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The High Price of Russias Military Improvement Plan Summary President Vladimir Putin has taken critical steps toward enhancing Russias military capabilities over the next five years. His recently approved plan calls for severe reductions in service people and civilians, with successive annual increases in defense spending. The coming year will likely bring large-scale strikes as military and civilian personnel demand justice and adequate social benefits. Analysis After months of wrangling, the Russian government has settled on a five-year plan to cut 600,000 service people and civilian staff from the militarys 3.1 million-member payroll. The cuts, agreed to last week by Russias Security Council and President Vladimir Putin, are expected to bring closure to debate on the issue. But among military personnel, the cutbacks which come as Moscow finally gives uniform pay raises to the armed services will likely incite strikes by personnel expecting to be discharged or laid off. The five-year plan for Russias armed forces could change in both its scope and its schedule. But staff layoffs scheduled for the next year will provoke an aggressive response from government employees and their families. Russia plans to allocate nearly 20 percent of its federal budget to defense in the coming year. Putins objective is to boost this amount annually. But this measure alone will not solve the problems of Russias military. Russian soldiers are notorious for being underpaid and frequently forced to serve without pay. Moreover, food and housing is considered inadequate for a modern army, and equipment and training has been lacking for years. Russia has moved slowly to plan cutbacks. Generals have resisted the cuts, and civilian leaders hoped maintaining the military trappings of a superpower might preserve Moscows diplomatic clout. But the strain of maintaining these troop levels merely advertised weakness. Putin demands an end to this approach. Putins solution to the militarys shortcomings is to increase the cost per soldier, affording each individual better training, resources and services. Money saved from cuts combined with budget increases will let Moscow multiply its spending per soldier over the next decade. The plan is to optimize Russias combat capabilities and readiness, which are dismal at present. Cutbacks in the five-year plan will come mostly from the ranks of support and administrative personnel. A scheduled reduction of 365,000 by 2005 is under way for the Ministry of Defense. According to this plan, about 5,000 airborne troops will be discharged in 2001. Putin indicated Nov. 9 that the Interior Ministry will lose 33,000 employees while the Federal Border Service, Federal Security Service, Federal Railroad Services and other agencies will lose about 235,000 workers over the next five years. The losers in this scheme will be those left to rely on social protection benefits, which have decreased in the last year. Housing and pensions for retired personnel do not appear to be a priority in the new budget. Though Putin approved a 10 percent increase in pensions beginning Nov. 1, service people were hit by a new flat tax earlier in the year and lost their transportation and utility privileges. The increase in pensions does not absorb these costs. Moreover, federal housing, offered to armed service pensioners, will not accommodate the proportion of retired in need. The impact on housing will be protracted, but as many as 240,000 officers and 380 generals will be eligible for federal housing over the next five years. Current shortages in state housing certificates do not portend to meet demand. This year, the federal government was able to present only 50 percent of certificates allotted for 2000. Less than one out of four applicants actually received an apartment. This trend is likely to worsen as cuts in armed forces proceed into the next year. The cutbacks will be especially painful for those laid off when on the precipice of better times. The new budget allows a 20 percent pay raise for armed service personnel by October, and the boost could go as high as 40 percent. Pay within the armed services now ranges from $14 to $800 per month, which in most cases is below poverty level. Higher salaries apply only to combat soldiers, and military paychecks in Russia are often delayed for months. Moreover, Russias armed service personnel are paid less than half of what employees in other parts of government earn. Raises, accorded by promotion, are also much smaller for those in the armed services than for federal employees. Russias military downsizing will deprive workers of wage hikes at a time when the pay could finally begin to meet cost-of-living needs. Worse yet, laid-off service people and civilian staff will have a very thin social safety net to fall back on. The combination of boosting wages for remaining personnel and executing substantial layoffs and discharges will incite strikes among employees across Russias armed services. Active duty personnel will insist on better social protections in anticipation of cutbacks. Stratfor.coms Global Intelligence Update - 17 November 2000

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