Russia Defence and Security Report Q4 2011

According to data published by Deputy Prime Minister Sergei Ivanov, Russia’s military-industrial complex increased its total production by 12% last year. By contrast, its output of defence-related items rose by 18.6%. Labour productivity rose by 17%. In part, this reflects the growing demand of a country whose large armed forces have been restructured and modernised, and who are re-equipping after a long period of under-investment. The energy boom that has dramatically boosted the fortunes of Russia’s economy and public finances since 2009 has laid the foundations for a bonanza. Over the long term, funds available for the modernisation of the navy, for instance, amount to around RUR5,000bn. A sum of RUR300bn alone has been made available for the modernisation of airports by the end of 2015.
A casual glance at the headlines from the three months to the end of July 2011 shows that, among much else: the navy is buying four Mistral helicopter carriers; the airforce will be looking to purchase 48 of the new Sukhoi Su-35S fighters; various agencies are taking deliveries of helicopters, and; the number of military specialists that are to be trained by the support organisation DOSAAF in 2012 will be 130,000 – or 20,000 more than were trained in 2011.
However, there remains a significant gap between the items that appear on official plans and the items that are actually ordered – let alone paid for. Official data indicated that only 60% of the contracts that should have been placed with suppliers of equipment in the first four months of 2011 had actually been given to contractors. Through mid-2011, there was no shortage of anecdotal evidence, dismissals of high profile officials and executives and laying of criminal charges relating to the handling of defence contracts: in short, inefficiency and corruption remains rife – notwithstanding the government’s apparent keenness to stamp them out.
A clear trend is that links between Russia’s defence industry and counterparts in foreign – notably Western – countries are growing. These linkages go far beyond the long-standing cooperation with other countries in space exploration. The Russian-Indian joint venture (JV) that makes the BrahMos cruise missile expects that sales over the next 10-15 years will amount to US$10bn. United Shipbuilding Corporation is working with French and South Korean partners on the Mistral helicopter carriers, of which the navy is looking to purchase four. Russian Helicopters, the holding company for a variety of manufacturers, is looking to buy 40 engines from France’s Turbomeca this year for installation in new Kamov Ka-62 helicopters. Italy’s AgustaWestland expects to begin production of helicopters at a new plant in Tomilino prior to the end of the year.
Russia is flexing its muscles in the field of strategic missiles once more. In June 2011, the Defence Ministry circulated data which showed that the US had leadership in terms of the number of ballistic missiles (882 to Russia’s 521) and warheads (1,800 to 1,537). At about the same time, the navy successfully launched one of the new Bulava missiles from a latest-generation nuclear submarine, the Yury Dolgoruky. Negotiations between Russia and NATO over missile defence systems appear to have stalled. Defence minister Anatoly Serdyukov has noted that the supply of strategic missiles (specifically the Topol-M, Yars and Avangard weapons) to Russia’s armed forces will increase by 300% in 2011-15 relative to the previous five-year period.
Overall though, there is much in relation to which Russia can agree and cooperate with NATO. Areas of mutual interest include: the fight against global terrorism; transportation of NATO forces through (or over) Russia on the way to or from Afghanistan and; jointly developed technologies. In June 2011, Russia and NATO together conducted an exercise called Vigilant Sky-2011: the aim of this was to rehearse procedures in the event of a ‘9/11-style’ hijacking over Eastern Europe.
In the meantime, Russia remains vulnerable to terrorism resulting from radical Islam and/or aggrieved ethnic minorities. According to interior minister Rashid Nurgaliev, the number of terrorist attacks in Dagestan alone in H111 was 118, or 19% more than in the previous corresponding period. Russia continues to collaborate with other Shanghai Cooperation Organisation (SCO) member states: in September 2011, for instance, Russian President Dmitri Medvedev is due to meet with Tajikistan’s President Emomali Rahmon in order to discuss border security and other topics of mutual interest. According to Alexander Dynkin, the director of the Institute of Global Economy and International Relations, the withdrawal of NATO forces from Afghanistan from 2014 could result in greater activity from radical elements of the Taliban – both in Pakistan and in the five countries of (ex-Soviet) central Asia.

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Executive Summary 7
SWOT Analysis 9
Russia Security SWOT 9
Russia Defence Industry SWOT 10
Russia Political SWOT 11
Russia Economic SWOT . 11
Russia Business Environment SWOT 12
Global Political Outlook 13
Global Hotspots: Libya, Iran, Afghanistan, Korea, Greece 13
Table: Election Timetable . 17
United States . 20
Latin America . 20
Western Europe 21
Russia And The Former Soviet Union . 22
Middle East And North Africa 23
Asia . 25
Wild Cards To Watch 27
Europe Security Overview . 29
Europe’s Key Security Issues Over Coming Decade . 29
The Role Of NATO . 36
Security Risk Ratings . 40
BMI’s Security Ratings . 40
Table: Europe Security Risk Ratings 40
Table: Europe State Terrorism Vulnerability To Terrorism Index . 41
Russia’s Security Ratings 42
City Terrorism Rating . 43
Table: BMI’s Central And Eastern Europe And Central Asia City Terrorism Index . 43
Political Overview 45
Russia Security Overview . 50
External Security Situation 50
United States . 50
The Western Front 53
Central Asia 55
China 57
Japan 58
The New ‘Great Game’ In The Arctic . 59
Beyond Eurasia . 59
Russia At Risk Of Losing Great Power Status . 62
Russia’s Military Doctrine To 2020 64
Shanghai Cooperation Organisation: New Global Force Or Paper Tiger? 66
Internal Security 71
Armed Forces 77
Armed Forces . 77
Historical Strength 78
International Deployments 79
Table: Russia’s Foreign Deployments 2008 . 79
Weapons Of Mass Destruction 80
Market Overview 82
Industry Trends And Developments 85
Table: Key Players In Russia’s Defence Sector, 2005 85
Arms Trade Overview . 86
Procurement Trends And Developments . 86
Industry Forecast Scenario . 89
Armed Forces . 89
Table: Russia’s Armed Forces, 2002-2008 (‘000 personnel, unless otherwise stated) 89
Table: Russia’s Available Manpower For Military Services, 2008-2015 (aged 16-49, unless otherwise stated) . 89
Defence Expenditure . 89
Table: Russia’s Government Defence Expenditure, 2008-2015 . 90
Table: Russia’s Defence Expenditure Scenario – Changing % Of GDP (US$mn), 2008-2015 91
Defence Trade . 91
Table: Russia’s Defence Exports, 2008-2015 (US$mn) 92
Table: Russia’s Defence Imports, 2008-2015 (US$mn) 92
Table: Russia’s Defence Trade Balance 2008-2015 . 93
Macroeconomic Outlook . 93
Table: Russia – Economic Activity, 2008-2015 . 95
Company Profiles 96
Irkut 96
Kazan Helicopters 97
Rosoboronexport State Corporation . 98
Russian Aircraft Corporation MiG (RSK MiG) 99
Sukhoi Aviation Corporation .100
United Aircraft Corporation 101
Uralvagonzavod .102
Country Snapshot: Russia Demographic Data . 103
Section 1: Population .103
Table: Demographic Indicators, 2005-2030 103
Table: Rural/Urban Breakdown, 2005-2030 .104
Section 2: Education And Healthcare 104
Table: Education, 2002-2005 104
Table: Vital Statistics, 2005-2030 104
Section 3: Labour Market And Spending Power 105
Table: Employment Indicators, 2001-2006 105
Table: Consumer Expenditure, 2000-2012 (US$) 105
Table: Average Annual Wages, 2000-2006 106
BMI Methodology 107
How We Generate Our Industry Forecasts 107
City Terrorism Rating 108
Table: Methodology .110
Sources 111
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