# 4, 2009 Moscow Defense Brief 1

#4 (18), 2009

PUBLISHER

CAST Director & Publisher

Ruslan Pukhov

Editor-in-Chief Mikhail Barabanov

Advisory Editors

Konstantin Makienko

Alexey Pokolyavin

Researchers

Ruslan Aliev

Sergey Denisentsev

Polina Temerina

Dmitry Vasiliev

Editorial Office 3 Tverskaya-Yamskaya, 24, office 5,

Moscow, Russia 125047

phone: +7 495 251 9069

fax: +7 495 775 0418

http://www.mdb.cast.ru/

To subscribe, contact

phone: +7 495 251 9069

or e-mail: mdb@cast.ru

Moscow Defense Brief is published by the Centre for Analysis of Strategies

and Technologies

All rights reserved. No part of this publication may be reproduced in any

form or by any means, electronic, mechanical or photocopying, recording

or otherwise, without reference to Moscow Defense Brief. Please note that,

while the Publisher has taken all reasonable care in the compilation of this

publication, the Publisher cannot accept responsibility for any errors or

omissions in this publication or for any loss arising therefrom. Authors’

opinions do not necessary reflect those of the Publisher or Editor

Computer design & pre-press: ZEBRA-GROUP

www.zebra-group.ru

The editorial team would like to thank Ivan Khokhotva for his contribution

in translation, editing and proof-reading

Cover photo by: REUTERS/Nir Elias

© Centre for Analysis of Strategies and Technologies, 2009

Printed in Russia

CONTENTSEditorialChina’s Military Modernization: the Russian Factor 2

Arms TradeRussian Exports to China: What the Future Holds 6

Defense IndustriesStrategic Cruise Missile Carrier H-6K – A New Era for Chinese Air Force 8

Highlights From Almaz-Antey 2008 Financial Report 10

Armed ForcesThe ‘New-Look’ Russian Army 12

Ukraine’s Defense Spending 19

Trade & ProcurementIdentified Contracts for Delivery of Russian Arms Signed in January-September of 2009 23

Our Authors 24

Centre for Analysis of Strategies and Technologies

Cover storyThe new Chinese YJ-62 coastal-launched anti-ship cruise missile paraded during the 60th PRC

Anniversary celebrations in Beijing on October 1, 2009. The missile (and the long-range CJ-10 version)

is based on the famous Soviet/Russian Raduga Kh-55 (AS-15) design. It appears to have been developed

using Russian and Ukrainian expertise.

The wheeled chassis is a Chinese clone of the Soviet MAZ-543, made since 1999 at a joint venture

with a Belarusian partner in Hubei Province.

The truck in the foreground is Dongfeng EQ2050 Mengshi, a Chinese clone of GM’s High-Mobility

Multipurpose Wheeled Vehicle (HMMWV).

# 4, 2009 Moscow Defense Brief2

Editorial

China’s Military Modernization: the Russian Factor

China’s Military Modernization: the Russian Factor Mikhail Barabanov

The Chinese leaders hoped the military parade in Beijing on October 1, the 60th anniversary of the People’s

Republic, would showcase the success of communist China’s “Fourth Modernization” – that of its armed forces. The event was supposed to demonstrate that rapid progress in military technology has propelled the country into the ranks of the world’s most advanced military powers.

All the brand-new military equipment put on display in Beijing has produced the required impression on the patriotic Chinese public, as well as some Western observers now gushing about the newly modernized People’s Liberation Army.

A more careful look at China’s military capability suggests there is little ground for either excessive optimism or alarmism – depending on the observer’s attitude to the country – about China’s status as a great military power.

The fruits of new great friendshipFor almost three decades between the Soviet-Chinese

bust-up in the early 1960s and the collapse of the Soviet Union in 1991, China was mired in technological backwardness. After the generous flow of military equipment from Moscow ended abruptly in 1961, the Chinese army was stuck with old Soviet technology dating back to the 1950s. The obsolete MiG-19 Farmer fighter jets manufactured under a Soviet license (Chinese designation J-6) remained the backbone of the Chinese fighter fleet. The adoption of the early versions of the MiG-21 Fishbed (J-7) fighter was excruciatingly slow and painful. The bulk of the bomber fleet was made of the Il-28 (H-5) Beagle aircraft, plus a few long-range Tu-16 (H-6) Badger bombers. The piston-engine Mi-4 (Z-5) Hound remained the main Chinese helicopter, the T-54 (designated in China as the T-59) the main battle tank, and the S-75 (HQ-2) the main SAM system. The Chinese navy relied on old Soviet designs of the 1950s, or their simplified clones. And the Chinese ballistic missile technology was based on the early Soviet R-2 (SS-2), R-11 (SS-1B) and R-12 (SS-4) missiles, which Nikita Khrushchev had given away as a gift.

China’s own attempts at weapons-building tended to yield either feeble contraptions such as the J-8 Finback fighter jet and the Ming class submarine, or slipshod modernizations of tanks and missiles that were obsolete even before they left the drawing board. The main thrust of the Chinese defense

industry’s effort was therefore aimed at ripping off the more recent Soviet designs, which Beijing was smuggling in via third countries. That is how China had cloned the T-72 main battle tank by the late 1980s, as well as the BMP-1 armoured infantry fighting vehicles, the 122 mm and 152 mm self-propelled and towed howitzers, the 122 mm Grad MRL systems, the Malyutka (AT-3) anti-tank missiles, and the Strela-2 (SA-7) man-portable SAMs.

In the 1980s China managed to achieve a certain degree of rapprochement with the West, based on shared hostility towards the Soviet Union. That gave it access to some modern Western technology. From France, it licensed the Super Frelon (Z-8) and Dauphine (Z-9) helicopters, as well as the Crotale SAM system. Another SAM system, Aspide, was licensed from Italy. China also bought a number of other weapons systems from France and Italy, and signed contracts with US companies to retrofit Chinese planes with new avionics. Another key partner was Israel, which became instrumental in the development of the new J-10 fighter jet. But the Tiananmen events of June 1989 soon put an end to China’s imports of military technology from the West, and plunged the country’s defense industry into a new bout of technological isolation.

Fortunately for China, relations with the Soviet Union took a sharp turn for the better at about the same time, and new defense contracts with Moscow soon followed. In 1991, China signed the first deals to buy modern Soviet weapons, including 24 Su-27 Flanker fighters and two of the Project 877EK (Kilo class) conventional submarines.

This breakthrough was vitally important to China. It would not be an exaggeration to say that modern Russian weapons and defense technology bought after 1991 have been at the heart of the People’s Liberation Army’s modernization and the Chinese defense industry’s progress in recent years. For China, Russia has become an abundant source of almost every type of modern weapons technology.

Thanks to the massive supplies of the Su-27 and Su-30 families of fighter jets from Russia (a total of 178 by 2005), the Chinese Air Force has leapfrogged from the second to the fourth generation of combat aircraft. The launch of production of the Su-27 (J-11) jets in Shenyang under a 1996 license deal gave a similar fillip to the Chinese aerospace sector, which had acquired access to modern avionics, radars, engines and missiles.

# 4, 2009 Moscow Defense Brief 3China’s Military Modernization:

the Russian Factor

Editorial

Supplies of modern Russian jet engines became a real boon for the Chinese combat aircraft makers, hidebound as they were by the unavailability of powerful modern propulsion units. China has finally managed to launch mass production of the only two decent fighter jets that it has - the J-10 and the FC-1, fitted with the Russian AL-31FN and RD-93 turbofan engines, respectively.

A total of 12 Project 636 and Project 877 (Kilo class) conventional submarines have been built for China by Russian shipyards, in addition to four Project 956 (Sovremennyi class) destroyers. For the first time in its history, the Chinese Navy has got hold of some truly modern ships with advanced acoustics, radars, torpedoes and supersonic anti-ship missiles (Moskit and Club). And the Project 956 destroyers are the first Chinese Navy ships armed with medium-range air-defense missile systems (as opposed to short-range missiles).

Even more importantly than buying individual Russian-made weapons, China has been able to acquire and license a wide range of Russian military technology, and to make use of Russian military expertise to design some new weapons - indeed, sometimes entire new weapons systems - of its own. In the 1990s and the early part of this decade, many if not most of the Russian military design bureaus and research facilities worked for the Chinese, who had become their main customer. As a result, many of the latest Chinese weapons systems developed over the past decade bear the hallmarks of their Russian origins.

One example is the Bakhcha-U turrets of the new Chinese ZTD-05 armoured infantry fighting vehicles, which were paraded on October 1. It was designed for China by the Tula KBP bureau, using the fighting compartment of the Russian BMP-3 armoured infantry fighting vehicle as the starting point. The Kurgan machine-building plant was involved in the development of the rest of the vehicle, as well as the launch of its mass production. The same is true of the Chinese ZBD-03 airborne fighting vehicle.

China’s latest artillery systems are licensed and slightly modified versions of Russian designs - and even the modifications themselves were probably made by Russian designers. That includes the fighting compartment of the 155 mm PLZ-05 self-propelled howitzer (a version of the Russian 2S19M1 Msta-S), the 120mm PLL-05 self-propelled gun-mortar (2S23 Nona-SVK), and PHL-05, a 300mm MLRS based on the Russian 9K58 Smerch system. China has also licensed the Krasnopol guided artillery projectiles, the Basnya, Refleks-M and Bastion tank-launched anti-tank guided missile systems, and the RPO-A rocket infantry flame-thrower. And the latest Chinese powered chassis are obvious licensed clones of the MAZ chassis.

Another area of Russian involvement worth a separate mention is the development of the latest Chinese SAM systems. Until recently China was hopelessly stuck with

the archaic S-75’s (SA-2) dating back to the Francis Gary Powers era. Since 1996, China has bought 28 battalions of the S-300PMU1/2 SAM (SA-20) SAM systems. What is more, it has also developed its own version of the Russian system, the HQ-9, with the help of the Russian Almaz-Antey group - although the Chinese are still having trouble launching mass production. The HQ-16 and HQ-17 systems also appear to be Russian designs, to all intents and purposes. China has also relied on Russian assistance in developing its short-range SAM systems (in addition to buying the Russian Tor SAMs) and radar stations.

In airborne weapons, China became the main importer of Russian air-to-air and air-to-surface missiles. It has also launched joint production of the Kh-31P/KR-1 (AS-17) anti-radar missiles (essentially those are just being assembled in China). And Russia’s MNPO Agat has developed an active radar homing seeker for the latest Chinese PL-12 air-to-air missile. The developers of the latest Chinese airborne and ground-based cruise missiles are also believed to have made use of Russian assistance, as well as of some related technologies and the Kh-55 (AS-15) cruise missiles bought from Ukraine.

Russia is known to have been heavily involved in the development and fine-tuning of the J-10 and FC-1 fighters. Russia’s Yakovlev bureau took part in the development of the new Chinese L-15 training jet, which appears to be a clone of the Yak-130.

The Chinese Navy has also made a colossal leap forward thanks to the acquisition of Russian arms and technology. It has bought a number of weapons and radar systems for its destroyers and frigates, such as the Rif-M (SA-N-20) and Shtil-1 (SA-N-12) SAM systems (the later includes a vertical launch version). The Chinese-built Type 051C and 052B destroyers, for which those systems have been bought, were themselves designed with the participation of Russia’s Severnoye bureau. The same bureau appears to have contributed to the design of the Chinese Type 052C fleet destroyers and Type 054 frigates, while the Rubin bureau was involved in designing the new Chinese subs. In the 1990s, Russia sold China the full set of designs and documentation for the Varyag heavy aircraft carrier cruiser. And the Nevskoye bureau has actually designed an entire medium-size aircraft carrier for the Chinese, which fact it announced with little fanfare in its annual report last year. China has also licensed the Russian 76 mm AK-176 naval artillery systems, and Russian companies have been developing torpedoes and mines for the Chinese Navy.

It is therefore clear that Russia has been the main engine of the Chinese army’s technological transformation, which fact has not escaped the attention of the experts who watched the October 1 parade. At least 12 of the key weapons systems put on display on Tiananmen Square that day have either Soviet or Russian origins. Russia has been both the main

# 4, 2009 Moscow Defense Brief4China’s Military Modernization:

the Russian Factor

Editorial

weapons supplier and the key weapons design bureau for China over the past decade and a half.

Trying to stand on its own two feetIn the past few years, however, it has become quite

obvious that defense industry cooperation between Russia and China is on the decline. In the 1990s, China was the main importer of Russian weapons, accounting for up to half of Russian arms exports in 2004-2005. By 2007, that figure had shrunk to just 25 per cent. The projection for 2008-2010 is a mere 12-17 per cent. China has almost stopped buying complete weapons platforms from Russia. It is now interested only in components, subsystems, engines, and technical expertise. Once the final deliveries are made in 2010 under the S-300PMU2 contract, exports to China can be expected to shrink even further. Beijing has also chosen not to continue the licensed assembly of the Su-27 fighter jets.

China appears to have acquired all the technology it wanted from Russia, and its strategy now is to develop its own weapons systems based on this know-how. On the other hand, Russia has obviously been careful not to sell China its very latest weapons. Interestingly, some of these weapons Moscow has been prepared to sell to India, but not to China. Essentially, Russian-Chinese defense industry cooperation has hit a glass ceiling.

What is more, the Chinese actually believe now that in many areas their technology is sufficiently advanced to do away with Russian assistance. That has resulted in blatant attempts to clone some Russian weapons rather than license them. The most notorious example is China’s “indigenous” J-11B fighter jet made in Shenyang, which is actually nothing more than a pirated copy of the Su-27 jet previously assembled there from Russian kit.

However, this particular “achievement” has actually put in stark relief the limitations of China’s defense industry. Only a few samples of the J-11B appear to have been built to date. China’s attempts to end its dependence on Russia for jet engines also remain fruitless. The powerful indigenous WS10A turbofan engine, which was designed to replace the Russian AL-31F on both the J-10 and J-11B fighters (and which could itself be a partial clone of the AL-31F), is still struggling with teething problems. All this is forcing Beijing to swallow its pride and keep signing contracts for new shipments of the AL-31FN engines for its latest prime fighter, the J-10.

It would appear that by remaining the sole source of some key components, Russia is keeping its finger on the pulse (or its hand on the tap if you like) of a whole number of crucially important Chinese weapons programs. And many of the latest “indigenous” or licensed Chinese weapons systems still rely on Russian supplies. China’s ability to launch

indigenous mass production looks especially uncertain where it comes to a number of modern missile systems, and SAMs in particular.

Careful study of China’s military capability and its latest weapons systems also leads to a number of other conclusions, which the Chinese would doubtless prefer not to hear. One obvious problem is the poor functionality and design of some of the Chinese weapons systems, which look half-finished. Another is the uninspired imitation of foreign designs, which points to a deficit of independent ideas in technology, strategy and tactics of warfare. There are gaping holes in some important areas of Chinese military capability. The air defenses of the parts of the country not covered by the Russian-made S-300PMU1/2 systems are a joke. Battlefield air defense also remains woefully inadequate. The anti-tank capability is rudimentary, and the country has no combat helicopters whatsoever; the Z-10 attack helicopter project is languishing because there is no indigenous engine it could make use of. The strike potential of the Chinese Air Force remains very limited, and the bulk of its fleet is made of the 1960s designs. The Chinese navy’s ability to defend against modern submarines is rated as very low, and on many important indicators that navy itself is nothing more than a coastguard fleet.

Finally, the bulk of the Army’s equipment remains obsolete. The handful of new vehicles of each type trotted out in front of Mao’s mausoleum do not change the bigger picture. Fewer than 300-350 of the latest Type 99 main battle tank have been built over the past decade. In order to be able to replace the ancient T-59’s, which still make up the bulk of the fleet, China has been forced to maintain production of the cheap, simplified and painfully obsolete Type 96. This kind of approach - i.e. producing a few modern-looking showcase pieces while the bulk of the output is made up of spruced-up old junk - exemplifies the current state of affairs in China’s defense industry. Even the Chengdu facility, which builds the latest J-10 fighters, also continues to churn out the J-7G model, a slightly updated version of the venerable MiG-21.

Meanwhile, the Type 99 tank is a fine example of the true level of Chinese military technology. It traces its lineage to Type 90, which is itself a heavily upgraded clone of the old T-72. Chinese military web sites and forums, as well as some Western observers who take all the patriotic verbiage at face value, sing the praises of Type 99. They describe it as world-class; some even go as far as to suggest that it outclasses the Russian T-90A.

The truth is, the armor system of the latest and greatest Chinese tank’s turret looks nothing short of ugly. Due to poor design choices, the thickness of the armor at the 30-35 degrees angle is a mere 350mm, whereas the figure for the latest Soviet/Russian tanks is about 600mm from all angles. Roof armor at the front is also weak, and the tank has inherited the weakness of the porthole and hatch areas from

# 4, 2009 Moscow Defense Brief 5China’s Military Modernization:

the Russian Factor

Editorial

the old Soviet designs. The dimensions of the Type 99 turret make any substantial improvements in its built-in protection system all but impossible - witness the latest modification, Type 99A1. Meanwhile, the decision to use the powerful but bulky German MTU diesel engine forced the Chinese designers to add an extra meter to the tank’s length, bringing its weight to 54 metric tons despite the sacrifices made in armor strength. (Besides, the use of imported engines - or their assembly from imported components - seems to be the key reason why so few of the Type 99’s have been built so far.) So compared to the latest Russian designs, Type 99 is a bulkier tank with weaker armor, handicapped by poor engineering. The Chinese rely too much on superficial mechanical copying of individual design elements, which often do not fit together very well. This copying does not translate into any advantages compared to the original foreign designs, and in many cases leads to unexpected problems. Compared to the vast experience of Soviet/Russian tank designers, the Chinese are only making their first steps - and it really shows.

Finally, a few words about China’s nuclear potential. For all the achievements of China’s defense industry, the country remains a clear outsider among the five official nuclear powers in terms of its strategic nuclear capability. Beijing has no more than 40 intercontinental ballistic missiles (ICBMs), and about 120 intermediate-range ballistic missiles. The number of the new DF-31A (CSS-9) solid-fuel ICBMs manufactured each year is in the low single digits. China has only one Type 092 SSBN carrying 12 aged ballistic missiles of the JL-1 type. The sub has never been at sea on active duty. There are also the two recently completed Type 094 SSBN subs, but the JL-2 missiles they are supposed to carry are still in development. That means that the Chinese nuclear arsenal does not have a combat-effective sea-based component. The Chinese Air Force, meanwhile, does not have a strategic bomber. It has to make do with the H-6 (up to 100 units), a clone of the

antiquated Soviet Tu-16 long-range bomber. Some of these aircraft are now being fitted with the DH-10 cruise missiles. That could make them a more powerful instrument - but they would still be a far cry from a proper strategic bomber.

China’s program of developing a new generation of strategic nuclear missiles has evidently hit some serious problems. Meanwhile, the existing arsenal, due to the limitations of its underlying technology, has insufficient potential and low combat-readiness. It is also highly vulnerable to a nuclear strike by the United States or Russia. That means that the Chinese nuclear arsenal is not fit for the purpose of either effective first strike or retaliation (since it would hardly survive the first strike against itself ). And if the United States deploys even a limited ABM system, the utility of the Chinese nuclear deterrent will diminish even further.

The Chinese leadership (including the defense industry captains) as well as the ordinary Chinese seem to be unreasonably euphoric about their country’s touted advances in military strength. Mesmerized by the brightly painted ranks of their new tanks and missiles, the Chinese flag-wavers tend to ignore the fact that their country’s military technology achievements are fragile, tentative and scant. And most importantly, these achievements are primarily based on Soviet and Russian imports rather than indigenous technology. China has succeeded in importing a wide range of military know-how from Russia - but it is far from certain that the Chinese defense industry will actually manage to absorb all that know-how. There are questions even about China’s ability simply to replicate the technology is has already bought. The current strategy of scaling down defense industry cooperation with Russia could yet come back to haunt China, revealing the decrepitude behind its army’s high-tech veneer. And then Beijing will have to turn to its northern neighbor for help once again.

# 4, 2009 Moscow Defense Brief6Russian Exports to China:

What the Future Holds

Arms Trade

Russian Exports to China: What the Future HoldsKonstantin Makienko

The decline of Russian-Chinese defense industry cooperation that began in 2004-2005 has continued into

2009. Up until five or six years ago, China was the largest importer of Russian weapons, accounting for about 40 per cent of all Russian arms exports over the period of 1992-2004. In some years that figure reached 55-60 per cent.

But after 2004, Russian sales to China fell off a cliff. The first signal was Beijing’s decision not to exercise its option to buy 95 Su-27SK Flanker fighter jet kits for licensed assembly in Shenyang. China took delivery of 105 such kits in 1998-2004. But now that it has launched mass production of the J-11 (the Chinese name of the licensed Su-27SK) and ironed out teething quality problems, the plan, apparently, is to dump licensed assembly in favor of home-made clones. There have already been media reports claiming that the engines and radars of the new J-11B version are of “China’s own design and manufacture”.

Russian hopes that China would order a second batch of the navalized Su-30MK2 fighters have also been dashed. The first 24 aircraft were delivered in 2004. The expectation was that the Chinese Navy would soon order more of these jets, which have an advanced anti-ship capability. That now seems unlikely. The last known Chinese contract for Russian aircraft platforms was the 2005 deal to buy 34 Il-76MD Candid military transport aircraft and four Il-78MK Midas aerial refueling tankers. But only a year after the deal was struck, it became clear that the Tashkent aviation plant would be unable to make the deliveries. It had run out of Soviet-era stocks of components, underestimated its costs and failed to factor in the weakness of the dollar.

That means that the last known aviation or naval platforms contract with China that has actually been fulfilled dates back to 2003. From then on, most of the new orders were either for the modernization of Russian-made aircraft, or for new airborne weapons and engines, as well as naval weapons and AA systems. One notable exception is the Mi-17 Hip transport and assault landing helicopters, as well as the naval Ka-28 Helix ASW helicopters – China still continues to buy those. But the overall revenue from Chinese contracts has dried up. According to Sergey Chemezov, the director general of Russia’s sole arms exports intermediary Rosoboroneksport, his company’s Chinese portfolio was only 200m dollars in 2006. Other Russian arms exporters – primarily the Sukhoi

bureau, which is authorized to export components and spare parts bypassing the intermediary – may have signed another 300m dollars worth of contracts with the Chinese, taking the total figure for 2006 to 500m. CAST estimates that sales to China in 2007 were in the region of 700-800m dollars, or 5.5-6 per cent of the total. That means that as an importer of Russian weapons, China has been overtaken by:

India (which accounted for at least 45 per cent of the •contracts in 2007, and about 30 per cent in 2008)Algeria (18 per cent in 2007) •Syria (9 per cent in 2007) •

What happened?There are three main reasons behind the slump in

Russian-Chinese defense industry cooperation:China’s defense industry has now developed the capability •to produce third and fourth generation weapons systems, which the country previously had to import from Russia;China has lost its status as a critically important buyer of •Russian arms after Moscow signed large contracts with Algeria and Venezuela in 2006, and bolstered its domestic weapons procurement programs;Moscow is wary of allowing the Chinese to get hold of •the more advanced Russian weapons of the 4+ and 4++ generations.

Another important, albeit local factor is that the Tashkent aviation plant has run out of old Soviet stocks of components. That is why the 2004 contract to supply 38 Il-76 platforms fell through.

In the 1990s, Russian-Chinese defense industry cooperation was a vital necessity to both sides. After Europe slapped its arms embargo on Beijing, Russia remained almost the only country both willing and able to sell modern weapons and technology to China. Only Israel could give Moscow a run for its money in this area. But the Israelis had their hands tied by their dependence, both financial and military, on the United States. America is not keen to watch Beijng being armed with the latest weapons. Israel has already had to turn down a Chinese contract for the airborne Phalcon radar, after Washington brought its pressure to bear.

# 4, 2009 Moscow Defense Brief 7Russian Exports to China:

What the Future Holds

Arms Trade

And before that it had to end its participation in the Chinese J-10 fighter program. That is why only Russia could help China make a leap from the second generation of weapons to the third or fourth. Meanwhile, the Russian designers and manufacturers of conventional arms depended on the Chinese contracts for 30-50 per cent of their revenue. Beijing had become an indispensible partner for Russia in that regard. Without the Chinese orders, the Russian defense industry would not have survived the 1990s. The Indian contracts, for all their importance, would not have sufficed on their own.

But by the middle of this decade, the landscape had changed dramatically. Russia was no longer the sole player on the Chinese market for 1980s weapons technology. It now faced stiff competition from China’s own defense industry, which had performed a feat of technological transformation in a space of 15 years. The Russian specialists who have seen up close the latest Chinese aviation, engine and shipbuilding facilities, all agree that they are built to world-class standards. Chinese workmanship and the expertise of its scientists, designers and engineers have all been improving in leaps and bounds. And on top of all that, as soon as the Chinese lay their hands on Russian weapons systems, they immediately attempt to copy them. Apart from the J-11B, they are known to have tried to clone the S-300P (SA-10/SA-20) SAM system, naval SAM systems and aircraft engines. For now, they have little to show for their efforts. But they have succeeded before in cloning and then continuously modernizing second-generation Soviet technology (especially the MiG-21 Fishbed fighters). So sooner or later, they will crack the more recent systems too.

Meanwhile, some European nations have been campaigning for five or six years now to lift the Chinese arms embargo. Beijing is therefore hoping that it will soon have access to the latest European weapons technologies. By 2005-2006, it had obtained all the spruced-up fourth-generation weaponry that it wanted, including aviation and naval systems. Now it demands much more advanced technology from the prospective suppliers. It also insists on buying only a small batch of each system, preferring to import the know-how rather than the finished product. And unlike India, China is showing little appetite for joint development, manufacture and marketing of new-generation systems.

The situation in Russia itself has also changed beyond recognition. The country has become much stronger, both politically and economically. It has become a more powerful force on the world stage, and won some new friends in various corners of the globe. That has resulted in an impressive diversification of its arms exports, which were previously confined mainly to China and India. In 2003, Moscow signed up to 2bn dollars worth of contracts with three Southeast Asian countries: Malaysia, Vietnam and Indonesia. Two large deals were signed in 2006 with Algeria and Venezuela, worth up to 11bn. There are also indications that Russia secured large Middle Eastern contracts in 2006-2007. The bottom line is, the list of Russia’s defense customers has become very long, and China is nowhere near the top of it. In fact, orders have piled so high that the Russian contractors may have a problem delivering. On an average year back in the 1990s, they had about 7bn dollars worth of contracts between them. As of late 2007, that figure had rocketed to 32bn. Meanwhile, defense industry capacity has been static at best, and may have actually shrunk compared to the previous decade. As a result, a whole number of contractors (including Irkut, Almaz-Antey and helicopter makers) are fully booked until 2012. And these are the very companies that produce Russia’s most competitive offerings on the world arms market. That, incidentally, may be one of the reasons for the slow progress of arms exports talks with Libya and Saudi Arabia. But be that as it may, the Chinese contracts are no longer critical for the Russian defense industry as a whole - although their scarcity has become a serious problem for some individual suppliers.

In this situation, the Russian generals are quite right to oppose the transfer of more advanced weapons systems and especially technology to China. The imbalance of the two countries’ potentials is growing, and that is a legitimate reason for concern among the Russian military elite and expert community. Previously, the Chinese contracts were instrumental in preventing the degradation of Russia’s defense industry. That degradation was a much more serious threat than China’s growing military power. Now, however, the Russian defense contractors are doing rather well even without the Chinese money. The era of large Chinese contracts for Russian weapons seems to have come to an end.

# 4, 2009 Moscow Defense Brief8Strategic Cruise Missile Carrier H-6K –

A New Era for Chinese Air Force

Defense Industries

Strategic Cruise Missile Carrier H-6K – A New Era for Chinese Air ForceVasiliy Kashin

China officially confirmed the entry into service of its latest H-6K bomber only during the recent celebrations

of the People’s Republic’s 60th anniversary. But first reports about the aircraft (including photos) were available from open sources and Chinese web sites as far back as late 2006 – early 2007. Information about the bomber is still scant. It has largely been upstaged by the more acclaimed Chinese aircraft, including the J-10, J-11 and FC-1.

Such relegation appears entirely underserved. For China’s strategic aviation, the H-6K is as much of a breakthrough as the J-10, J-11 or Su-27 were for its tactical wing. This is in fact China’s first proper strategic bomber, and its specifications make it entirely fit for modern warfare. It has an increased range, new engines, a modified airframe, and improved avionics. It is also the first Chinese aircraft to be armed with relatively up-to-date long range cruise missiles, which can be launched from beyond the enemy’s air defense radius. The bomber appears to have been dubbed God of War by the Chinese - that was the name on the side of one of the first H-6K units pictured on the Chinese websites.

The new bomber has evolved from the H-6, the Chinese version of the Russian Tu-16 Badger. The Chinese made several improvements to the old model in the 1970s-early 1990s, including better navigation, targeting and communication systems. They built a navalized version carrying anti-ship missiles, the H-6D. There were also attempts to fit the plane with new engines (the H-6I project), but they proved unsuccessful.

In the 1990s, the H-6 was still a reasonably serviceable model when used as an anti-ship missile carrier. China’s land bomber fleet, however, was in an obvious crisis. Its only weapon was the free fall bomb, and the chances of the bombers themselves penetrating the enemy’s air defenses were minimal. All the H-6 versions also suffered from insufficient range, which was especially problematic given the growing range of modern fighters and the wide spread of mid-air refueling. Some Chinese analysts argued in the 1990s that there would be no point maintaining a fleet of the H-6’s after the arrival of the Su-30 fighter, with its mid-air refueling capability.

The H-6H version, which appeared in the late 1990s, was China’s first attempt to address that glaring problem. It carried only two KD-63 cruise missiles, which were themselves a remake of the anti-ship C-601, modified to hit

land targets. The missile was obsolete and had a range of only about 200km, leaving the pilot little chance of accomplishing his mission when faced with modern air defenses. The range of the bomber itself also remained a problem. All that called for a radical overhaul of the H-6. Work on the new H-6K project began in 2000, and the first test flight took place in January 2007.

The main difference of the new H-6K, made by Xian Aircraft Company, from the previous versions is the Russian-made D-30KP-2 turbofan engines. They replaced the WP-8 turbojet units, which were a copy of the old Soviet AM-3M, the original engines of the Tu-16. The new engines, made by NPO Saturn, are much more powerful and fuel efficient. China had previously bought them for its Il-76 fleet. An announcement made in March 2009 said China had signed a contract to buy 55 such engines, with an option for another 33. The official version was that the engines were “for the existing Chinese [Il-76] fleet”.

But the Chinese Air Force has only 14 of the Il-76 transports, and another five KJ-2000 airborne early warning planes, a modification of the A-50I (which is itself a modification of an Il-76 AEW version). Plans to purchase another 38 Il-76 transports and Il-78 aerial refueling tankers under a 2006 contract fell through because Russia was unable to make the deliveries. Clearly, China did not sign such a large contract for the D-30KP-2 engines in the expectation that most of its existing Il-76 fleet would suddenly develop engine problems. The engines are obviously meant for the H-6K fleet.

To accommodate the new propulsion unit, the engine inlet of the new bomber has a much large diameter and a very different shape compared to the early H-6 versions or the Soviet Tu-16. This is one of the most distinguishing features in the new bomber’s appearance. The main purpose of replacing the engines was to give the bomber a greater range. Chinese media sources put the new model’s combat range at 3,000-3,500km. There has been no official confirmation of the figure to date.

China is trying to end its dependence on Russia for aircraft engines. To that end it is developing the WS-18 turbofan engine, an unlicensed copy of the D-30KP-2, which it also plans to install on its future heavy transports. Testing of the WS-18 began in 2007 at one of the facilities of Chengfa Group (former Factory 420 in Chengdu). It is not clear when

# 4, 2009 Moscow Defense Brief 9Strategic Cruise Missile Carrier H-6K –

A New Era for Chinese Air Force

Defense Industries

the engine might be ready for mass production. Chinese engine programs are notorious for missing deadline after deadline, and for taking an inordinate amount of time to achieve the target specifications.

The nose section of the H-6K has been completely reworked. The new version is missing the navigator’s cockpit and the attendant glass paneling. The nose has therefore become shorter, with a visible change of proportions compared to all the previous members of the H-6 family. In place of the navigator’s cockpit, the bomber has a radome covering a powerful radar “of a new type” (no further details have been given to date). The plane is therefore missing the ventral radome under the navigator’s cockpit, which was clearly visible on the H-6H and all the naval versions of the H-6. Several photos apparently showing the new plane’s crew station, which seems to employ a glass cockpit design, have been published on Chinese web sites. There is no information on the plane’s avionics or radioelectronic warfare equipment.

The bomber has six wing pylons for the CJ-10A cruise missile, an airborne version of the CJ-10, with a range of 2,000 km (some sources put the figure at 2,200km). Some reports claim that a seventh missile can be mounted on the centerline pylon. The H-6K does not seem to have a bomb bay - the space is used to house an additional fuel tank and radioelectronic equipment. Some experts believe that in future, the new bomber will also carry the heavy YJ-62 anti-ship missile with a range of over 300km, a design based on the CJ-10. This raises the prospect of a navalized version of the bomber with special avionics.

The YJ-62/CJ-10 family is an evolution of the earlier Chinese land-based Honhniao (Red Bird) cruise missiles. Their design also seems to use some elements of the Soviet Kh-55 (AS-15) cruise missiles. China bought several of those in Ukraine in 1999-2001. It is possible that Ukraine

has retained some role in the CJ-10 project, in areas such as the manufacturing of engines and navigation systems. Also, after America’s failed Tomahawk missile strike against the Taliban targets in Afghanistan in 1999, China acquired several salvaged missiles, which fell somewhere in Pakistan and Afghanistan. The information gleaned from the salvaged Tomahawks was used in the CJ-10/YJ-62 project. Recent reports suggest that at present, these missiles are not being fitted with nuclear warheads. They are seen instead as a weapon for surgical strikes.

It is estimated that fitted with the new missiles, the H-6K can strike land targets at a distance of at least 5,000km. This makes the new bomber a serious threat to America’s military bases in Asia Pacific. And when fitted with the YJ-62 missiles, it can also threaten the navies of the United States and its allies in the region - provided of course that the new bomber is produced in sufficient numbers.

Equipped with high-precision cruise missiles, the H-6K can be an effective instrument of delivering a non-nuclear preemptive strike against India’s small and vulnerable nuclear deterrent. This threat will probably prod India into an expensive effort to upgrade its nuclear infrastructure and air defenses.

If China modifies its nuclear doctrine and develops a new, nuclear-armed version of the CJ-10A, the Chinese strategic aviation can become an integral part of a highly flexible and resilient strategic nuclear triad. On the whole, the Chinese are inclined to believe that their new bomber’s capability is close to that of the Russian Tu-22M3 Backfire long-range bomber. The H-6K is going to become the backbone of the Chinese bomber fleet, and to retain that role for an indefinitely long period, until the Chinese aerospace industry can offer the country’s armed forces a radically new, indigenously designed long-range aircraft.

# 4, 2009 Moscow Defense Brief10Highlights From Almaz-Antey 2008 Financial Report

Defense Industries

Highlights From Almaz-Antey 2008 Financial ReportSaid Aminov, editor of Vestnik PVO web site (www.pvo.su)

For several years now the leading Russian manufacturer of air defense systems, Almaz-Antey, has been publishing

its annual financial reports. The 2008 report is especially interesting since it contains detailed information on the group’s finances, R&D program and export contracts.1

According to the report, the entire group’s consolidated revenue from core activities reached 88.8bn roubles (about $3.3bn) in 2008 – up 37.1 per cent on the previous year. The group’s head company reported that its own revenues from core activities were up 73.1 per cent to 26.13bn roubles. By that indicator Almaz-Antey remains Russia’s biggest defense contractor.

The group normally exports its air defense systems via Russia’s state-owned Rosoboroneksport intermediary. Revenues from direct exports of spare parts and components, as well as contracts for maintenance of previously exported equipment, added up to a mere $12.6m in 2008. The absolute figure is not very impressive – Sukhoi, a combat aircraft manufacturer, exports $200m worth of spare parts every year – but it still represents a six-fold increase on 2006 (no figures are available for 2007). Considering how much military equipment Almaz-Antey has already sold abroad, and how much it keeps selling, the direct repair and maintenance contracts are expected to become a much larger part of its portfolio.

The report also contains a list of countries Almaz-Antey is dealing with. Interestingly, it includes the United Arab Emirates, Oman and Kuwait, although there has been no recent reports about Russian military exports to these countries in the Russian media. There have been mentions of the proposal to build an air defense system for the UAE based on the Russian S-400 (SA-21) SAM system, but in 2008 the country opted for the US-made Patriot PAC-3 instead.

The list does not, however, include Venezuela, which, according to media reports, has been planning to buy the Russian Tor-M1 and Tor-M2E (SA-15) mobile SAM systems. And in September 2009, Venezuelan President Hugo Chavez, fresh from a visit to Moscow, announced several large contracts to buy Russian weapons, including the S-300V (SA-12/SA-23) SAM system2. Nether does the list include Saudi Arabia, which is apparently in talks with Russia to buy air defense equipment. Various media reports3, as well as Almaz-Antey’s annual financial report itself suggest that such talks have indeed taken place. The document says that in 2008, the concern “developed and submitted to Rosoboroneksport a

proposal on setting up a comprehensive system of repair and maintenance of the Triumf and Antey 2500 missile defense systems for foreign customer 682” - 682 being the Russian code for Saudi Arabia4.

This has been the first official mention of a proposal to export Antey 2500 (S-300VM) (SA-23) for several years. The document also says that in 2008, the company finished the assembly of the test samples of the modernized S-300V system, as part of the Modern-2 R&D project. The system includes a command station, a multi-channel missile guidance station, a launcher and a radar station5. All that suggests that the company continues to work on improving the S-300V system and its updated Antey 2500 version, and that both systems are being marketed abroad. Antey 2500, when paired with the powerful S-400 Triumf (SA-21), can offer the potential foreign buyer (such as Saudi Arabia) an impenetrable system of defense against aircraft and non-strategic missiles. That could translate into a major boost for Almaz-Antey’s exports.

The R&D-related parts of the report worth a separate mention include the completion of several research projects under the program of Russia’s future aerospace defense strategy, including the Razvitiye-KTVD-25 and the Vozrozhdeniye research projects. Almaz-Antey has also produced schematic designs for the Triumfator-M project (which is apparently an improved version of the S-400)6, Morfey (presumably referring to the ultra-short range air defense system Morfey)7 and Vityaz-PVO (presumably the medium-range air defense system Vityaz)8. It has also completed early designs for a proposed new automated system of air force and air defense command. Meanwhile, the Tikhomirov instrument-building research institute has built the first sample of an active phased array airborne radar for the T-50 fifth-generation fighter being developed by the Sukhoi bureau.9

The report also says that in 2008, Almaz-Antey manufactured several sets of the 40N6 ultra-long range (up to 400 km) anti-aircraft guided missiles designed by MKB Fakel10. The missiles were needed for the state trials of the 40R6 system (S-400 Triumf)11. There have been reports in the Russian media that first deliveries of the 9M96 missiles and the long-range 40N6 missiles designed specifically for use with the S-400 are not expected before 201012.

Almaz-Antey has also been working to modernize the Buk (SA-11/SA-17) series of its air defense systems. The

# 4, 2009 Moscow Defense Brief 11Highlights From Almaz-Antey 2008 Financial Report

Defense Industries

introduction to the report by the group’s director-general, Vladislav Menshikov, mentions R&D work on the project to modernize the Buk-M2E system (for a foreign customer) and to upgrade the Buk-M2 (SA-17) systems to the Buk-M3 level (for Russia’s own armed forces). The report also mentions that the company has completed the installation and tuning of the 9S18M1-3 radar for Buk-M3. It has also completed comprehensive preliminary trials of the Buk-M1-2A system equipped with the 9M317A active radar homing seeker13. That latter system is now awaiting state trials. The commander of the Army Air Defense, Nikolay Frolov, said in September 2007 that first deliveries of Buk-M3 to the Russian Armed Forces will be made in 2009. In addition, the 2006 annual report of the NPP Dolgoprudnenskiy company15 (which is part of the Almaz-Antey group) mentioned plans to complete the development of three new versions of missiles for the Buk SAM systems - 9M317A, 9M317M, and 9M317ME - by 2009. It also said the company had begun developing the 9M317MAE missile for export markets.

Almaz-Antey is also working on short-range air defense systems, including the Tor (SA-15) SAM system. Its Tor-M2 system equipped with the 9M311 missile passed state trials in 2008. Tor-M2 in a combination with the 9M338K16 missile successfully completed comprehensive preliminary trials in the same year. The company has also been developing the export version of the system, Tor-2ME.17 Army Air Defense

commander Nikolay Frolov said in December 2007 that first deliveries of Tor-M2 to the Russian armed forces were expected in 2009. It was said that the system would be equipped with improved missiles, and its combat performance figures would more than double compared to the previous version18. Whereas the export version, Tor-M2E, is still equipped with the standard 9M331 missile, the version for the Russian army will probably come with the new 9M338K.

The report also says that due to the deficit of the GM-352M1 tracked chassis for the Tor mobile launchers, and of the GM-355A chassis for the Tunguska (SA-19) tracked gun-missile air defense systems, Almaz-Antey has submitted a proposal to the Russian Defense Ministry to resume the production of these chassis at the Minsk tractor plant in Belarus. 19

Also in 2008, the company’s Kolchan SAM system equipped with the 9M330 missile passed the first stage of the state trials. This is a modernized version of the Kinzhal (SA-N-9) naval short-range missile system. It is being developed as part of the navy ships modernization program.20

Finally, the Almaz-Antey annual report mentions the completion of preliminary trials of Product 3M14 as part of the Kalibr R&D project21. This is a conventional submarine-launched land-attack cruise missile developed by OKB Novator design bureau.22

1 Almaz-Antey yearly report for 2008 / editorial commission chairman Y.V. Novikov. Moscow: OAO Concern PVO Almaz-Antey, 20092 Terekhov A. Chavez reveals his weapons plans // Nezavisimaya Gazeta, September 15, 2009. If the contract is confirmed, Venezuela

will become the second foreign country to buy the S-300V. The first buyer was the United States, which in the mid-1990s purchased one unit which was missing some components.

3 Konovalov I. Reality in documents // Kommersant, July 29, 20094 Almaz-Antey yearly report for 2009, P 385 Almaz-Antey yearly report for 2009, P 326 Nefedova A. Half a century of service to Motherland // Argumenty i Fakty (Bryansk), July 29, 20097 Ibid8 Ibid9 Butovski P. Fighter jets of transitional period // Kommersant supplement, August 21, 200710 Richardson D. Russia Tests Missile for S-400 // Jane’s Missiles & Rockets, 02.01.2009.11 Almaz-Antey yearly report for 2009, P 32; Gyürösi M. Russia Plans New Chassis for S-400 Triumf // Jane’s Missiles & Rockets,

05.05.2009; ZRS Triumf - main result of 2007 // Strela, December 200712 Barabanov M. Where the Russian aviation flies // Vlast, August 25, 200813 Almaz-Antey yearly report for 2009, P 32 - The letter A in the missile’s name stands for “Active radar homing device”, see http://www.

reference.com/browse/Buk+missile+system?jss=114 Tor-M2 and Buk-M3 air defense systems to be delivered to Russian armed forces in 2008-2009 // Gazeta, September 19, 200715 DNPP yearly report for 2006 (www.oboronregistr.ru/DNPP/1-07/Doc8.doc).16 Almaz-Antey yearly report for 2009, P 3217 Ibid, P 318 Deliveries of Tor-M2 missile systems to armed forces to commence in 2009 // Ria Novosti, December 25, 200719 Almaz-Antey yearly report for 2009, P 3820 Catalogue of Russian Arms for 2006-2007 (www.centrmag.ru/book2869.html).21 Almaz-Antey yearly report for 2009, P 3222 OKB Navigator advertising brochure 3M-14E/3M-14TE (http://paralay.com/885/88515.jpg).

# 4, 2009 Moscow Defense Brief12The ‘New-Look’ Russian Army

Armed Forces

The ‘New-Look’ Russian ArmyIvan Konovalov, a Kommersant correspondent, for Moscow Defense Brief

In October 2008, Russian Defense Minister Anatoliy Serdyukov announced a new stage of military reform,

and the most radical transformation of the Russian military machine since 1945. The MoD set about implementing the new strategy with great energy – most of the changes are supposed to be in place by December 1, 2009. The reform will affect the Army’s numbers, structure, command system, and officer training.

The key elements of the reform are as follows:Accelerate the downsizing of the Armed Forces; •Reduce the number of officers and restructure the officer •corps;Establish a noncommissioned officer (NCO) corps; •Centralize the system of officer training; •Reorganize and downsize central command, including the •MoD and the General Staff;Eliminate cadre-strength (skeleton) formations and bring •all units to permanent readiness status;Reorganize the reserves and their training system; •Reduce the number of units, formations, and military •bases;Reorganize the Army into a brigade system, abolishing the •division, corps, and army echelons; andReorganize the Airborne Troops, abolishing divisions. •

Moscow Defense Brief outlined the gist of the reform in Issue No 4 of 2008. Arguably the most interesting part of the whole package is the abolition of Army divisions and regiments in favor of the new brigade structure.

The main thrust of the reform is to abandon the traditional Soviet and Russian model of mass mobilization army. The idea is that in peace time, the new Russian Army will be made of fully-manned formations which are always ready for combat duty – the so-called permanent readiness forces. All skeleton-strength units are to be disbanded.

If the reform goes as planned, by 2012 all Army formations should be fully manned, i.e. become permanent readiness forces. To that end, Russia is moving away from conscription and towards professional military service. The increase in the numbers of permanent readiness forces will compensate for the overall downsizing of the Army. The skeleton-strength units, manned in peace time by officers without any privates, will be disbanded. That means than many officer vacancies – most of them senior – will also be cut.

The existing arms and equipment reserve depots will become the key element of the Army’s reserve system. The reserve depots are essentially warehouses that store division or brigade-size complements of military equipment. Under

the reform, there will be more than 60 such reserve depots, most of them storing enough equipment to field a brigade.1

Another important change as part of the new brigade structure is the transition towards a three-tier command system comprising Military District Command, Operational Command, and the actual brigades. Some 23 divisions are to be disbanded (with the exception of the 18th Machine-gun & Artillery Division stationed on the South Kuril Islands, and of the airborne divisions). The existing divisions, combined services armies and army corps will be replaced by brigades, all taking orders from their respective Operational Commands. These Commands will use the Western ‘joint’ setup structure, whereby a single Operational Command will be in charge of all the forces in its area of responsibility, including aviation, air defense, missile units, etc.

The new Operational Commands are supposed to be in place by the end of 2009, to replace the existing Combined Services Army commands, which will be disbanded. Latest reports suggest that there will be a total of eight Operational Commands. One will be created in the Moscow Military District on the basis of the 20th Army command. Another will be set up in the Volga-Urals Military District, to replace the 2nd Army command. There will also be two Operational Commands in the North Caucasus Military District (both replacing the 58th Army command), two in the Siberian Military District (replacing the 36th Army and 41st Army commands) and another two in the Far East Military District (replacing the 5th Army and 35th Army commands). 2

Six Strategic Commands will be set up on the basis of the six existing Military Districts. The commanders of the Military Districts will be in charge of the respective new Strategic Commands. The Military Districts themselves remain in place.3

The new brigadesThe restructuring of divisions into brigades commenced

in October 2008, and the standard make-up of the new brigades was approved in December 2008. The reform proceeded at a brisk pace throughout 2009. Most of the changes were in place by June 1, and the remaining ones should follow by December 1, 2009. Some of the new brigades have already taken part in several exercises. The results of these exercises are being used to fine-tune the final structure.

The entire Russian Army now consists of 40 regular combat brigades, including 4 tank brigades, 35 motorized rifle brigades, and one ‘cover’ (fortification) brigade. All four

# 4, 2009 Moscow Defense Brief 13The ‘New-Look’ Russian Army

Armed Forces

of the new tank brigades have been formed from pre-existing tank divisions. Of the 35 motorized rifle brigades, 10 had been in place before 2008, 21 have been formed from pre-existing motorized rifle divisions, and another four have been newly created using equipment stored in the reserve depots.

Under the new guidelines, at least 95 per cent of personnel vacancies in the new brigades should be filled. The actual figures are all in the range of 95-100 per cent. All the new brigades are fully supplied with equipment and other provisions.4

The actual make-up of the new brigades is not much different from the brigade structure that was introduced in the early 1990s. It essentially follows the model established by the independent brigades that existed in the period of 1993-2008. The core of the new brigades is made of the former tank and motorized rifle regiments of the Soviet Army, but with a stronger logistics component, and with some additional combat support (artillery, air defense, etc) that was previously situated at the divisional level. So essentially the new brigades are the old regiments, but with additional artillery, air defense and logistics. Organizationally, this allows for a relatively straightforward process of forming new brigades from the old regiments. A tank brigade includes three tank battalions (each armed with 31 tanks) and one motorized rifle battalion. A motorized rifle regiment is made of three motorized rifle battalions and a single tank battalion (with 41 tanks). Each brigade keeps the former regiment’s two artillery battalions, and gets an additional rocket artillery battalion. Its existing mixed SAM-artillery air defense battalion is bolstered by an SAM battalion. Each brigade therefore has a new artillery and air defense command and control chain.

The composition of the formations that make up the brigades has undergone more substantial changes, but they are not groundbreaking, being essentially based on the existing structure. The number of officers has been cut (mostly in the command chain, with the expectation that in the future they will be replaced by noncommissioned contract officers). At the same time, each formation now has more firepower and a stronger logistics component, in an effort to make the companies and battalions more independent.

There are two types of brigades: tank and motorized rifle. There are also at least five variations of the motorized rifle brigade. Two of them rely mostly on infantry combat vehicles (BMP), another two on armored personnel carriers and their amphibious versions (BTR and MT-LBV-M), and one is a mountain motorized rifle brigade.

A good example of a ‘new-look’ brigade is the make-up of the typical Independent Motorized Rifle Brigade, approved in December 2008. Such a brigade includes:

a tank battalion (41 tanks, four tank companies with 10 •tanks each);three motorized rifle battalions (the numerical strength •of each is 510; each has 43 of the BMP, BTR or MT-LBV-M vehicles, plus six to eight 120mm mortars);

two self-propelled howitzer artillery battalions (each •armed with eighteen 152mm self-propelled howitzers);a rocket artillery battalion (18 122mm Grad MLR •systems);an anti-tank artillery battalion (24 self-propelled anti- •tank missile launch vehicles plus six 125mm 2S25 Sprut-SD self-propelled anti-tank guns or 100mm MT-12 towed anti-tank guns; alternatively, 12 self-propelled anti-tank missile launch vehicles plus 12 towed anti-tank guns);a SAM battalion (12 Tor-M1 [SA-15] or Osa-AKM [SA-8B] •self-propelled SAM systems);a mixed SAM-artillery air defense battalion (six Strela- •10M3 [SA-13] self-propelled SAM systems, six 2S6M Tunguska [SA-19] self-propelled gun-missile systems, and 36 man-portable SAMs);four support battalions (engineers, communications, •repair and maintenance, and logistics);five separate companies (reconnaissance, radio electronic •warfare, NBC, medical and a commandant’s service company).5

The numerical strength of an independent motorized rifle brigade in peace time is 3,500-4,400 servicemen, including some 300 officers. The commander has the rank of major general.6

The make-up of a mountain motorized rifle brigade is quite different - it is essentially a light formation, designed for combat in mountainous areas. The structure of these brigades was approved back in 2007 for the newly created 33rd and 34th Mountain Motorized Rifle Brigades stationed in the North Caucasus. The changes made to the brigade structure in 2008-2009 were fairly insignificant. A typical mountain motorized rifle brigade comprises:

two mountain motorized rifle battalions (armed with •MT-LBV);a reconnaissance battalion (armed with MT-LBV, •essentially a special task force);one self-propelled artillery battalion (18 self-propelled •122mm 2S1 howitzers).

The mountain motorized rifle brigade has no tanks, rocket artillery, anti-tank or air-defense battalions.7 Examples of the brigades that use this fairly unusual structure include the 27th Motorized Rifle Brigade (based in Moscow, merged with the former 1st Independent Rifle Brigade, which guarded MoD facilities), and the 15th “peacekeeper” Motorized Rifle Brigade (Samara). The brigades stationed outside Russia (in Armenia, Abkhazia and South Ossetia) also have a different make-up.8

In 2009, the MoD approved the standard make-up of a “light” motorized rifle brigade armed with the MT-LBV vehicles. It is similar to the composition of the mountain motorized rifle brigades and includes two motorized rifle battalions (armed with MT-LBV), a reconnaissance battalion (also armed with MT-LBV) and one self-propelled artillery

# 4, 2009 Moscow Defense Brief14

Armed Forces

The ‘New-Look’ Russian Army

battalion. The numerical strength of this light brigade is 2,200.9

The ‘new-look’ Independent Tank Brigade (under the peace time structure approved in 2008) has largely retained the make-up of the former tank regiments. It is made of:

three tank battalions (armed with 31 tanks, and comprising •three 10-tank companies); a motorized rifle battalion (43 BMP-3 vehicles, plus six to •eight 120mm mortars); a self-propelled artillery division armed with 18 152mm •self-propelled howitzers; a rocket artillery battalion (18 122mm Grad MLR •systems); a SAM battalion (12 self-propelled Tor-M1 SAM •systems); a mixed SAM-artillery air defense battalion (6 Strela- •10M3 self-propelled SAM systems, 6 2S6M Tunguska self-propelled gun-missile systems, and 36 man-portable SAMs); three support battalions (communications, repair and •maintenance, and logistics); six separate companies (reconnaissance, radio electronic •warfare, engineer, NBC, medics and a commandant’s service company).10

The tank brigade has a total of 94 main battle tanks and 2,900 servicemen, including 250 officers.11

Both types of the “heavy” brigade (tank and motorized rifle) seem to have largely the same list of logistics and support units. There have been reports that after the new tank and motorized rifle brigades took part in a few training exercises in 2009, it was decided to upgrade their reconnaissance component from a single company to a battalion. This change to the standard brigade structure, which was introduced in May 2009, has been the most significant to date. The new reconnaissance battalion includes the command and three companies (reconnaissance, technical reconnaissance equipment and ELINT). The battalion should be equipped with 18 GAZ-2330-24 Tiger vehicles, designated as the main reconnaissance vehicle.12

Further changes can be expected in the structure of the new brigades. The top brass reportedly believe that they may have gone a bit too far – which is not unusual for Russia – in slashing the number of commanding officers, so some of those cuts may have to be reversed. Another idea is to bolster the reconnaissance component yet again. The MoD is also reported to be considering an increase in the number of tanks in the motorized rifle brigades. The proposal is that instead of just one tank battalion armed with 41 tanks, these brigades should have two battalions, each armed with 31-41 tanks, taking their total tank strength from 41 to 62 or 82. Journalists were shown papers outlining the structure of this beefed-up motorized rifle brigade at a meeting with the chief of General Staff, General Makarov, in the summer of 2009.

The brigade would comprise: a command battalion; • two tank battalions, each armed with 41 tanks; • three motorized rifle battalions; • a reconnaissance battalion; • two self-propelled artillery battalions; • a SAM battalion; • an anti-tank battalion; • an engineer battalion; • a logistics battalion; • an NBC company; • an electronic warfare company; • a medical company. •

It is not clear whether and when this proposed new structure will be enacted.13 A number of critics argue there is no need at all for independent tank brigades.

The structure of the “dormant” tank and motorized rifle brigades, which exist in peace time in the form of equipment stored at the reserve depots, is similar to that of the deployed brigades. However, several of these dormant brigades have fewer pieces of artillery, and some older models of other equipment.14

The ongoing reform has also introduced an entirely new type of brigade – the Reconnaissance Brigade. So far there is no information as to the exact structure of the new formation, but it is expected to be a hybrid of the mountain motorized rifle brigade and the airborne assault brigade. One report suggests that such a brigade will include two reconnaissance battalions (which will look similar to a special task force unit), an airborne assault battalion, and an electronic warfare battalion.15 Two reconnaissance brigades will be created from the existing formations. One is the 56th Airborne Assault Brigade16, which is now being relocated to Mozdok, and the other is the 33rd Mountain Motorized Rifle Brigade.17 The official line is that there will be “several” of such brigades.18

It is also worth a separate mention that as part of the ongoing reform, the MoD has disbanded almost all the ‘machine-gun & artillery’ formations (which are essentially part of the fortifications on Russia’s Eastern borders, mainly with China). Most of the fortifications themselves will apparently be demolished, and the rest are to be mothballed. The only remaining formation of this type - indeed, Russia’s only remaining Army division - is the 18th Machine-gun & Artillery Division, stationed on the four disputed South Kuril islands, which Japan claims as its own. It is not clear what future awaits the division beyond 2009. It was reduced to just two machine-gun & artillery regiments during the 2009 reform. But it was also slated to receive some modern equipment. The only similar “positional” formation that will remain on the Russian mainland is the 69th Independent ‘Cover’ Brigade stationed in the Jewish Autonomous Region.19

As for the military bases outside Russia, the 4th Military Base in the South Ossetia and the 7th Military Base in

# 4, 2009 Moscow Defense Brief 15The ‘New-Look’ Russian Army

Armed Forces

Abkhazia have the same structure as a standard motorized rifle brigade. The 102nd Military Base in Armenia will include two fully-equipped motorized rifle brigades (although there have been reports that one of those brigades might have to be disbanded to cut costs). Meanwhile, the 201st Military Base in Tajikistan will retain its quasi-divisional structure and include two motorized rifle regiments.20

Unlike the tank or motorized rifle brigades, the new Artillery Brigades represent a radical departure from the old Soviet model. The old artillery regiments and brigades were fairly “heavy” formations, comprising a large number of artillery battalions. The new artillery brigades are unusually compact. Each includes only three battalions, one of which is an anti-tank unit. It appears that these new brigades will have a two-fold task. In peace time, they will be used in local conflicts as a compact and mobile means of bolstering tank and motorized rifle brigades with additional artillery. And during war, they will serve as a platform for assembling new artillery formations from the equipment stored in reserve depots. To that end, a reserve depot of missile and artillery equipment is being created near every new artillery brigade. This means that these brigades are training and reserve formations, to a large extent. But at the same time they are fully manned, and therefore qualify as permanent readiness forces.

The new artillery brigades comprise: one or two self-propelled howitzer artillery battalions •(each has 18 152mm 2S19 self-propelled howitzers); one rocket artillery battalion (replacing one of the self- •propelled howitzer artillery battalions and armed with eight 220mm 9P140 Uragan MLR systems); one anti-tank battalion (18 Shturm-S [AT-6] self-propelled •anti-tank missile launch systems and six 100mm MT-12 towed anti-tank guns); one reconnaissance artillery battalion (or battery). •

Each of the artillery reserve depots holds enough equipment to arm seven batteries, including:

three battalions of 152mm howitzers or guns (18 units of •either 2S5 Giatsint-S, 2A36 Giatsint-B or 2A65 Msta-B); two rocket artillery battalions (each armed with eight •220mm 9P140 Uragan MLR systems); two anti-tank battalions (each armed with 18 Shturm-S •self-propelled anti-tank missile launchers and six 100mm MT-12 towed anti-tank guns).

Russia has four Rocket Artillery Brigades and two rocket artillery regiments armed with the 220mm 9P140 Uragan and 300mm 9A52 Smerch MLR systems. Each of the brigades now has 12-18 of these systems, and the regiments 24 each. The rocket artillery brigades of the new type are structured in the same way as the regular artillery brigades.

The Missile Brigades comprise three missile battalions (each armed with four Tochka-U [SS-21] or Iskander [SS-26] missile systems for a total of 12 systems per brigade).

All the SAM brigades armed with the S-300V (SA-12) SAM systems, and some of the brigades armed with the Buk (SA-11/SA-17) SAM systems, have been transferred under the command of the Air Force and Air Defense. The “new-look” Army is now left with eight SAM Brigades armed only with the Buk SAM systems. They also have one additional brigade and two air defense missile regiments for training purposes.21

Command of all the support brigades has now been fully centralized under the Military District commands. To illustrate, previously the engineer brigades took their orders from the Army’s commander of Engineer Troops. The arms reserve depots were part of the Main Rocket Artillery Directorate’s chain of command. Now, all these units take their orders directly from the commander of their respective Military District, and are essentially part of that district.22

Several tank and motorized rifle regiments attached to four Military District’s Training Centers have retained their regimental setup. That includes the Moscow, Volga-Urals, Siberian and Far East training centers. All four of these centers had training division status until 1987. Meanwhile, the 56th Guard District Training Center of the Leningrad Military District will move towards the battalion structure. Beyond 2009, the status of the district training centers remains uncertain.

Of all the former engineer brigades, only the 317th Engineer Brigade has retained its former status as a result of the reform, and takes its orders directly from the center. The rest of the permanent-readiness engineer formations are now regiments within the structure of their respective Military Districts. However, each district has an engineer troops reserve depot (for a total of six for the whole Army), which should deploy into independent engineer brigades during mobilization.23

Airborne TroopsPlans for the reform of the Airborne Troops (VDV)

have undergone a substantial transformation in 2008-2009. In 2008, the proposal was to disband airborne divisions altogether, and to replace them with brigades (up to eight of them). Later it was decided to preserve the divisional structure of the Airborne Troops, but cut the number of the divisions from four to three by disbanding the 106th ‘Tula’ Airborne Division. An order to disband the 106th Division by November 1 was signed in January 2009, but later rescinded at the insistence of Gen Vladimir Shamanov, who was appointed commander of the Airborne Troops in May 2009.24 What is more, Shamanov proposed an entirely opposite course of action, arguing that the Airborne Troops should be strengthened. His proposals were accepted. All four of the airborne and air assault divisions (the 7th, 76th,

# 4, 2009 Moscow Defense Brief16The ‘New-Look’ Russian Army

Armed Forces

98th and 106th) will not just be left in place but actually reinforced. The plan now is that the number of parachute regiments in each division will be increased from two to three (thus restoring the pre-2000 situation). For now, only the 76th ‘Pskov’ Guard Airborne Assault Division has received an additional regiment (the 23rd Airborne Assault Regiment).25 Also at Shamanov’s initiative, the SAM battalions of the airborne divisions were upgraded into SAM regiments in the summer of 2009.

In addition to that, the latest reform plan is to increase the number of separate airborne and airborne assault brigades to six, one for each Military District. The brigades will be taking their orders from district commanders. In addition to the single airborne brigade (83rd) and two airborne assault brigades (11th and 31th) that existed prior to 2008, brigade status has also been returned to the 56th Airborne Assault Regiment. The formation, which was formerly part of the 20th Motorized Rifle Division in Volgograd, is now being relocated to Mozdok. But there have also been reports that it will be reformed into a reconnaissance brigade. There are also plans to form another new airborne assault brigade, to be based in Smolensk, Moscow Military District. In future, each of the new airborne assault brigades will also be reinforced with a helicopter regiment (armed with 60 attack and transport helicopters). That move will be part of the process of returning Army Aviation, which was previously transferred to Air Force and Air Defense command, back to the Army. The top brass also believe that the Army needs to have independent combat helicopter regiments to support combat operations.26

Numerical strengthIn absolute terms, the reform of the Russian Army has

led to a significant reduction in the number of large military formations. As of early 2008, the Army (not counting the Airborne Troops) had 24 divisions (three tank divisions, 16 motorized rifle divisions, and five machine-gun & artillery divisions), 12 independent rifle and motorized rifle brigades, plus two divisional strength military bases (in Armenia and Tajikistan). That made for a total of about 112 tank, motorized rifle, and machine-gun & artillery regiments or brigades. The ‘new-look’ Army has 40 deployed brigades and brigade-strength bases (4 tank brigades, 35 motorized rifle brigades and one ‘cover’ brigade). The Army has also retained the 18th Machine-gun & Artillery Division and the 201st Military Base (comprising two regiments each). The number of regimental or brigade-size formations has therefore been slashed by almost 60 per cent.

Of course, the real-terms reductions in Army strength were not as great. Out of the 24 divisions and two bases that existed in 2008, only the 201st Military Base and five

motorized rifle divisions were fully deployed in terms of their personnel numbers. And of those five motorized rifle divisions (the 3rd, 19th, 20th, 27th and 42nd), only the last one was manned under a full war-time schedule. The rest of the formations had only one or two deployed regiments each. This means that the number of the deployed brigades and regiments has been cut by a third (from 66 to 44), which is still a very significant reduction. Comparisons of the pre-reform numbers of battalions in several Military Districts with the current situation yield a similar figure of reductions in the Army’s combat strength. As an example, all the Army divisions and brigades of the North Caucasus Military District had a total of 65 deployed tank and motorized rifle battalions between them. By late 2009, that number was expected to fall to 40 (including the military bases in South Ossetia and Abkhazia).

That means that despite the ongoing instability in the North Caucasus and last year’s war with Georgia, the Russian military strength in the region will be reduced. Even steeper reductions are in the pipeline for the Moscow Military District - from 50 deployed tank and motorized rifle battalions to 22. That last number may yet have to come down even further, if the district’s 5th Motorized Rifle Brigade is transferred to the North Caucasus in 2010.27 Meanwhile, Russian Army strength on the border with Ukraine will be reduced to almost nothing. Once the 10th Guard Tank Division is disbanded, Russia will have only an Army reserve depot in the region, which can deploy the 1st Tank Brigade in case of necessity. In theory, the situation will improve somewhat once the new airborne assault brigade, reinforced with helicopters, is in place in Smolensk. But for now, we are witnessing an unprecedented weakening of the Army’s strength in central Russia and along its Western borders.

The creation of the 25th Motorized Rifle Brigade in the Leningrad Military District, and the deployment of the 23rd Airborne Assault Regiment as part of the 76th Guard Airborne Assault Division, strengthens the Russian Army group along the Baltic States border to a certain extent. But on the whole, the ongoing reform continues the general trend of reducing the Russian military strength deployed in the West of the country. The obvious conclusion is that the Russian military and political leadership does not consider an armed conflict or large-scale combat action in the European part of the country (apart from the North Caucasus) a real possibility.

The regular ‘new-look’ tank and motorized rifle brigades will have a total of about 45 tank battalions and 160 motorized rifle battalions between them. That means that rearming all these battalions with new and modernized equipment by 2016, under the 2007-2015 National Armaments Program (GPV-2015), is quite feasible. As part of the program - which, incidentally, was adopted before the launch of the latest stage of military reform - the Army should receive 22 battalions of new tanks and 23 battalions of upgraded tanks by 2016. It

# 4, 2009 Moscow Defense Brief 17

Armed Forces

The ‘New-Look’ Russian Army

will also have enough new equipment to arm 93 motorized rifle battalions and 50 airborne battalions, plus enough upgraded equipment for roughly another 80 motorized rifle battalions.28 But these figures may well have to be revised in view of the economic situation. They may also be affected by the latest plans to increase the numerical strength of each battalion (such as increasing the number of tanks in each tank battalion from 31 to 41).

As for the new-look tank and motorized rifle reserve depots, their number is relatively small for now. Only about 15 brigade-size reserve depots (for one tank brigade and 14 motorized rifle brigades) should be created by the end of 2009.29 On the whole, we believe that the question of whether the ‘new-look’ mobilization deployment system is fit for purpose is one of the most contentious issues of the whole reform package.

Marines and Navy Coastal Defense TroopsThe reform of the Marines and the Navy’s Coastal Defense

Troops follows the same pattern as the reform of the Army. Of

all the Army formations that were transferred to the Navy in the 1990s, only the coastal defense forces in the Kaliningrad Defense Area have retained their former status after the latest stage of reform. These forces have, however, been reduced in strength. Of the two motorized rifle brigades stationed there (7th and 79th), one (the 7th) has been reformatted into the 7th Independent Motorized Rifle Regiment. In the Kamchatka, the 40th Motorized Rifle Brigade has become the 40th Marine Brigade - but that happened back in September 2007.30

The Russian Navy’s Marine corps has also undergone fairly significant changes as part of the ‘new-look’ drive. In 2009, the Navy’s only existing marine division (the 55th, stationed with the Pacific Fleet in Vladivostok), was reduced in strength to become the 165th Marine Brigade. And the 40th Brigade in the Kamchatka, which was only recently transformed into Marines, has become the 31st Marine Regiment. The Caspian Flotilla’s 77th Marine Brigade, which was created as recently as 2002, was again split into two independent marine battalions. In November 2009 all three marine brigades of Russia’s “European” Fleets (the 61th, 336th and 810th) were converted into the Marine Regiments.

Table 1. Post-reform Russian Army formations, as of late 2009 (projection)Formation Military District Total

Leningrad Moscow North Caucasus

Volga-Urals

Siberia Far East Abroad

Tank brigades - 2 - 1 1 - - 4

Motorized rifle brigades (BMP) - 1 3 2 4 5 2 17

Motorized rifle brigades (BTR) - 2 2 2 1 - 2 9

Motorized rifle brigades (MT-LBV) 3 - 4 - - 2 - 9

‘Cover’ brigades - - - - - 1 - 1

Airborne divisions 1 2 1 - - - - 4

Airborne and airborne assault brigades - - 1 1 1 1 - 4

Machine-gun & artillery divisions - - - - - 1 - 1

Motorized rifle divisions (201st Base) - - - - - - 1 1

Reserve depots (tank brigade equipment) - 1 - - - - - 1

Reserve depots (motorized rifle brigade equipment)

1 1 - - 5 7 - 14

Special task force brigades 1 1 2 1 1 1 - 7

Missile brigades 1 2 1 2 1 2 - 9

Artillery brigades 1 2 1 1 2 2 - 9

Rocket artillery brigades - 1 1 - 1 1 - 4Source: Table compiled by the author using open sources

# 4, 2009 Moscow Defense Brief18

Armed Forces

The ‘New-Look’ Russian Army

1 Time for mobility: Interview with Army Commander Gen V. Boldyrev // Krasnaya Zvezda, October 1, 20092 Warfare.ru3 Time for mobility: Interview with Army Commander Gen V. Boldyrev // Krasnaya Zvezda, October 1, 20094 Statement by Army Commander Gen V. Boldyrev // ARMS-TASS, September 29, 20095 www.soldat.ru/forum/viewtopic.php?f=12&t=15555&start=40 and www.ryadovoy.ru/forum/index.php/topic,279.msg2670.

html#msg26706 www.soldat.ru/forum/viewtopic.php?f=12&t=15555&start=40 7 www.ryadovoy.ru/forum/index.php/topic,422.0.html8 www.ryadovoy.ru/forum/index.php/topic,422.0.html9 www.ryadovoy.ru/forum/index.php/topic,422.651.html10 www.soldat.ru/forum/viewtopic.php?f=12&t=15555&start=4011 www.soldat.ru/forum/viewtopic.php?f=12&t=15555&start=4012 http://www.ryadovoy.ru/forum/index.php/topic,422.630.html 13 www.ryadovoy.ru/forum/index.php/topic,422.0.html14 www.ryadovoy.ru/forum/index.php/topic,422.0.html15 desantura.ru/forums/index.php?showtopic=15001&st=900 16 Gulko N. Russia deploys new reconnaiisance and assault brigades // Kommersant, June 8, 200917 www.ryadovoy.ru/forum/index.php/topic,422.630.html18 Time for mobility: Interview with Army Commander Gen V. Boldyrev // Krasnaya Zvezda, October 1, 200919 www.ryadovoy.ru/forum/index.php/topic,340.105.html 20 specnaz.pbworks.com/201-%D0%92%D0%9121 www.ryadovoy.ru/forum/index.php/topic,421.0.html 22 Time for mobility: Interview with Army Commander Gen V. Boldyrev // Krasnaya Zvezda, October 1, 200923 www.ryadovoy.ru/forum/index.php/topic,438.0.html24 Konovalov I, Muradov M. No-one but him // Kommersant, May 26, 200925 Statement by Gen Shamanov, quote from desantura.ru/forums/index.php?showtopic=15001&st=92026 Gulko N. Russia deploys new reconnaiisance and assault brigades // Kommersant, June 8, 200927 www.ryadovoy.ru/forum/index.php/topic,422.609.html 28 Russian National Armaments Program for 2007-2015, see www.ru.wikipedia.org29 www.ryadovoy.ru/forum/index.php/topic,340.105.html30 www.ryadovoy.ru/forum/index.php/topic,86.21.html

# 4, 2009 Moscow Defense Brief 19

Armed Forces

Ukraine’s Defense Spending

Ukrainian MoD budget in 2004-2010Year 2004 2005 2006 2007 2008 2009 2010

(projection)

Total, million UAH 5,225.5 5,925.7 7,594.9 9,061.5 9,926.4 11,650.1 13,035.7

General Fund, million UAH 4,423.5 5,324.1 5,915.7 7,549.4 8,926.5 7,428.5 8,279

Special Fund, million UAH 802 601.6 1,679.1 1,512.1 999.9 4,221.6 4,756.7

As share of GDP, % 1.5 1.3 1.4 1.3 1 1.1 1.2

UAH/USD exchange rate 5.32 5.12 5.05 5.05 5.27 7.7 7.5

Total, million USD 982.2 1,157.4 1,503.9 1,794.4 1,883.6 1,513 1,738.1Source: Ukrainian Legislation, Ukrainian National Bank (http://www.bank.gov.ua/)

Ukraine’s Defense SpendingAnton Lavrov

Ukraine’s new leaders, who came to power after the so-called ‘Orange Revolution’ in late 2004, had some

ambitious plans for the Ukrainian army. The aspiration was to make it a more capable fighting force, equipped with modern weapons and manned by professional servicemen rather than conscripts. The long-term goal was to join NATO, which meant that the Ukrainian military had to be adapted to a new set of Western requirements. All that called for a steep increase in defense spending – indeed, a much steeper one than Kiev could afford. The ambitious plans were soon on the rocks.

General and Special FundThe Ukrainian national budget consists of two parts:

the General Fund and the Special Fund. The General Fund includes revenues from all the usual sources such as taxes and other incomes. The Special Fund is for target spending using revenues from specific sources strictly defined by the legislation.1 Revenues of the Ukrainian MoD’s Special Fund are generated by selling off excess military equipment, land and property on the ministry’s balance sheet, as well as by privatizing MoD-owned companies.

The initial purpose of the Special Fund was to ensure reliable financing of critical programs, even when there is an overall shortfall in budget revenue. But lately that strategy has backfired: spending from the general fund is mostly on target, whereas revenues of the Special Fund are well below the projections. The MoD has been especially hard hit because a large proportion of its financing comes from the Special Fund.

In 2004-2008, the Special Fund was just a peculiar budget instrument. But in the crisis-hit 2009 and 2010, a

large chunk of MoD outlays came to depend on it. Offloading much of the defense spending onto the Special Fund has been a forced step on the part of the Ukrainian government. The country’s budget is deeply in deficit, which means that there is only enough cash in the General Fund to cover the very basic needs of the army - such as payroll, utility bills and fuel.

In an effort to bolster Special Fund revenues, the government approved a massive program in 2008 to sell large amounts of excess military equipment2 and hundreds of MoD properties. Entire military compounds were supposed to be put up for sale. The proceeds were to be used on new and modernized equipment, new housing for servicemen, the Antonov An-70 military transport aircraft program and other projects. The MoD was essentially told that if it wanted to modernize the army, it would have to generate the money from its own sources.

The 2004 and 2005 defense budgets were not much different from all the previous ones during the Leonid Kuchma presidency.3 Drawn before the arrival of the new ‘Orange’ administration, they remained relatively small (about 1bn dollars), and unambitions. Payroll and related outlays accounted for over 80 per cent of MoD spending. In order to address this sorry situation, in 2005 the government adopted the National Armed Forces Strategy for 2006-2011. The program envisioned a gradual increase in military spending, with a higher proportion of it channeled into army reform and modernization.4

The 2006 budget was entirely the product of the new administration. Military spending was increased by 28 per cent to 7.6bn hryvnyas ($1.45bn), with a noticeably different spending structure.5 The bulk of that increase was supposed to be financed by revenues of the Special Fund. Its share in total military spending was increased to 22 per

# 4, 2009 Moscow Defense Brief20

Armed Forces

Ukraine’s Defense Spending

Year 2004 2005 2006 2007 2008 2009 2010

Share of Special Fund, % 15.3 10.1 22.1 16.7 10.0 36.2 36.5

Source: Ukrainian Budget Legislation for 2004-2010

Share of Special Fund revenue in Ukrainian MoD budget

cent, or 1.7bn hryvnyas in real terms – triple the previous year’s figure. Most of the increase was supposed to be covered by proceeds from privatization of companies and facilities owned by the MoD.

But this attempt by the new government to ramp up the special fund of the defense budget ended in failure. The privatization deals the government had hoped for never materialized, and actual military spending from the Special Fund was only 41 per cent of the projected figure (696.4m hryvnyas)6. The MoD had to put on hold the procurement of new equipment and freeze a number of R&D projects. Its ambitious program of building new housing for servicemen was also hit.

The 2007 budget projected another substantial increase in military spending (by 19 per cent to 9bn hryvnyas, or $1.8bn). Despite the massive shortfall in Special Fund revenue in the previous year, the 2007 target was only slightly lower (1.5bn hryvnyas).7 This time the government was determined to press ahead with the sale of MoD-owned companies and properties.

Most of the spending increase was supposed to be channeled into procurement of new and modernized equipment, as well as R&D programs. The 2007 budget allocation for these purposes was 934m hryvnyas, compared to 191m in 2006 and just 60m in 2005. The programs that would benefit from this largesse included the Antonov An-70 project, R&D work on a new corvette and a tactical missile system, and procurement of the upgraded T-64BM Bulat main battle tanks.8

But the MoD special fund revenue fell well short of its target yet again. Actual military spending from the Special Fund in 2007 was only 513.5m hryvnyas, or 32.6 per cent of the projection. Meanwhile, MoD financing from the General Fund also came in below target at 88.4 per cent. The procurement and R&D programs were the hardest hit. Their funding was 453m hryvnyas (about 50 per cent) below target. The funding gap for the army reform program was 260m hryvnyas.9

Ukraine’s 2008 defense budget rose by only about 10 per cent in absolute terms, which did not even offset the inflation. Defense spending as a share of GDP fell to 0.99 per cent, the lowest level in recent years. That was largely because the government had recognized the failure of its special-fund strategy in the previous two years. It lowered the 2008 Special Fund revenue projection to a more realistic 1bn hryvnyas, compared to 1.5bn in 2007.10

The government was hard-pressed to meet its budget revenue and spending targets in 2008 due to the onset of the world financial crisis and the devaluation of the hryvnya that soon followed. Nevertheless, defense spending from the General Fund came right on target that year. Thanks to a more realistic projection of Special Fund revenues, spending from that source came in at 62 per cent of the target, and in real terms the defense funding shortfall was a relatively modest 376m hryvnyas.11 The only program that was seriously underfunded was the reform of the army and the transition from conscription to professional service.

But although the spending targets for 2008 were largely met, the inadequacy of the targets themselves was becoming increasingly obvious. The army’s combat training programs had to be scaled down, and many of the best-qualified servicemen left in search of greener pastures.

The world economic crisis was already in full swing as the 2009 budget was being drawn, so the spending plans had to be adjusted accordingly. The Ukrainian General Staff estimated that the army’s minimum funding requirement was 17.5bn hryvnyas ($2.2bn) in 2009. The budget allocation was 11.65bn, with only 7.4bn coming from the General Fund.12

Amid this bleak economic outlook, the Ukrainian government once again resorted to offloading a large part of military spending onto the Special Fund. In practice this translated into a reduction of “guaranteed” military spending from the General Fund. The 2009 Special Fund revenue projection more than quadrupled to 4.2bn hryvnyas compared to 2008 - despite the fact that the actual spending figure for 2008 came in well below target at 651 million.13 Meanwhile, defense allocation from the General Fund was cut by 1.5bn, or 16 per cent. Given the 22.3 per cent inflation figure for 2008, the real-terms spending cuts were even deeper. The worst affected by this General Fund spending cuts were the army reform and development program (a reduction of 84 per cent, or 445m hryvnyas), equipment procurement (cut by 71 per cent, or 307m hryvnyas), applied R&D (90 per cent, or 353m) and housing for military personnel (50 per cent, 359m hryvnyas).

The bulk of the spending on these programs was transferred to the Special Fund. The proportion of the budget allocation for payroll and utility bills coming from the Special Fund was also increased. The already questionable projections for Special Fund outlays became even more unrealistic. And it is not just the reform and development programs that now depend on the proceeds from selling military equipment and

# 4, 2009 Moscow Defense Brief 21

Armed Forces

Ukraine’s Defense Spending

property – it is the actual upkeep of the army as well. It had become clear by the middle of 2009 that the Special Fund was hardly receiving any revenues at all. That has led so a severe underfunding of the Ukrainian army.

The repeat of the Special Fund experiment of 2006 has produced an entirely predictable result. Combat training programs have been slashed to a bare minimum. All joint exercises with foreign partners have been cancelled. Combat training of pilots has practically ceased. Even the fighter pilots of the Rapid Reaction Forces had clocked in an average of 10 hours of flight time by September 2009, compared to the 2008 figure of up to 40 hours. And the Ukrainian attack and bomber fleets have been grounded, to all intents and purposes.14

There is not enough money even for the bare basics. Some military units and compounds had their electricity supply cut in the autumn of 2009 over unpaid bills.15 Spending on transport has been slashed. A number of units have had to cancel their catering arrangements with private contractors, and return to the old practice of cooking their meals at their own kitchens, sometimes in makeshift conditions.

Once it became obvious that the Special Fund was broke and no money would be forthcoming for development programs, the government was forced to step in. On October 19, 2009, it allocated 250m hryvnyas from the stabilization fund to finance the top-priority projects, including the upgrade of the Mi-24 Hind attack helicopters, the upgrading of tanks to the T-64BM Bulat specification, the development of an indigenous corvette and a tactical missile system.16 The move came after another 100m hryvnyas was allocated from the stabilization fund for the T-64BM tank upgrade program in May.17 Essentially, not a single one of the key modernization programs has been properly financed from the Special Fund in 2009.

Amid the ongoing budget crisis, the government has decided to freeze the MoD’s budget in 2010. The General Staff ’s estimate for the Ukrainian army’s minimum funding requirement for 2010 is 19.8bn hryvnyas. Normal functioning and development, as opposed to bare survival, would cost something closer to 32bn hryvnyas.18 The defense allocation in the government’s 2010 budget draft is only 13bn, or 1.2 per cent of Ukraine’s GDP. Much of that figure - 4.8bn hryvnyas - is still expected to come from the Special Fund, meaning that it will have to be generated by the MoD itself.19 Judging from the experience of 2009, that is mission impossible, and the army will once again have to face acute funding shortages.

The programs that are supposed to draw the bulk of their funding from the Special Fund will be particularly hard hit. The construction and purchase of housing for military personnel, which was partly financed from the general fund in 2008, relies solely on the Special Fund in 2009 and 2010. This year the program was frozen due to lack of financing. Next year, the situation is unlikely to be any different.20

For the first time since 2006, there is a separate line in the Ukrainian budget on the financing of the An-70 military transport project, to the tune of 120m hryvnyas ($14m). That is probably a reflection of resumed cooperation with Russia on the project. But it too will be financed from the Special Fund, which almost certainly means spending cuts.

All spending on procurement and modernization of military equipment will also have to come from the Special Fund. That includes the T-64BM Bulat tank program, the development of the Ukrainian corvette, the modernization of several aircraft (MiG-29 Fulcrum fighters and L-39 trainers), and procurement of ammunition, including anti-tank guided missiles. In addition, the Special Fund is supposed to finance the army reform and development program (772m hryvnyas), as well as all outlays on storing military equipment, repairing it and maintaining it in combat-ready condition (614m).

The MoD allocation from the General Fund in 2010 is 8.28bn hryvnyas. The bulk of that money (93 per cent) will be spent on the upkeep of the army, including payroll, utility bills, fuel, medical and rehabilitation expenses, and officer training at educational establishments.

The 2010 budget draft has drawn a lot of flak in parliament. President Viktor Yushchenko, who is playing the nationalist card, and the General Staff have said that the level of military spending is totally inadequate, and will lead to the collapse of the Ukrainian army.21

These criticisms are quite fair. Attempts to generate enough revenue for the Special Fund of the MoD budget failed spectacularly in 2009. The government must therefore realize that the Special Fund revenue projections for 2010, which dwarf previous year’s figures, are entirely unrealistic. By offloading outlays on the Special Fund, government ministers are essentially trying to cover up the fact that Ukraine’s actual defense spending has plummeted, and all the key modernization programs have been frozen. This kind of chicanery has turned the country’s defense budget into a bad joke. It has only served to further complicate the spending of those moneys that are actually available. And on top of all that, there is a real danger that in addition to problems with the Special Fund, military spending from the General Fund will fall short of the projections as well.

It has now become quite obvious that all the attempts at modernizing and reforming the Ukrainian army made during the Yushchenko presidency have come to nothing. Basic upkeep of the army (payroll, utility bills, etc.) will account for more than 80 per cent of the MoD’s spending in 2009 and 2010 - just like it did back in 2004. Military spending is barely able to keep up with inflation - indeed, in the last few years this spending has actually fallen in real terms. This fall has been only partially offset by the reduction of the Ukrainian army’s numerical strength from 285,000 in 2005 to 191,000 as of late 2008.

# 4, 2009 Moscow Defense Brief22

Armed Forces

Ukraine’s Defense Spending

Due to budget constraints, the Ukrainian armed forces have been able to afford only a few odd pieces of new equipment. The modernization programs are proceeding at a glacial pace. There is not enough money even to maintain the existing equipment, despite the steep cuts in the numbers of this equipment. The Ukrainian Air Force has been especially hard hit. As of September 2008, only about 30 per cent of its aircraft were able to fly.22 Combat training

1 Ukrainian Budget Code, p 132 Ukrainian Cabinet decree No 1092-r // zakon.rada.gov.ua/cgi-bin/laws/main.cgi?nreg=1092-2008-%F0&p=12369216269086283 Law of Ukraine “On the 2004 national budget of Ukraine” // zakon.rada.gov.ua/cgi-bin/laws/main.cgi?nreg=1344-15 ; Law of

Ukraine “On the 2005 national budget of Ukraine” // zakon.rada.gov.ua/cgi-bin/laws/main.cgi?nreg=2285-154 White Paper 2005. Ukraine’s Defense Policy // www.mil.gov.ua/files/white_book_uk2005.pdf5 Law of Ukraine “On the 2006 national budget of Ukraine” // zakon.rada.gov.ua/cgi-bin/laws/main.cgi?nreg=3235-156 Execution of the state budget of Ukraine by the Defense Ministry // www.mil.gov.ua/index.php?lang=ua&part=budget_

army&sub=budget20067 Law of Ukraine “On the 2007 national budget of Ukraine”// zakon.rada.gov.ua/cgi-bin/laws/main.cgi?nreg=107-178 Law of Ukraine “On the 2007 national budget of Ukraine”// zakon.rada.gov.ua/cgi-bin/laws/main.cgi?nreg=489-

16&p=1257022406591458 9 White Paper 2007. Ukraine’s Defense Policy // www.mil.gov.ua/files/white_book/white_book_uk2007.pdf10 White Paper 2008. Ukraine’s Defense Policy // www.mil.gov.ua/files/white_book/wb2008ukr.pdf11 White Paper 2008. Ukraine’s Defense Policy // www.mil.gov.ua/files/white_book/wb2008ukr.pdf12 Law of Ukraine “On the 2009 national budget of Ukraine” // zakon.rada.gov.ua/cgi-bin/laws/main.cgi?nreg=835-1713 Ukrainian Defense Ministry Spending in 2008-2009 // www.mil.gov.ua/files/vudatku/vudatku-2008-2009.pdf14 Ukrainian army has run out of money - and that is just the beginning, UNIAN // unian.net/rus/news/news-331431.html15 Army in critical condition due to lack of financing - Yushchenko, RIA Novosti // www.rian.ru/crisis_news/20091008/188029837.html16 Tymoshenko finds 250 million for weapons, UNIAN // unian.net/rus/news/news-342032.html17 Defense Ministry receives 100 million to buy tanks // www.unian.net/rus/news/news-317961.html18 General Staff: Current level of financing will destroy Ukrainian army, Korrespondent.net // korrespondent.net/ukraine/

events/96616219 Draft Law of Ukraine “On the 2010 national budget of Ukraine”// zakon.rada.gov.ua/cgi-bin/laws/main.cgi?nreg=835-1720 Gritsenko confident that 2010 budget will destroy Ukrainian army, Liga novosti // news.liga.net/news/N0933111.html21 Ukrainian army to hungry and unwashed - expert, UNIAN// unian.net/rus/news/news-336000.html22 Government receives a doze of reality, Kommersant-Ukraine // www.kommersant.ua/doc-y.html?docId=1033267&issueId=

47020

has also fallen foul of the need to cut costs. There have been no major military construction works in recent years. The program of building new housing for military personnel is far from adequate, and the waiting lists are not becoming any shorter. Cost cutting has also forced Ukraine to scale down or freeze the programs of adapting its army to NATO requirements and improving the system of cooperation with the alliance.

# 4, 2009 Moscow Defense Brief 23Identified Contracts for Delivery of Russian Arms

Signed in January-September of 2009

Trade & Procurement

Identified Contracts for Delivery of Russian Arms Signed in January-September of 2009

Recipient System designation No. ordered Years of deliveries

Contract value, mln USD

Notes

China AL-31FN turbofan engines 122 2009-? 500 For Chinese J-10 fighters

D-30KP2 turbofan engines 55 2009-? n/a For Chinese H-6K bombers

Venezuela T-72M1M main battle tanks 92 n/a 400-500 Upgraded ex-Russian

Vietnam Su-30MK2 fighters 8 2010-? 320 Aircraft to be delivered without armament. Vietnam will buy it later

Yemen BTR-80A armoured pesonnel carriers

100 n/a 100

Kamaz trucks 400

2B11 Sani 120 mm towed mortars

50

Turkmenistan Kamaz trucks 1052 n/a 100

T-90S main battle tanks 10 2009 25 Pilot contract

Kazakhstan S-300PS SAM systems 10 battalions 2009-2011 n/a Ex-Russian

Bolivia Mi-171 transport helicopters 4 2009 n/a

Sri Lanka Mi-171 transport helicopters 4 2009 n/a

Kuwait BMP-3M armoured infantry fighting vehicles

n/a n/a n/a

Source: Russian press

# 4, 2009 Moscow Defense Brief24

Our AuthorsSaid Aminov is a 1994 cum-laude graduate of the Moscow Bauman National University of Technology specializing in aviation instruments and systems; in 1998, he graduated from the Financial Academy under the Government of the Russian Federation with a degree in banking. He has been working in the Russian banking system with corporate customers since 1994. As of 1999, he runs his own on-line project Air-Defense Herald (www.pvo.su), specialising on air and missile defense.

Mikhail Barabanov. Graduated from the Moscow National University of Culture, then worked for the Moscow City Government. Editor-in-Chief of MDB since 2008. An expert on naval history and armaments.

Vasiliy Kashin, PhD. Graduated from the Institute of Asian and African Studies (Moscow) in 1996, then worked for the Russian government. Currently a senior research fellow at the Institute of Far East Studies (Moscow).

Ivan Konovalov. Graduated from the Moscow Lomonosov State University in 1994 with a degree in Journalism. In 1994-2003 worked as a military journalist for Russian television, covering military conflicts in the former Soviet republics and other countries. A military analyst at the Kommersant Publishing House since 2008.

Anton Lavrov. Graduated from the Tver State Technical University. An independent aviation analyst and one of the most prominent independent Russian researchers of the 2008 Russian-Georgian War.

Konstantin Makienko. Graduated from the Oriental Department of the Moscow National Institute for International Relations in 1995 and the French-Russian Masters’ School of Political Science and International Relations in 1996. Project leader of a conventional armaments project at the Center for Policy Studies in Russia (PIR-Center) in 1996-1997. Deputy Director of CAST since September 1997. Author of numerous articles on Russian arms trade and advisor to the head of the Russian Federal Agency on Industry since 2007.