth are required 

to send medical data of potential draftees to 

the military district commissariats throughout 

the year. Thus, the disqualification of a draftee 

on medical grounds is to become much more 

difficult to fake. Special military training and 

education courses are to be reinstated in the 

secondary schools to upgrade physical fitness 

and the educational and professional levels of 
29

potential draftees. Special training programs are 

being introduced in the military commissariats 

to provide physical training for future 

conscripts. 

All these changes have long-term goals aimed 

at addressing not only demographic loopholes in 

recruitment, but also the profound reductions in the 

quality of military recruits. Until recently, the armed 

forces mostly drafted reserves with working class 

backgrounds from industrial estates and rural areas. 

This imbalance was a deficiency since the recruitment 

pool ought to be “socially balanced” and, most 

importantly, “better ready for new generation 

equipment and new military tasks.” The military 

would like to upgrade the educational level of all 

recruits. Special attention is being given to the new 

generation of recruits in view of the important 

procurement programs being implemented by 2008-

10. In the year 2000 assessments, qualitative changes in 

the mobilization base were targeted for achievement by 

2010. According to the most current public statements 

by authorities, the timing of mobilization reform 

has been advanced by 2 years; reform is expected 

to be completed by 2008. Meanwhile, the closing 

of deferment loopholes is supposed to provide the 

military with more boots on the ground, obtaining 

recruits, first of all, from the regions with higher-thanaverage unemployment among young men, as well as 

rural areas. The selection process is intended to ease 

social tensions while preserving recruitment potential 

from higher educational backgrounds for future 

mobilization campaigns.

As a demonstration of the armed forces’ transformation, the MoD is introducing new regulations that reflect 
30

the practical realities of operating within a complex 

combined (professional and conscript) mobilization 

system. Presently only the Drill (Operational) Manual, 

which takes into account the Rules of Engagement 

(ROE) for the service under contract, has been submitted 

to the units. Within a few months, however, the MoD 

and MoI are planning to provide the armed forces with 

several new manuals addressing disciplinary issues, 

guard and garrison duty, home affairs service (MoI 

only), etc.47

MODERNIZATION AND REARMAMENT

The focus of its procurement programs confirms 

that the political and military leadership sees its main 

tasks to be sustainment of nuclear deterrence as a 

political/military tool and obtaining the capability to 

wage counterterrorist/special operations domestically 

or internationally, as part of cooperation with the 

West (CJTFs, NATO, EU, CIS), etc., or against internal 

instabilities. Moscow is redefining its national priority 

interests by focusing its attention on rebuilding and 

reforming the country’s defense and security systems. 

Engaging the business community in the restructuring 

plans is seen as one of the main elements of the 

program’s success. The priority focus is on nuclear 

deterrence and counterterrorism. 

The government has announced a policy of selected 

and targeted state investments in defense/security 

procurement programs. The procurement program 

has three main elements: (1) nuclear strategic forces; 

(2) equipment for permanent/readiness units; and 

(3) equipment for units engaged in counterterrorist 

operations. 
31

Strategic Nuclear Deterrence.

Moscow is investing heavily in strategic nuclear 

forces and special operations forces until it can 

reform its conventional military. The focus is on the 

nuclear triad (strategic air, naval, and ground forces) 

for sustaining nuclear deterrence. Though publicly 

and officially Moscow has confirmed its interest in 

preserving the nuclear triad, the currently existing 

programs concentrate mainly on the modernization 

of naval and ground-based nuclear strategic forces by 

2015-20. The RF constantly reiterates its continuing 

intent to preserve nuclear deterrence. On March 30, 

2006, President Putin, addressing a special meeting 

on the military nuclear complex, said that “analysis of 

the current international environment and prospective 

trends of its development determines that Russia 

should consider nuclear deterrence as a cornerstone 

of its policy, to guarantee its national security and the 

safety of its nuclear weapons complex.”48

Russia was and is consistent in promoting minimum 

deterrence. In 2005 and 2006, Russia’s Minister of 

Defense confirmed the attainment of a level of adequate 

sufficiency in strategic nuclear defense as a priority 

state policy. In comparison with that of the Union of 

Soviet Socialist Republics (USSR), the Russian nuclear 

potential is considerably less: 39 percent fewer strategic 

bombers, 58 percent fewer intercontinental ballistic 

missiles (ICBMs), and 80 percent fewer submarines 

with ballistic missiles.49 But the remaining potential 

is still enough to sustain the policy of minimum 

deterrence. Major General Vladimir Vasilenko, head 

of the 4th Central Research Institute of the Ministry 

of Defense (which is responsible for strategic nuclear 

planning), pointed out in February 2006 that “reductions 

of missiles in the Strategic Deterrence Forces during 
32

the last years did not affect their ability to carry on the 

task of strategic deterrence.”50

At the same time, Moscow introduced changes in 

its criterion for assessing the sufficiency of deterrence. 

Parity of nuclear weapons has become an insufficient 

criterion for the strategic nuclear components. The 

new criterion for sufficiency is based on the capability 

of nuclear forces to penetrate the enemy’s national 

missile defense.

 A new posture could be announced by the end of 

2006 or even sooner. According to Yury Solomonov, 

head and chief missile designer at the Moscow Institute 

of Thermal Technology (MITT), the main research 

institute for the designing of ground- and sea-launched 

nuclear missiles, Russia could announce planned 

changes in its strategic nuclear capability by the end 

of the year.51 Although official details are not available 

yet, there have been several public statements pointing 

to the following essential characteristics: 

• Balance, but not parity; 

• Minimal deterrence; 

• Asymmetric response;

• Return of MIRVs; and,

• Russia’s possible unilateral withdrawal from 

the Intermediate Range Nuclear Force Treaty as 

a response to similar U.S. actions. 

General Yury Baluyevskiy, Chief of the General 

Staff, hinted that Russia was giving up the principle 

of symmetry, that is, an all-out effort to preserve 

quantitative parity with the potential enemy. It also 

will develop its armed forces asymmetrically, shaping 

priorities that will deter reliably any threats. One such 

priority is a “search for ways of most efficient use of 
33

military hardware . . . in conditions of limited resources, 

first of all, financial and economic.”52 With the April 3, 

2006, publication of a new MoD policy statement, “The 

Armed Forces of the Russian Federation,” Baluyevsky 

confirmed this shift. President Putin also stressed the 

possibility of asymmetrical responses in his address to 

the nation on May 10, 2006.53

This approach echoes the strategy of “realistic 

deterrence,” which was introduced initially in the 

1990s. The concept signaled Russia’s acknowledgement 

of its limited financial resources and force capabilities. 

“Realistic deterrence” implies abandonment of an 

orientation towards the preservation of military 

balance through quantitative parity in weapons, instead 

reserving the right to respond to any aggressive acts 

by all possible means. According to Russia’s National 

Security Concept (2000), the country is giving priority 

to diplomatic, political, economic, and nonforce 

methods in crisis- and conflict-prevention operations. 

However, the state reserves the right to use military 

force unilaterally if the combination of nonmilitary 

threats to national security is considered unacceptably 

dangerous.54

In other words, the principle of realistic deterrence

accepts the possibility of becoming engaged in a 

military conflict both through an escalating pattern and 

through one’s inadequate or asymmetrical response 

(for instance, a unilateral strike as a response to a nonnuclear threat to the existence of the nation).55 This 

approach is based on a new understanding of how 

the state should maintain its influence in vital areas 

by changing the nature of its presence, for example, 

from physical deployment to monitoring a security 

space through intelligence networks; by keeping 

open the option of upgrading its military presence in 
34

“zones of influence”; and by adopting a new policy 

in relations with local communities. This approach 

represents an attempt by defense and security forces 

to address structurally the threats and challenges of 

the 21st century with adequate means and at the same 

time to optimize the costs of national security and 

defense postures. Two factors define the posture that 

RF strategic deterrence could assume—new weapon 

acquisitions and external weapon developments. Let’s 

discuss each in turn:

1. New Weapon Acquisitions. Russia will retain 

its nuclear triad of land-based ICBMs, sea-based 

submarine-launched ballistic missiles (SLBMs), and 

airborne strategic missiles that can deliver a nuclear 

attack from land, sea, or air without relying on third 

countries. The nuclear programs have had 100 percent 

funding support from the government in the last 2 years, 

although some technical problems were encountered 

in transferring funds originally allocated to the MoD 

and other services to the nuclear enterprises. Russia is 

planning to complete the modernization of its strategic 

deterrent components by 2015-20. It plans to deploy 

up to 2,000 nuclear warheads as allowed within the 

existing arms control treaties with the United States, 

in line with the U.S.-Russian Strategic Offensive 

Reductions Treaty (SORT). SORT requires that both 

sides reduce their nuclear stockpiles to 1,700-2,200 

warheads by December 31, 2012. 

Russia’s sea- and land-based missile groups would 

be reequipped by 2015, and the Strategic Missile 

Forces would then have 2,000 warheads. After 2015, 

the Strategic Missile Forces would be able to operate 

“efficiently and without further modernization” until 

2045, according to RF official statements. Russia is 

planning to maintain the SORT-approved number 
35

of warheads, even though decommissioning its SS18 Satans. Its SS-19 Stilettos are being replaced every 

year by single-warhead silo-based, road-mobile 

RT-2PM2 Topol-Ms. Two new missiles, the groundlaunched Topol-M (SS-27) and the sea-launched Bulava30 (SS-NX-30) ICBMs, can carry from three to six 

warheads. Moreover, news media reports have cited 

Moscow’s recent disclosure of a six-warhead multiple 

independently targetable reentry vehicle (MIRV) 

Bulava. It was designed as part of Russia’s effort to 

implement the Memorandum to START I (expiring 

in 2009). The news reports suggest that the number of 

MIRVs per missile was likely to grow to 10 in the near 

future.56

According to the designers, the missiles are based 

on totally different principles and technology than 

were previous systems and are impossible to track or 

intercept by available antimissile systems. Moscow is 

convinced that it would take other countries 10-15 years 

to design ICBMs similar to Russia’s Topol-M (SS-27) 

and Bulava-30 (SS-NX-30). The RF strategic component 

being built is based on a missile unification principle 

which makes the use of nuclear missile capabilities 

more flexible and financially efficient in production. 

Unification of the missiles generated savings up to 30-

40 percent (or up to 12-15 billion rubles) in R&D and 

testing. The cost inflation rate in producing this new 

type of missile is 1.95 percent annually, about the same 

as the standard inflation rate 1.93 percent for industry 

as a whole, according to the industrial production 

index.57

Production of the Topol-M missile was started 

in 2006. Despite some concern expressed by defense 

experts about the low rate of production of the missiles 

and their delivery systems,58 deputy head of the newly 

established Military-Industrial Committee Putilin 
36

confirmed that measures are being taken to speed up 

the production cycle.59 Presently Russia has five missile 

regiments equipped with silo-based Topol-M missiles. 

Also, the first regiment equipped with mobile Topol-M

systems will enter operational service in 2006.

Last year Russia conducted successful launch tests 

of the Bulava SLBM, a submarine-launched version 

of the Topol-M (SS-27).60 While the tests will continue 

until the end of the year, the new delivery systems 

are already under production. Fourth-generation 

submarines will be armed with the Bulava SLBM.61

Several new Borey-class nuclear submarines are being 

built or planned for future construction at the Sevmash

plant in the Archangelsk region. The first one, the 

Yury Dolgorukiy, was commissioned in 2006 and is 

expected to enter active service by the end of 2008. 

The Alexander Nevsky is to be commissioned in 2007 

and is planned to be in service in 2009; the Vladimir 

Monomakh is expected to be commissioned in 2008 and 

to be in service by 2010. The MoD also has continued 

the process of modernizing older systems. For instance, 

the Topol ICBM was modernized, tested on November 

29, 2005, and reentered service with a life expectancy 

of 23 years. After modernization, seven submarines 

were returned to service with the Northern Fleet (12th 

Squadron).

Special attention has been given to building a 

Russian system of global navigation (GLONASS) that 

would provide more reliability than even the U.S.-

controlled global-positioning system.62 It currently has 

12 operational satellites of the 24 ultimately required. 

This year, another six satellites are being sent into orbit. 

Moreover, Russia’s system of space-based surveillance 

satellites can detect missile launches worldwide. The 

space forces will increase their early warning capabili-
37

ties with new equipment reportedly enabling Russia’s 

early warning system to function without radars based 

abroad.63 In addition, according to Colonel General 

(Ret.) Victor Yesin, Vice-President of the Academy on 

security, defense, and law enforcement and former 

head of the main staff of the Strategic Deterrent Forces, 

new land-based radar stations are being either built 

(with the one at St. Petersburg already in operation) 

or planned to be built in Russia proper to reduce its 

reliance on the radar network deployed abroad.64

2. External Weapon Developments. Russian experts 

believe that if the American missile defense posture 

is to be developed within the parameters of the U.S. 

Presidential Directive dated December 17, 2002, 

the existing and planned Russian nuclear deterrent 

capabilities will not be threatened until 2020. The U.S. 

missile shield will have limited capabilities, which 

would allow Russian missiles to penetrate it. Thus the 

U.S. shield would not require additional changes in the 

RF response. However, if elements of the U.S. Missile 

Defense System are to be deployed along the perimeter 

of RF territory, then additional adjustments in the 

Russian nuclear deterrent will be required. Moscow 

is waiting for an announcement from Washington 

on the nature of deployments in Europe (which was 

supposed to be clarified in spring 2006). As stated by 

Russian Minister of Defense Ivanov during his trip to 

Surgut, Russia, on March 23, 2006: 

The U.S. administration recently announced plans to 

set up a base in Europe as part of its plans to deploy a 

global missile shield, and said it would determine the 

[receiving] country this spring. Russia will respond 

to the deployment of the U.S. missile-defense base in 

Europe after it learns about the capabilities of the new 

military facility, and the number of missiles deployed 

there rather than its location. Only after this Russia will 

formulate its response.65
38

Major General Vasilenko, head of the 4th Central 

Research Institute of the Ministry of Defense, observed 

that: 

Russia might consider unilateral withdrawal from the 

Intermediate Range Nuclear Force Treaty (1987) and 

deploy a group of medium range (land-based) missiles 

if it must respond to the threats related to nuclear and 

missile proliferation, modernization, and upgrading of 

the nuclear arsenals . . . belonging to the nuclear club.66

The existing technical and technological capability 

and industrial base allow Russia to resume production 

of medium-range (1,000-5,500 km) and short-range 

(500-1,000km) missiles if a political decision on such 

countermeasures is made. Though in 2005-06 the 

Russian Ministry of Foreign Affairs officially confirmed 

Russia’s adherence to the Intermediate Range 

Nuclear Force Treaty, forthcoming developments will 

demonstrate whether both states are willing to preserve 

Mutual Assured Security (MAS) in the nuclear sphere 

as established between the two states after the end of 

the Cold War. 

Permanent Readiness Forces.

The airborne forces development program for 2006-

10 implies the creation of special-purpose airborne and 

air assault units, and mountain rangers. The units are 

to differ by the type of equipment, training, and functions. In 2006 the airborne forces started to receive 

modern equipment in accordance with the procurement 

program for 2006-08 tailored especially for the needs of 

the units. First Deputy Minister of Defense Alexander 

Belousov stressed that, until the end of 2006, the armed 

forces were to receive over 170 modern armored 
39

vehicles, i.e., 30 T-90 main battle tanks, 40 infantry 

combat vehicles, and over 125 armored personnel 

carriers (BTR-80 and BTR-90). The air force is to receive 

10 new helicopters (Mi-28 and Ka-50). Modernization 

of 180 main battle tanks (Т-72, Т-80), 170 armored 

personnel carriers, 90 combat vehicles, and 152 aircraft 

and helicopters will continue. Most importantly, the 

MoD procurement program for the airborne forces for 

2006-08 is focused on acquiring high-tech equipment, 

including personal theater navigation positioning 

systems based on the GLOANASS; night vision goggles; 

new combat armored personnel carriers (BND-4); 125 

mm artillery pieces (Kord); machine guns (Pecheneg), 

etc. According to the MoD, such new equipment allows 

Russia to increase combat strength of receiving units 

by two-fold.67

DEFENSE SPENDING

Defense spending has doubled in nominal terms 

(up 28 percent in real terms) since 2003. Although 

official overall spending on national defense is 30 

times lower than in the United States, it is difficult 

to compare statistical data on defense-oriented 

expenditures. Since 2004, each year a different system 

for classifying defense expenditures has been presented 

to the public and parliament. For instance, the national 

defense budget headings in the 2004 state budget 

aggregated to 2.56 percent of gross domestic product 

(GDP). However, the figure excluded data on certain 

significant defense-related expenditures (e.g., military 

pensions and paramilitary forces), which were funded 

outside the national defense budget. If we combine all 

data on defense-related expenditures, according to the 

IISS assessments, then total defense spending came 
40

to over 680 billion rubles, or 4.05 percent of GDP.68

The presentation format of the 2005 national defense 

budget was changed due to the major structural reform 

of the RF government in 2004. As a result, under the 

new budget classification system, all defense-related 

expenditures were combined in a dedicated chapter 

on national defense, which contained an itemization of 

funds for R&D, maintenance of current equipment, and 

procurement of new equipment for both the MoD and 

paramilitary forces, etc. There were several innovations 

in the presentation format of the 2006 national defense 

budget. The itemization principle of the previous year 

was abandoned, although the classified portion of 

funds transferred to the MoD (183.1 billion rubles out 

of 497.7 billion) and the 666 billion total allocated for 

all defense-related purposes was published. 

Despite such impediments to budgetary clarity, 

there are several obvious trends in defense spending 

worth mentioning. In 2004, for the first time since the 

dissolution of the Soviet Union, the funds allocated 

for internal defense equalled or exceeded the amount 

received for military exports. Defense expenditures in 

2006 grew to 1.3 times the figure for 2005. In 2006, the 

sum of federal defense orders exceeded profits from 

military hardware sales abroad, i.e., $8 billion against 

$6 billion, according to Andrey Belianinov, newly 

appointed head of the Federal Custom Service and 

former director of the Federal Defense Order Service.69

During the last several years, national defense 

expenditures have increased on the order of 25-to-30 

percent annually. In 2005 and 2006, although substantial 

attention was given to routine modernization of 

existing equipment, one of the priorities of future 

defense reform is more focussed on intensive technical 

modernization of the RF armed forces as a whole.
41

The goal is to increase the percentage spent on 

R&D and procurement as opposed to personnel. In 

the past, 70 percent of defense spending went to fund 

personnel and only 30 percent went for procurement. 

For instance, in 2004 the personnel-to-procurement 

spending ratio was 63-37 percent; in 2005, 61-39 

percent; in 2006, 60-40 percent. The targeted goal is to 

reach 50-50 for “procurement” relative to “personnel 

support.” Specifically, the RF Security Council in 

2004 established the goal of “optimizing” budget 

appropriations through 2010-11 by achieving the 50-50 

ratio.70

The structure of the procurement budget was 

transformed as well. Until 2005, funds allocated to 

operational equipment were transferred mainly into 

R&D. In 2005 and 2006, however, the MoD and security 

services are starting to receive actual deliveries from the 

procurement projects, not just single items but complex 

deliveries of equipment kits. At a press conference on 

March 28, 2006, Minister of Defense Ivanov pointed 

out that the MoD and the services finally had started 

to commission new equipment in substantial volumes. 

From 2000 until 2005, the MoD commissioned only 40 

items of equipment, but in 2005 its commissioned list 

grew to over 400 items.71 However, this data should 

be tempered by the fact that the Russian MoD had 

been greatly underfunded in procurement, which 

led in the last decade to the aging of the majority of 

equipment, with only 20 percent of all equipment in 

the MoD service being new. In comparison, 70 percent 

of Western military equipment kits are new.72 Serial 

production and deliveries of military equipment to the 

Russian armed forces should be in full bloom by 2010.

The state defense order for 2007 was taken under 

consideration (first reading) by the Military-Industrial 
42

Commission (MIC) on May 19, 2006, with a second 

reading expected on June 2, 2006 (postponed). Defense 

spending is projected to increase by 27-28 percent in 

general in comparison with 2006, not just 20 percent 

as originally announced.73 The MoD’s 2007 order estimated a need for 302.7 billion rubles to cover equip-ment 

procurement, repair, and R&D. Procurement programs 

of weapons and military equipment are to increase by 

22 percent; spending on repairs is to rise by 15 percent; 

and funding of R&D is to rise by 20 percent. The MoD is 

planning to spend the equivalent of over 10 billion U.S. 

dollars for these purposes in 2007. Despite the lower 

projections announced earlier, Defense Minister Ivanov 

said that the next year’s procurement budget would 

rise by 27-28 percent. At the session of the State Duma 

on defense reform, he stated that spending on national 

defense was to exceed $29.6 billion (U.S.). Western 

military experts assessed the newly provided statistical 

data cautiously. For example. Dr. Stephen Blank of the 

U.S. Army War College made this assessment: “While 

[the new higher figures] might result from inflationary 

pressures for raw materials, it might also suggest that 

the lack of transparency in Russian defense spending 

is growing.”74

The acquisition programs did cover nuclear and 

non-nuclear items, contrary to the assessments of some 

western scholars.75 On May 18, 2006, First Deputy 

Minister of Defense Alexander Belousov stated that the 

RF armed forces received more than 170 items in 2006. 

The naval procurement program was revived with 

several important projects commissioned, including 

stealth technologies.76 However, despite the substantial 

increase in funding, the volume of the state defense 

order in shipbuilding and vessel-building is still 100 

times less than the comparable figure for U.S. Navy 

programs.
43

There are 146 types of weapons and weapon 

systems being designed and adopted for industrial 

production to meet the needs of the MoD. According 

to MIC Deputy Head Putilin, an additional 415 items 

of military hardware successfully passed the testing, 

and another 409 items passed the initial testing phase.77

The MoI and internal forces budget for procurement 

programs is expected to increase by one billion rubles 

in 2007. The Security Services budget for procurement 

programs is to increase by 5 billion rubles in 2007.78

Additional funding is to be provided for counterterrorist operations and law enforcement activities in 

“conflict/hot spots” across the country. Presently, the 

acquisition programs are implemented on the basis 

of a 3-year plan. On April 26, 2006, the State Budget 

Commission adopted in principle the defense funding 

parameters for 2007-09. The state procurement program 

extending to 2015 is expected to be adopted in the 

second half of 2006. 

In the course of implementation of the Federal 

Defense Order, several problems were revealed that 

triggered intervention of the RF government:

• Increasing costs of the procurement programs 

due to the existing mechanism for pricing, 

commissioning, and implementing the defense 

projects. The government demonstrated limited 

ability to regulate the pricing mechanisms on 

the defense procurement projects. Problems 

were registered with the limited efficiency of 

the defense enterprises and the irregular flow 

of financing from the Ministry of Defence to 

defense enterprises.

• Devaluation of export contracts occurred due 

to the internal competition of the defense 

enterprises for military export orders.
44

• The state of aged equipment and the technological base of defense enterprises has considerably 

degraded in the last 15-20 years in the absence of 

substantial financial investments in the defense 

industrial sector.

As a result, the RF government took several ameliorative steps:

• A new mechanism for commissioning procurement projects and monitoring their delivery was 

introduced. As part of this process, the MilitaryIndustrial Commission was established as we 

saw earlier.

• A decision was made to accelerate the creation 

of vertical holding companies as avenues for 

reforming the defense industry.

• A new approach to funding defense projects 

was introduced; the Public Private Partnership 

(PPP) principles allowed the government to 

rely on business support in its plans of defense 

modernization. 

Reforming the Defense Industry.

According to Stanislav Puginsky, Deputy Head of 

the Federal Agency on Industry (Rostcom), completion 

of the reforms of the military-industrial complex 

is expected by 2010. The main concern of the RF 

government and MoD officials has been the ability of 

the defense industry to deliver both the expanding 

military export contracts and internal state defense 

orders on time. An analysis of industry reform plans 

revealed that the government has abandoned the old 

practice of preserving specialized labor forces as a 

means of holding the country’s military-industrial 
45

complex together. The current focus is on establishing 

technologically competitive and financially efficient 

corporations that can swiftly deliver the needed 

product to the consumer. 

The reform of the defense industry is to stimulate 

mergers and acquisitions among the presently existing 

579 state-owned enterprises and 428 shareholding 

firms of the defense complex. The reforms aim to 

trigger needed bankruptcy declarations, closures 

of some enterprises, and mergers of others. It is 

believed that approximately 46 percent of the existing 

enterprises could survive the reforms and be formed 

into 40-45 integrated holdings with potential options 

for further consolidation of assets. Integrated holdings 

are envisioned in aviation, shipping, automobile, 

radioelectronics, information technology, tank building, etc.

In 2005–06, a detailed feasibility study took place of 

the efficiency and possibility of cooperation among 600 

enterprises traditionally involved in nuclear missile 

procurement programs. In the last few months, the 

senior management personnel of several dozens of 

defense enterprises were changed. A directing staff, 

with 20 and more years of experience, was ordered to 

retire, while new appointments were made with the 

aim of bringing fresh blood into the system. The new 

management is expected to be free from any sentimental 

attachments to the firms they were put in charge of so 

as to be able to introduce such needed but unpopular 

measures as personnel cuts, bankruptcy declarations, 

etc. 

In his national address on May 10, 2006, President 

Putin called for the swift creation of holding companies 

in aviation/space and shipbuilding/vessel-building 

sectors. On the next day, he expressed interest in 
46

creating such holdings by the end of 2006. The RF 

government is emphasizing creation of specialized 

holdings in aviation, shipbuilding, information 

technology, communications, etc., where PPP 

principles of combining state funding and business 

initiatives are to contribute to the swift revival of 

national industry and the military-industrial complex. 

For instance, a proposed aviation holding company, 

like the United Aircraft Construction Corporation, is 

to have different levels of engagement of private and 

state sectors in military and civilian R&D.79 The level 

of state involvement in the military sector is to be no 

less than 75 percent; in transport and special-purpose 

aviation, it is to be around 51 percent; and in civil 

aviation projects, no more than 25 percent.

Rosoboronexport, created by the merger of 

Rosvooruzheniye and Promexport in November 2000, is 

to oversee the process of creating holding companies. 

Rosoboronexport already has experience in the creation 

and consolidation of helicopter firms as embodied in 

Oboronprom, a Rosoboronexport subsidiary. As part of the 

defense industry reforms, Rosoboronexport is scheduled 

to be transformed into a state corporation. The firm 

will continue to act as one of the main facilitators in 

establishing specialized vertical holding companies. 

Rosoboronexport (with a budget grown to $6.1 billion 

and a portfolio worth over $20 billion) has not only 

been coordinating arms export deals but, from 2002 

onward, started investing in the domestic defense 

sector by creating incentives for specialized holdings. 

Recent examples of such holdings are the following: 

Oboronprom, which Rosoboronexport established through 

acquisitions and mergers of helicoptor producers, and 

the automobile-building holding company, AvtoVaz, 

which Rosoboronexport acquired by buying a controlling 

interest and installing its own management team. The 
47

next goal is creation of a shipbuilding holding company 

(the priority firms for acquisition are Severnaya Verf

and Baltiyskiy Zavod).80

In sectors where vertical integrated holdings have 

not yet been set up, the mechanism of additional state 

oversight over foreign defense orders was introduced. 

In accordance with the Presidential decree titled “On 

Military and Technical Cooperation between Russia 

and Foreign States,” dated September 2005, the Federal 

Military and Technical Service (headed by Mikhael 

Dmitriev) was given the right to appoint managers to 

execute export contracts, approvals of which are based 

on collective decisions. 

Additional Sources of Financing.

There is overall support for increasing defenseoriented spending in Russia. The debates in the 

parliament have shown that MPs supported the 

allocation of more than one-third of the state budget 

to defense needs. Some MPs such as Viktor Ozerov, 

Chairman of the Committee on Defense and Security 

of the Upper Chamber, are keen to use nonbudgetary 

financial means for military procurement, for example, 

financing some of the military procurement projects 

from the Stabilization Fund. However, for the time 

being any attempts to channel Stabilization Fund 

reserves into the defense sphere have been rejected by 

the government. On May 12, 2006, First Deputy Prime 

Minister Medvedev stated that the Stabilization Fund 

was not planned to be used for such national programs 

as defense/security.

On May 10, 2006, the address to the nation by 

President Putin revealed only the main outline of the 

government’s elaborate plans for the defense sector. 
48

There is an intent to combine tighter state control with 

liberalization of domestic investment opportunities by 

introducing PPP principles in rebuilding the state’s 

industry and reforming the defense/security complex. 

Funding for the modernization of the armed forces 

and services is to come from a variety of sources and 

through several channels. The main influx of funds to 

the national budget is expected to come from customs 

and new taxing regulations, at least in 2007-09. The 

funds are not to be transferred directly to the national 

defense budget, but implementation of certain social 

and economic development programs is to benefit the 

general “environment” for implementation of the state 

defense order. Several of the measures contemplated 

are discussed here in greater detail:

• Customs. In May 2006 the RF President ordered 

the government to reintroduce direct control 

over customs, given up in 2004, to the Ministry 

of Economic Development and Trade as a 

major channel for increasing state revenues. 

The Federal Custom Service (which provides 

up to 40 percent of budget revenues) was thus 

resubordinated directly to the government. In 

addition, the Federal Custom Service was given 

the authority to formulate norms and regulations 

covering foreign economic activity. Its head 

is responsible for appointing and discharging 

the heads of regional departments and custom 

offices, although the deputy head is appointed 

directly by the government. Andrey Belyaninov, 

former head of Rosoboronexport and a close 

associate of President Putin, was appointed 

head of the Federal Custom Service on May 

11, 2006. As part of the reform initiative, the 

private custom checkpoints, which previously 

functioned on some borders, were closed.
49

• Arms Sales. Moscow introduced the practice 

of prepaid agreements for future arms export 

deals. On May 13, 2006, First Deputy Prime 

Minister Ivanov announced that Russia was 

abandoning the practice of selling its military 

hardware on credit or in exchange for promised 

future incentives and paybacks. 

• State Control. The government announced 

plans to increase its role in sectors of the 

economy associated with national resources 

and industry, while creating favorable 

conditions for private investment. Measures 

proposed include establishment of industrial 

holding companies and creation of rubledenominated commodity exchanges for oil, gas, 

gold, etc. 

More specifically, on May 10, 2006, speaking 

before both chambers of parliament, cabinet 

members, and reporters, President Putin 

proposed setting up ruble-denominated oil and 

natural gas commodity exchanges in Moscow. 

The feasibility of the proposal was established 

by several business teams with the participation 

of Western partners during the early months 

of 2006. Particularly, increased dividends are 

expected to be received from sales on the oil 

exchange. Preparations are to be completed by 

the end of 2006, with full functioning to begin 

in early 2007. According to Russian experts, 

Russian companies lose up to $5-6 billion per 

year on sales of Urals oil on foreign commodity 

exchanges due to existing pricing mechanisms. 

The changes will increase the price of the Urals 

oil on the world markets. A radical innovation 
50

will be the opening of access to pipelines not 

only to the oil companies but to traders as well.

 This initiative is to be followed by a creation of 

a gas commodity exchange. As part of the new 

EU-RF energy charter, the EU purchases of gas 

on the Russian exchange could serve as quid 

pro quo for Russia’s grant of access to its gas 

pipelines to foreign traders, as demanded by the 

EU. This idea received support from Alexander 

Dvorkin, Head of the Exports Department in 

the Presidential administration on May 12, 

2006. It was announced formally that the gas 

commodity exchange would start operation 

within these parameters as early as June 2006. 

Russia is planning to follow the trend (initiated 

by Iran and China) of transferring the bulk of 

operations in the energy and metals exchanges 

from “customer” to “producer” markets.

• “Social” Tax on Business. This tax is expected to 

be introduced without formal legislation. The 

government expects to reap a concrete financial 

return as entrepreneurs become motivated to 

participate in the main economic development 

programs.

• Public Private Partnership as a Legal Base. The 

government is taking steps to ease the process 

for private capital investments in the defense 

sector. For instance, the government has sought 

new legislation that would allow it to shortcut 

the decisionmaking process of private/foreign 

investment in the defense and security sector 

without referring such matters for presidential 

consent. Such a shortcut would be granted 

only if the proposed investment amounts to as 
51

much as 25-30 percent of the target enterprise. 

A draft of new legislation titled “On the Order 

of Investment in Commercial Enterprises That 

Have Strategic Importance for National Security 

of the Russian Federation,” was expected to go 

to the Ministry of Industry and Energy and 

Ministry of Economic Development and Trade 

for consideration by early June 2006. This new 

legislation will redefine the term “strategic 

enterprise,” formerly applied primarily to 

organizations that either are involved in 

implementation of the state defense order, or 

have the authority to import and export military 

or dual-use technologies and products. As of May 

2006, however, the government will reconstrue 

the meaning of “strategic enterprise” so as to 

keep the decision on applying PPP in the military 

industrial complex out of the hands of the MoD 

and the military/defense establishment.81 The 

purpose is to avoid overemphasizing defense 

orders in the overall industrial revival plans. 

• Foreign Currencies. On July 1, 2006, a half-year 

before the scheduled date, Russia suspended all 

restrictions on the internal movement of foreign 

currencies. The suspension was for the purpose 

of making the Russian domestic market more 

attractive to foreign and private investors. Such 

measures were introduced to coincide with 

forthcoming initial public offerings (IPOs) of 

shares of Russian companies on domestic and 

foreign stock exchanges, thus opening up for 

trading shares of oil and gas firms, etc.

• Energy Prices. Russian experts count on rising 

worldwide energy prices resulting from the 

growing demands for energy supplies in North 
52

America, the EU, China, and India as well as 

possible energy shortages ensuing from the 

confrontation between Iran and the United 

States over Iran’s noncompliance with the 

Nuclear Non-Proliferation Treaty (NPT). 

CIVIL CONTROL OVER THE DEFENSE/MILITARY

Establishment of civilian control over the military 

is an essential part of defense reform. Russian scholars 

make a clear distinction between “political,” “civilian,” 

and “parliamentary” control over the military. It is 

strongly believed in the RF that not every country is 

ready and prepared to exercise an identical level of 

control over the military, and that the state of affairs 

in specific states and societies should be correlated 

to the respective mechanisms of control. Vladislav 

Cheban, a former military strategist, has taken the 

position that civil control does not mean civilian, or 

nonmilitary, as such, but rather that the state’s control 

over the military and security services is manifested 

by having military or personnel from other national 

services monitoring the activities of the MoD and 

other security services in their role as citizens with 

special professional knowledge and understanding 

of the sensitive nature of information and respect for 

secrecy.82 This interpretation of a “proper pattern” for 

civil-military relations came about as a result of events 

Russia experienced after the collapse of the USSR. 

Parliamentary Control.

Parliament is conceived to provide a legal basis for 

the armed forces in combatting contemporary threats 

and implementing defense reform. Accordingly, 
53

the RF parliament passed such federal laws as “On 

Emergency and Military Rule” and “On Defense,” plus 

other federal laws regulating the actions of the armed 

forces, special forces, and law enforcement agencies. 

Laws also were adopted regulating the activity of the 

military-industrial complex. In November 2004, after 

parliamentary hearings, the Federation Council of the 

RF invited the executive branch to participate jointly 

with the members of parliament in formulating and 

drafting over 30 laws, including those titled “On the 

Armed Forces of the Russian Federation,” “On Military 

Construction of the Russian Federation,” “On the 

State Defense Order,” and “On Military Navy Bases.” 

In 2005, the State Duma adopted 14 laws related to 

defense and security.83

However, some of the new laws could not be 

implemented properly because they left certain 

loopholes for violations or misinterpretation. For 

instance, issues like responsibility for executing the 

state defense order or guarantees for social security 

of servicemen were not addressed adequately by the 

new regulations. Particularly serious adjustments are 

needed to the federal law “On Mobilization Training 

and Mobilization in the RF.” Parliament has not 

always been successful in persuading the government 

to introduce long overdue legislation increasing civil 

control over the military. For instance, since 2000, the 

Russian government has stalled consideration of the 

draft federal law “On the Armed Forces of the Russian 

Federation,” mentioned above, by the State Duma.84

Some defense experts draw attention to the weak 

role played by legislators in the implementation of 

defense reform, e.g., failure to exercise parliamentary 

control over the budgeting process. But it is difficult 

for parliament to monitor and assess defense-related 

data. Some data is not released to the MPs at all, and 
54

some data is classified, especially as to costs and the 

efficiency of procurement programs. The monitoring 

job is difficult in the absence of long-term publicly 

announced procurement plans, which are essential 

for determining the relative efficiency of defense 

spending. There is no stable, regularized taxonomy for 

the defense spending and procurement document sent 

forward for parliamentary assessment. Continual yearto-year changes in budgetary categories have been the 

rule for national defense budget expenditures since 

2004.

The Public Chamber.

Pervasive dissatisfaction with the efficiency of the 

Russian parliament has led the government to create 

the Public Chamber as an important element of civil 

control. The main formal task of the Chamber is to 

monitor how state institutions comply with existing 

law and provide a channel for “bottom up” suggestions 

for new laws. For instance, The Public Chamber’s 

commission on public control over law enforcement 

institutions (Chair Anatoly Kucherena) has held 

sessions on the subject of bullying in the armed forces. 

On April 14, 2006, the Commission held hearings on 

hazing in the army as well as public/civil control of 

the military.

On other occasions, the Public Chamber has acted 

as a test bed for new policies being considered by 

the authorities. For instance, the Chamber suggested 

adoption of a new law that would require legal 

limitations on applicants for civil service managerial 

positions in the executive or legislative bodies, e.g., 

disqualification of any person who deliberately 

avoided serving in the military. It remains to be seen 
55

whether this initiative, condemned by Human Rights 

Ombudsman Vladimir Lukin on April 20, 2006, will be 

translated into law.

Independent Judicial System.

An independent judiciary is still in the process of 

realization. However, revelations of hazing in the army 

have relevance to the matter. Chief Military Prosecutor 

Alexander Savenkov publicly confronted Minister 

of Defence Ivanov at a session of the Main Military 

Prosecution Office (MPO) in May 2005. He blamed the 

Minister personally for inept handling of the “Ulman’s 

court case” in the North Caucasus and for appointing 

former Commanding Officer of the Northern Fleet 

Gennady Suchkov as an adviser to the Minister of 

Defense. The public controversy continued into 2006. 

On February 15, 2006, the Minister of Defense, in 

turn, blamed the MPO for the high level of unsolved 

crimes in the military. Among 20,390 registered crimes 

and incidents, he claimed the MPO managed to close 

only 153 cases (0.75 percent). The arguments between 

the MoD and MPO demonstrate the RF General 

Prosecution Office’s support of MPO efforts to make 

the investigative mechanisms within the military more 

effective and to introduce new channels of professional 

and public scrutiny. The establishment of MoD-MPO 

joint working groups in military units can be taken as 

a measure of support for law and order within military 

units. In the most troublesome units, these groups are 

to function on a permanent basis.

Financial Monitoring and Audit.

Defense spending has increased three-fold since 

2000. On the one hand, the funds provided exceed 
56

spending on national health care and education before 

these areas were named as national federal priority 

programs for development. On the other hand, the 

funding provided is not enough to implement the type 

of reform espoused publicly. The rise in the amount 

spent in the last few years in procurement programs 

did not result, in some cases, in an increase in the 

amount of equipment delivered to the armed forces. 

The spending increase was due both to inflation 

and to the decision of the enterprises to submit a 

much higher bill to the MoD and other services for 

commissioned procurement orders. This frustrating 

situation triggered a decision by the political/military 

authorities to order an independent audit of defense 

procurement programs. Since 2004, the Federal Audit 

Chamber has been investigating such procurement 

programs and possible misuse of state defense funds. 

These investigations have resulted in several highlevel convictions on charges involving corruption and 

misuse of funds. 

Presidential Control. 

As part of administrative reform in 2004, the power 

structures were subordinated directly to the President. 

In order to overcome the institutional autonomy of the 

military, particularly as expressed in the ministerial 

opposition to reforms dealing with corruption 

within the defense and security establishment, the 

Presidential administration is enforcing vigorous 

personal presidential control over the military/defense 

and security establishment. Though there already 

was a tradition of strong presidential control over the 

military85 in Russia, the present phase properly can be 

characterized as an attempt to put the FSB under tight 

presidential control. Two measures will illustrate:
57

• The personnel policy in the Federal Security 

Service (FSB) has been under presidential control 

since December 2005 (including the numerical 

strength of the service).86

• First made public in September 2005,87 an 

independent investigative unit within the 

Ministry of Justice has been created, but it 

is subordinated directly to the President. It 

has the specific functions of monitoring and 

investigating any violations of regulations and/

or corruption charges brought against personnel 

in the power block ministries (siloviki). The first 

results of the investigative work of the unit 

were revealed in May 2006, when high-ranking 

officials in the FSB, counterterrorist units, MoI, 

Customs, and the Prosecution Office were 

dismissed from their positions on charges of 

corruption and criminal activity.

CONCLUSIONS AND RECOMMENDATIONS

Analysis of current developments in Russian 

defense reform shows that, despite a very slow and 

rocky start extending even to the present, defense 

reform is happening steadily, although still very slowly. 

Elements of the reform “road map” are indeed being 

implemented when conditions are conducive. Marked 

change can be expected to be visible by 2008-10, when 

the Russian defense and security establishment will 

review results of progress in professionalizing member 

institutions. This is the period when serial deliveries 

from the procurement programs are expected to reach 

the armed forces and services. That is also the time 

when a transfer of military functions from the Military 

Districts to strategic directions and operational task 

forces is envisioned. 
58

Meanwhile, the current phase of defense reform 

can be considered as transitional. Nevertheless, it 

affects all elements of the state’s defense and security 

systems. Current Russian defense reform provides 

new windows of opportunity for the U.S. armed forces 

regarding cooperation/links/contacts with their 

Russian counterparts. For example:

• As a re-MIRVing program for Russian strategic 

nuclear forces becomes a reality, it might 

become essential to “revisit” the arms control 

agenda. As part of the package, both militaries 

could exchange views on prolonging the START 

regime.

• With expanding energy cooperation between the 

two nations, the task of securing deliveries and 

storage facilities could be shifted to the armed 

forces as a possible opportunity for combined 

missions. As the Russian military is given new 

missions in securing offshore energy facilities 

and maritime transportation corridors, the U.S. 

armed forces might well be interested in the 

possibilities of increased cooperation with the 

Russians, or at least in making space monitoring 

of maritime transportation routes more transparent. New options for naval cooperation 

could be seen as part of the energy security 

framework, or as extended missions under the 

New Proliferation Initiative mandate.

• In Russian defense industries, it might become 

essential to explore new opportunities provided 

by the restructuring of Russia’s defense 

enterprises and creation of holding companies 

performing R&D and producing civil, dual-use 

military equipment as part of their portfolios. 

The possibility of participation in the PPP 
59

projects (joint integrating holdings) should be 

considered seriously, especially in view of the 

potential deals already made or forthcoming 

between Russian companies and European, 

Chinese, and other foreign firms.

• Consideration should be given to enhancing 

contacts between national special-purpose 

forces, joint training/exercises, and short-term 

exchange programs, since special-purpose 

forces/peacekeeping units should be seen 

as specially selected preferential partners for 

cooperation with the U.S./NATO forces in 

“out-of-area” operations. However, it should 

be acknowledged that Russian armed forces are 

going to be employed internally with expanded 

“policing” functions. 

In addition to contacts between the U.S.-RF armed 

forces, defense reform opens additional opportunities 

for legislative contacts between the corresponding 

committees of the Russian Parliament and the U.S. 

Congress. It might be useful to consider the possibility 

of reopening the exchange program for members of the 

parliamentary/congressional committees’ staffs. Such 

a program could help to establish long-term contacts 

between the two legislative bodies and stabilize 

channels of communications on issues related to the 

public debates on bilateral defense and security issues. 

These are some of the opportunities that conceivably 

could arise as Russian defense reforms progress. But 

whatever course bilateral military relations between 

Moscow and Washington take, American analysts and 

officials should understand that, while Russian defense 

policy may not have been of consuming interest or 

importance in the recent past, it is certainly so today. 
60

A new, improved Russian military establishment is 

arising, and it demands to be taken seriously both as 

an object of analysis and of policy.

ENDNOTES

1. Isabelle Facon, “The Modernisation of the Russian Military: 

The Ambitions and Ambiguities of Vladimir Putin,” Conflict 

Studies Research Centre, Russian Series 05/19(E), April 2005; 

Steven E. Miller and Dmitri Trenin, “The Russian Military: 

Power and Policy,” Steven E. Miller and Dmitri Trenin, eds., The 

Russian Military: Power and Purpose, Cambridge, MA: MIT Press, 

2004; Stephen Blank, Threats to Russian Security: The View From 

Moscow, Carlisle Barracks, PA: Strategic Studies Institute, U.S. 

Army War College, 2000; Stephen Blank, “The Framework of 

Russian Defense Policy Under Vladimir Putin,” paper presented 

to the II Conference on Russia’s Security Environment, Center for 

Strategic Leadership, U.S. Army War College, Carlisle Barracks, 

PA, December 4-6, 2000.

2. In October-November 2005, a new mission for the Russian 

armed forces was announced by First Deputy Prime Minister and 

Minister of Defense Sergei Ivanov. The Minister went public with 

a new mission statement for the navy during his inspection visit 

to Vidinyaevo, Murmansk region (a base of the multifunctional 

and combat nuclear submarines), on May 16, 2006. The 

Northern Fleet is going to take the mission of safeguarding the 

transportation routes of Russian liquified natural gas to the free 

market customers. The Northern Fleet is to take part in serious 

exercises in the world’s oceans. Russia has capabilities to take part 

in the Non-Proliferation Initiative, as the Northern Fleet possesses 

up to 75-80 percent of total naval combat capabilities. See “Sergei 

Ivanov Had a Working Visit to the North Fleet,” ITAR-TASS,

May 16, 2006. Dr. Stephen Blank assumes that this mission will 

be transferred to other services as well: “The Northern Fleet, and 

presumably other formations as well, are now openly tasked with 

defending energy platforms and tankers.” See Stephen Blank, 

“Reading Putin’s Military Tea Leaves,” The Jamestown Foundation 

Eurasian Monitor, May 19, 2006.

3. Keir A. Lieber and Darryl G. Press, “The Rise of U.S. Nuclear 

Primacy,” Foreign Affairs, Vol. LXXXV, No. 2, March-April, 2006, 

www.foreignaffairs.org/20060301faessay85204/keir-a-lieber-daryl-gpress/the-rise-o.
61

4. Victor Ozerov, “In XXI Century Our Army Cannot Allow 

Itself to Exist as It Did,” www.Strana.ru, March 14, 2005.

5. In one of his articles, former Chief of the General Staff 

General Anatoly Kvashnin made the following point: 

One of the vital elements of the military reform is 

making a transfer to the territorial principle of C&C over 

the military and other services of the Russian Federation

. . . . The system of a military-administrative territorial 

division in Russia is based on a territorial principle of 

subordination, command, and control. The realization 

of this principle in full should help to unite all elements 

of operational control of the “power ministries” under 

one executive official, who as a result should carry 

personal responsibility for defense and security of 

the state within the defined territorial boundaries. . . . 

Today’s victory on the ground is not to be achieved 

without gaining superiority in the air and space, and 

without active information superiority. . . . The principal 

character of future wars will be determined by the use 

of high precision weapons, intelligence-information 

systems, and radio-electronic warfare. The increasing 

possibility of incorporating all these components in one 

joint combat system will change radically any future 

military activity. . . . Forming of this system began in the 

Russian armed forces in the mid-80s. Presently it is at the 

stage when such a system is receiving realistic features 

and can be established on the existing material basis

. . . . Establishing a unified system of technical assistance 

and logistics for the armed forces and all other forces 

and military formations and institutions of the Russian 

Federation that are responsible for the state’s military 

security is becoming one of the main priority tasks of 

military construction.

6. “Generaly-Admiraly,” Vedomosti, May 22, 2006. 

7. Information Agency “Finmarket” and Military News Agency, 

June 13, 2000, available at www.finmarket.ru/z/nvs/snews.asp and 

www.militarynews.ru/emain/asp.

8. Sobranie Zakonodatelstva Rossiyskoi Federatsii (Collection of 

Legislation of the Russian Federation), No. 31, Article 3839, 1998; RF 

Military Doctrine, Moscow, Article 19, 2000.
62

9. Security Council of the Russian Federation, November 9, 

2000, available at scrf.gov.ru.

10. Ibid.

11. Georgyi Kasyanov, “Discharged Generals Lead Military 

Reform,” Nezavisimoye Voyennoye Obozreniye, March 17, 2006.

12. Ibid.

13. The most common mistake is to dismiss the evidence of 

transformation of C&C that is imposed by the introduction of a 

new joint command structure (Regional Command) and gradual 

transfer of functions from the Military District to this additional 

(for the time being only) level of command between the General 

Staff and the Military District. See Keir Giles, “Russian Regional 

Commands,” Conflict Studies Research Center, April 2006.

14. Irina Isakova, Russian Governance in the Twenty-First 

Century: Geo-strategy, Geopolitics, and Governance, London & New 

York: Frank Cass, 2005.

15. “Generaly-Admiraly,” Vedomosti, May 22, 2006, available 

at www.vedomosti.ru; “Liquidation of the Military Districts Is Not 

Far Away,” Russian Kurier, No. 552, Moscow, May 2006, available 

at ruscourier.ru/archive/1363.

16. The infrastructure of the RF Armed Forces Logistic Support 

Service is an aggregate of bases, depots, enterprises, and other 

facilities and installations designed to ensure logistic support 

for combat operations and to conduct daily routine activities. 

See Lieutenant General D. V. Bulgakov, “Reforming the Logistic 

Support System,” Military Thought, January 7, 2000, p. 68, available 

at news.moisinfo.ru/news/2000/MTH/07/data/004mth67.htm.

17. Krasnaya Zvezda, April 26, 2001.

18. Robert Cottrell, “Russia to Restructure Army,” Financial 

Times (United Kingdom), April 26, 2001.

19. Interfax, October 11, 2002.

20. Interfax, March 28, 2006.

21. ITAR-TASS, March 2, 2006.

22. “Russia’s Military Industrial Complex Is Getting Rid of 

Monopoly Producers,” Izvestia, May 6, 2006.

23. Ibid.

24. Victor Myasnikov, “Main Starting Point of Defense 

Financing: The Military Industrial Commission Is to Form the 
63

State Defense Order,” Nezavisimoye Voyennoye Obozreniye, May 

19, 2006.

25. RIA Novosti, May 11, 2006.

26. It was formerly headed by Andrei Beliyaminov before his 

current posting as Head of the Federal Custom Service, to which 

he was appointed in May 2006.

27. “Military Are Transferring the Defense Order to the 

Civilians,” Kommersant, May 15, 2006.

28. Ibid.

29. Grani.Ru, April 4, 2006, available at www.grani.ru.

30. Ibid.

31. Vedomosti, April 4, 2006.

32. Irina Isakova, Russian Governance in the Twenty-First 

Century: Geo-strategy, Geopolitics, and Governance, London & New 

York: Frank Cass, 2005, p. 269.

33. This definition of military reform was given by RF Minister 

of Defense Sergei Ivanov at the meeting in the State Duma that 

was organized in celebration of the National Day of Defender on 

February 18, 2003. He noted the role of the State Duma in defense 

and security of the country. RIA-Novosti, February 18, 2003. 

34. Information, available at www.vesti.ru; www.lenta.ru; www.

Strana.ru.

35. “Operational HQ Are Established As Part of the NAC 

Structure,” May 12, 2006, available at www politcom.ru.

36. The Military Balance 2006, London: International Institute 

for Strategic Studies (IISS), 2006, p. 148.

37. “Operational HQ Are Established as Part of the NAC 

Structure,” May 12, 2006, available at www.politcom.ru.

38. Yevgeny Zybchenko, “Siloviki Are Building a Vertical 

Power: The Responsibilities Given to the National Antiterrorist 

Committee Allow to Govern the Country Directly,” Novye 

Izvestiya, May 17, 2006.

39. ITAR-TASS, December 27, 2005. 

40. RIA Novosti, May 26, 2006.

41. ITAR-TASS, April 3, 2006.
64

42. Nikita Petrov and Filipp Sterkin, “Airborne Troops Are To 

Receive Modern Equipment,” www.Strana.ru, May 18, 2006. See 

www.Strana.ru.

43. RIA Novosti, May 26, 2006.

44. The Military Balance 2005-2006, London: Routledge, Taylor 

& Francis Group for IISS, 2005, p. 151.

45. The Roundtable “Debate on Defense Reform,” Moscow: 

Carnegie Center, March 2006.

46. Komsomolskaya Pravda, May 12, 2006.

47. Ibid. Nikita Petrov, “Voyennoi Politcii ne Budet” (“There 

Is Not Going to Be Any Military Police”), www.Strana.ru, May 19, 

2006.

48. www.Strana.ru, March 30, 2006.

49. www.oborona.ru, April 7, 2006.

50. Ibid.

51. RIA Novosti, April 13, 2006.

52. Krasnaya Zvezda, January 25, 2006.

53. “RF President Putin’s Speech to the Federal Assembly, May 

10, 2006,” www.president.ru.

54. Nezavisimoye Voyennoye Obozreniye, No. 7, 1998, p. 5.

55. “The RF is reserving the right to use nuclear weapons as a 

reciprocal measure to the use of nuclear or other weapons of mass 

destruction against it or its allies, as well as against large-scale 

aggression with non-nuclear means in critical situations when the 

national existence of the RF is threatened,” Article 8, RF Military 

Doctrine (2000).

56. RIA Novosti, April 13, 2006.

57. Alexander Babakin, “The Retaliation Strike Is Unavoidable,” 

Nezavisimoye Voyennoye Obozreniye, May 19, 2006.

58. According to Alexei Arbatov, head of the International 

Security Center at the Russian Academy of Sciences, Russia needs 

to produce up to 30 ICBMs per year to maintain a strategic nuclear 

balance with the United States. Arbatov pointed out that at the 

present production rate of 6-8 Topol-Ms missiles a year, Russia 

would have only 150 such missiles and three nuclear submarines 

in 10-15 years. See RIA Novosti, April 11, 2006.

59. Itar-Tass, May 18, 2006.
65

60. The first in-flight test launch was conducted on September 

27, 2005, from the Dmitry Donskoi, a Typhoon class ballistic missile 

submarine. On December 21, 2005, another Bulava was launched 

from the Dmitry Donskoi (from a submerged position) in the White 

Sea to the Kura test site on the Kamchatka Peninsula. 

61. RIA Novosti, March 1, 2006.

62. Kommersant, April 13, 2006.

63. The Military Balance 2006, London: Routledge, Francis & 

Taylor Group for the IISS, 2006, p. 148.

64. Vasily Kasarin, “The Revenge Is Going To Be Unavoidable,” 

www.oborona.ru, April 7, 2006, available at www.oborona.ru.

65. “Russia to React Properly to the U.S. Anti-Missile Base in 

Europe,” RIA Novosti, March 23, 2006.

66. Nikita Kohan, “For Providing a Secure Parity,” available at 

www.oborona.ru, February 26, 2006.

67. Nikita Petrov and Filipp Sterkin, “Airborne Troops Are 

to Receive Modern Equipment,” www.Strana.ru, May 18, 2006, 

available at www.Strana.ru.

68. The Military Balance 2006, London: Routledge, Taylor & 

Francis Group for IISS, 2006, p. 151.

69. Vlast, February 9, 2006.

70. ITAR TASS, May 26, 2006.

71. RIA Novosti, March 28, 2006.

72. Vremya Novostei, March 28, 2006.

73. Izvestiya, May 6, 2006.

74. Blank, “Reading Putin’s Military Tea Leaves”; JRL 2006-

117, Eurasia Daily Monitor, Vol. 3, No. 98, May 19, 2006.

75. Christopher Swift, a specialist with the Center of 

International Studies at the University of Cambridge, stated that 

the Russian armed forces “have not produced any new planes or 

ships in the last 5 years. All the money they are investing is being 

put into the Topol [multiple warhead] missile system,” Washington 

Times, May 12, 2006.

76. Rosbalt, May 16, 2006.

77. ITAR TASS, May 18, 2006.

78. Izvestiya, May 6, 2006.
66

79. The government supports creation of a single purpose 

corporate structure, with units for civil aviation; military transport 

and special purpose aviation; combat aviation; automated and 

unmanned aerial vehicles; management company; engineering 

center; leasing company; and testing, R&D, and training centers. 

There are two goals: (1) to secure Russia’s future place in the 

international aviation market, and (2) to preserve technological 

independence of the Russian aviation industry in any joint 

ventures, aiming to cover up to 10 percent of the international 

aviation market by 2015. The company is competing with the major 

aircraft-making nations: with the U.S. (Boeing), Europe (EADS, 

mainly Airbus), Canada (Bombardier), and Brazil (Embraer). The 

creation of a holding company—United Aircraft Construction 

Corporation—is to proceed in two stages. At the initial stage a 

consortium is to be established, with merging of all existing firms, 

private and state, such as MiG, Sukhoi, Irkut, BASO (Voronezh), 

Aviastar (Ulianovsk), Ilushin (Kazan’), Yakovlev, Tupolev, etc. The 

production is to be a joint one (military and civil). The mergers 

are to be accompanied by massive closures of projects, facilities, 

and jobs. Presently, there are 500,000 jobs in the market and 

300 enterprises; the aircraft industry covers 35 percent of the 

military-industrial complex production and 44 percent of military 

procurement. By the end of 2007, only 50 percent of the existing 

companies will have survived. Half of the surviving firms are 

to function as producers of assembly lines, working on foreign 

contracts. A new United Aircraft Construction Corporation is 

to be created no later than December 31, 2006. The final concept 

of the future holding company is to be completed by the end of 

next year. At present, a three-layer structure is envisioned for 

the future holding company, with the main HQ responsible for 

strategic planning (marketing, financing) at the top level. The 

subsidiary companies with strict specialization (on civil liners, 

combat planes, helicopters, etc.) are to constitute a second layer. 

The plants, producing elements, and assembly parts of the airliners 

are to create a third layer of the company. Immediately after the 

completion of the merger of all assets, the profits from the sales 

of the products are expected to reach $2.5 billion annually (with 

a ratio of military to civil products sales being 70:30). By 2015, 

this sum is expected to increase to $8bn (with a ratio of 50:50). 

There are plans to merge all intellectual and financial resources to 

overcome the barriers of regional competition.

80. Nikita Petrov, “Oboronnaya Corporatsia” (“Defense 

Corporation”), Novoye Vremya, May 18, 2006.
67

81. “The Investment Climate Is Going to Be Softened for the 

Foreigners: The Government Suggests Selling Strategic Assets 

Without the Presidential Decision,” Kommersant’, May 17, 2006.

82. V. V. Cheban, Geopoliticheskoye Polozhenie I Voennaya Politika 

Rossii (Geopolitical Situation and Military Policy of Russia), Moscow: 

Graliya, 2001, pp. 363-371.

83. ITAR-TASS, April 3, 2006.

84. Ozerov.

85. Irina Isakova, “The Evolution of Civil Military Relations in 

Russia,” in Andrew Cottey, Timothy Edmunds, Anthony Forster, 

eds., Democratic Control of the Military in Postcommunist Europe: 

Guarding the Guards, New York: Palgrave Publishers Ltd, 2002, p. 

215-233.

86. ITAR TASS, December 27, 2005. 

87. “Government Siloviki Are to Expect Another Reform,” 

Nezavisimaya Gazeta, September 28, 2005.