Russia Defence and Security Report Q2 2010

Russia’s economy is expected to improve in 2010 but the recovery process will be fragile and protracted. We expect economic growth to rise to 3.4% in 2010, as much driven by re-stocking and base effects as productivity gains and an expansion of new consumptive capacity. Unemployment was 8.1% in November 2009 – up from the previous month – reinforcing our view that seasonal effects are likely to push the jobless rate higher through to the early part of 2010. Unemployment is likely to rise to 8.5% by end-2009.
The stabilisation of oil prices above US$60.00/bbl and the recapitalisation of domestic banks will underpin the macroeconomic recovery beyond 2009. Windfall oil revenues should help to bolster the government’s ability to maintain support of the country’s domestic capital market; and also to pay down external debt and build up a stabilisation fund to help safeguard public finances.
Domestically, democratic conditions came under increased scrutiny through October and November with allegations of electoral fraud at regional elections held on October 11. According to official results from the Central Electoral Commission, the governing United Russia Party, led by Prime Minister Vladimir Putin, won a landslide victory in almost every one of the 76 regional legislatures.
In the worst terrorist attack in Russia outside the North Caucasus region for 5 years, a bombing on November 28 on a Russian train – on the Nevsky Express main line, which operates between Moscow and St Petersburg – left dozens dead and over 100 injured. Chechen separatist militants claimed responsibility for the attack and, in turn, Russian Prime Minister pledged to destroy any terrorist groups. The bombing highlights the persistent security risks in Russia. Violence in the North Caucasus remains high and has increased since the start of 2009.
Russia’s vast size (comprising one eighth of the world’s landmass) means that it inevitably has interests across the entirety of Eurasia. In the West, Russia continues to view NATO with suspicion. In the South- West and South, Moscow continues to seek hegemony over the Caucasus and Central Asia, and limit the spread of militant Islam from Afghanistan. In the East, Russia continues to court China as an ally, but remains vigilant about potential Chinese designs on its Far Eastern region. To its North, Russia is becoming more assertive in staking its claim to Arctic resources. Russia also continues to view the US as a major threat.
By 2020, Russia will possess modern nuclear weapons that that would deliver guaranteed ‘unsustainable damage’ to any aggressor on first-strike. Nuclear weapons and equipment to be ordered include: 36 new silos, 66 Topol-M intercontinental ballistic missiles (ICBMs), 30 Bulavas (the submarine-launched version of the Topol-M), Tupolev Tu-160 and Tu-95 bombers carrying Raduga Kh-555 and Kh-101 cruise missiles.
Conventional weapons and equipment to be ordered include: 700 T-90 tanks, 1,500 BTR-80 armoured personnel carriers, BMP-3M infantry vehicles, Su-34 fighter aircraft, Yak-130 jet trainers, 156 helicopters and S-400 missile systems. There will be further development of the Sukhoi Future Air Complex for Tactical Air Forces fighter programme and Borey-class nuclear submarines. The State Programme of Armaments (GPV-2015) is the blueprint of the current defence force modernisation, through to 2015. It covers purchasing, upgrades and maintenance worth a total of RUB5,000bn.
Russia’s defence policy supports a minor but growing commitment to international peacekeeping operations. President Medvedev has spoken of increasing Russia’s presence in peacekeeping, in part to increase Russia’s international profile.
Although Russia is reluctant to rely on other countries for defence procurements, as the industry becomes less state-controlled, greater multinational involvement may lead to products being sourced from overseas.