Russia’s economy is slowly emerging from the global recession. Its GDP expected to grow 3.4% in 2010, following last year’s 8.1% decline. Russia is heavily dependent on revenues from oil and gas exports. The sharp drop in oil prices in 2009 hit hard: unemployment increased alarmingly and the rouble was devalued. A return to oil prices above US$60.00/bbl, as well as the recapitalisation of domestic banks, will strengthen the economic upturn. However, unemployment is expected to increase to 11.0% this year, in part at least from seasonal effects. It was 8.5% 2009.
Corruption remains a major problem in Russia, with bribery seen as endemic throughout government agencies. It has become worse over the past few years, and most Russians see it as one of the most pressing issues facing the country. However, President Dmitry Medvedev has declared that he would make fighting corruption a ‘national priority project.’ However, changes will not happen overnight and any positive changes will likely take place over the longer term.
On February 5 2010, The Military Doctrine of the Russian Federation was published on the president’s website, replacing the earlier version released in 2000. The State Programme of Armaments (GPV-2015) remains in force, representing the modernisation plan for the defence forces through to 2015. It includes purchasing, upgrades and maintenance worth RUB5,000bn.
On April 13, the Nuclear Security Summit – a meeting of 47 countries – was hosted by US President Obama in Washington DC. The summit meeting released a communiqué resolving to strengthen nuclear security and to address the threat of nuclear terrorism. (Source: US President’s website, www.whitehouse.gov, April 2010). Also signed at the same time was an agreement between Russia and the US to dispose of tonnes of plutonium from nuclear weapons, beginning in 2018. (Source: AP News) In April, foreshadowing a new era of NATO-Russian cooperation, Anders Fogh Rasmussen, Secretary- General of NATO, has called for Russia join NATO’s missile defence shield. This unprecedented plan is expected to be discussed at the next meeting of the alliance in Tallinn, Estonia in April. (Source: Telegraph Media Group, www.telegraph.co.uk, April 19 2010)
On April 10, a plane carrying Poland’s President Lech Kaczynski and a host of senior government officials crashed in Smolensk, Western Russia, killing all 96 on board. Those killed included Poland's top political and military brass, who were visiting Russia to commemorate the 70th anniversary of the massacre of thousands of Polish officers at Katyn by Soviet soldiers in 1940. The swift, positive response from Moscow to the tragedy, with Prime Minister Vladimir Putin announcing that he would personally lead the post-crash investigation, which has been seen to comfort Prime Minister Tusk, could limit any negative fallout from Poland’s anguish. It could even improve Russo-Polish relations.
In Kyrgyzstan, the political uprising escalated from April 7, leading to the violent overthrow of the government there. On April 15, President Kurmanbek Bakiyev formally resigned from office, with Roza Otunbayeva becoming the leader of the new interim government. Russian President Dmitry Medvedev, expressed hopes for future positive Russian-Kyrgyzstani relations, which had deteriorated in the weeks leading up to the crisis.
On March 29, there were two suicide attacks on the Moscow Metro – killing at least 37 people – in yet another reminder to the Kremlin that the war in the North Caucasus is not over. Chechen separatist militants claimed responsibility for the attacks, which are more broadly connected to the ongoing Islamist insurgency in the North Caucasus. Despite a combination of heavy federal subsidies and repression, the insurgency there looks set to continue. On January 19, President Dmitry Medvedev announced the creation of a new North Caucasus Federal District in order to better administer the region. The Kremlin realises that it has to address the economic deprivation of the North Caucasus if it is to end the insurgency. However, Russian security forces have also continued with their crackdown.
Russia has tended not to source its defence procurements from overseas; but this is changing, especially with increasing multinational involvement. In February, France announced that it plans to sell at least one, and possibly four, Mistral-class amphibious assault ships to Russia. The ships cost up to US$750mn each. Some of NATO and members of the US Congress have expressed concern at the proposed sale. (Source: New York Times, February 8, 2010)

Report Highlights

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Executive Summary 5
SWOT Analysis 7
Russia Security SWOT 7
Russia Defence Industry SWOT 8
Russia Political SWOT 8
Russia Economic SWOT 9
Russia Business Environment SWOT 10
Global Defence Overview 11
Table: Election Timetable, 2010 12
Central And Eastern Europe Overview 24
Security Risk Ratings 26
BMI’s Security Ratings 26
Table: Europe Security Risk Ratings 26
Table: Europe State Terrorism Vulnerability To Terrorism Index 27
Russia’s Security Ratings 28
City Terrorism Rating 28
Table: BMI’s Central And Eastern Europe And Central Asia City Terrorism Index 29
Political Overview 31
Long-Term Political Outlook 31
North Caucasus Outlook 34
Table: The North Caucasus – Profile Of The Republics 39
Regional Political Outlook 42
Foreign Policy 45
Security Overview 48
External Security Situation 48
Russia's New Military Doctrine And NATO's Response 58
Internal Security 59
Table: Russian Insurgent Groups 62
Armed Forces And Government Spending 64
Armed Forces 64
Table: Regional Armed Forces, 2007 (Including conscripted, ‘000) 64
Defence Budget 67
Historical Strength 67
International Deployments 68
Table: Russia’s Foreign Deployments 2008 68
Weapons Of Mass Destruction 69
Market Overview 72
Industry Trends And Developments 75
Table: Key Players In Russia’s Defence Sector, 2005 75
Arms Trade Overview 77
Procurement Trends And Developments 77
Industry Forecast Scenario 79
Table: Russia’s Armed Forces, 2007-2014 (‘000 personnel) 79
Table: Russia’s Government Defence Expenditure, (2007-2014) 79
Macroeconomic Outlook 80
Table: Russia – Economic Activity 82
Company Profiles 83
Irkut 83
Kazan Helicopters 85
Rosoboronexport State Corporation 87
Russian Aircraft Corporation MiG (RSK MiG) 89
Sukhoi Aviation Corporation 91
United Aircraft Corporation 93
Uralvagonzavod 96
Country Snapshot: Russia Demographic Data 98
Section 1: Population 98
Table: Demographic Indicators, 2005-2030 98
Table: Rural/Urban Breakdown, 2005-2030 99
Section 2: Education And Healthcare 99
Table: Education, 2002-2005 99
Table: Vital Statistics, 2005-2030 99
Section 3: Labour Market And Spending Power 100
Table: Employment Indicators, 2001-2006 100
Table: Consumer Expenditure, 2000-2012 (US$) 100
Table: Average Annual Wages, 2000-2006 101
BMI Methodology 102
How We Generate Our Industry Forecasts 102
Defence Industry 102
City Terrorism Rating 103
Table: Methodology 105
Sources 106
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