Foreign Correspondence

[Amaunet]

Russia to boost 2005 military spending
17 Jun 2004 15:36:40 GMT

(Recasts, adds defence official's call to raise spending)

By Maria Golovnina

MOSCOW, June 17 (Reuters) - Russia will boost domestic arms spending by a third to $6 billion in 2005, industry sources and media said on Thursday, but a top defence official called for more cash to help the sector recover from a post-Soviet crisis.

The arms industry -- the core of the Soviet economy during the Cold War -- shrank in the 1990s. Production picked up under President Vladimir Putin but still remains below Soviet levels.

Frequent military accidents such as the sinking of the Kursk submarine in 2000, as well as the army's inability to end a military conflict in rebel Chechnya, have underscored the need for urgent reform of Russia's shoe-string military machine.

Defence spending, including security and emergencies, will rise 146 billion roubles to 894 billion roubles ($30.8 billion) in 2005 -- or about five percent of the economy, according to a draft 2005 budget obtained by Reuters.

Industry players also confirmed a newspaper report the budget was likely to allocate more than $6 billion to state purchases of hardware -- about 30 percent more than in 2004.

The rise is in line with Putin's plan to bolster military capability by reforming the ill-equipped army, reorganising the nuclear sector and boosting defence exports to Asia to offset lower sales to eastern Europe.

But key defence players were still disappointed by the draft, which was discussed by ministers on Thursday and is subject to revision.

"I call on you to clarify the 2005 budget from the point of view of national security and defence," the chief of Russia's military staff, Anatoly Kvashnin, told a cabinet meeting.

"The draft budget does not give grounds to suppose it would be possible to boost national security and lead the armed forces out of crisis."

Hardware producers were also sceptical as they said the state seemed divided over which defence sectors to favour.

"The good thing is that for the first time in many years, state spending has reached the level of annual arms exports: about $5-6 billion," said a high-ranking official in a big state-owned defence company. "But there is a long way to go because in the West this number is many times higher."

Defence officials have hinted the government wants to concentrate on researching next-generation technology, especially for the strategic rocket forces, rather than purchasing modified versions of existing stocks.

Aviation, growing at double-digit rates due to rising exports, hopes to get the largest slice. Jet sales form the backbone of Russian arms exports and insiders say the government could give it priority due to the industry's high profitability.



http://www.alertnet.org/thenews/newsdesk/L1739413.htm