MILITARIZATION THREATENS THE GDP

Vladimir Mukhin
DEFENSE and SECURITY (Russia) | July 25, 2014

GROWTH OF MILITARY EXPENSES IN RUSSIA WILL HIT THE ECONOMY AND WELL-BEING OF THE POPULATION

Participants of the meeting of the Security Council determined priority measures related to provision of sovereignty and territorial integrity of the country. A big part of them deals with the matters of strengthening of national defense and security of the state. On the one hand, these are forced and necessary measures due to which the army and other security agencies will grow more combat capable on the other hand, in conditions of international sanctions related to Ukraine increase of defense capability of Russia will have bad effect on its economy. It is evidently necessary to expect worsening of social parameters and living standards of many categories of citizens. But such is political choice of the Kremlin and, so to speak, this is not to be discussed

At the meeting President Vladimir Putin stressed, "Of course, there is no direct military threat to the sovereignty and territorial integrity now. First of all, strategic balance of forces in the world s a guarantee of this." Along with this, according to the President, Russia should react to NATO expansion and to approach of the military infrastructure of the alliance to its borders adequately and equivalently. Moscow also "will not leave deployment of global antimissile defense and increase of the stockpile of nonnuclear strategic weapons without attention."

It seems that response to these threats will not be cheap for the Russian budget. The course at further growth of military expenses was outlined in the recently developed and approved by the government main lines of the budget policy for 2015 and planned period of 2016 and 2017 (ONBP-2017) even before the yesterday’s meeting of the Security Council. In comparison to the similar document of the last year, new financial plans of Russia despite the forecasts of "slowdown of GDP growth to 0.5% because of geo political tension" make provisions for outrunning growth of expenses on national defense and security between 2015 and 2017." In the table it is possible to see that in the next few years aggregate expenses on military needs, security and law-enforcement activity will amount to 6.8-6.9% of the GDP. This much more than the parameters planned last year.

According to the content of ONBP-2017, "In the section "National defense" growth of expenses takes into account a need for provision of readiness of the Armed Forces for parrying of aggression, armed protection of integrity and immunity of the territory of Russia; steady and uninterrupted functioning of the system of military and state governance; readiness of industrial enterprises to satisfy the needs of the Armed Forces, state and population in wartime" etc. Expenses on modernization of the army and functioning of the system of material and technical procurement of troops are written as a separate line in ONBP-2017. Significant amounts are also planned for formation of professional army in accordance with decree of the President of May 7 of 2012 No. 604 "On further improvement of military service in Russia" with regard to increase of the quantity of contract servicemen in five years. The additionally allocated funds allow development of the strategic nuclear forces, military space industry and GLONASS system at accelerated speed. It is planned to increase money allowances of servicemen by 5% every year. Similar indexation of military pensions for retired servicemen is planned too.

If GDP almost does not grow where from there will appear additional budget funds?

A certain decrease of expenses to 6.1% of the GDP s planned in the field of defense and security in 2017. The Finance Ministry explains this circumstance by the planned reduction of personnel of security agencies by 10%. It is necessary to remark that previously such reduction of the quantity of servicemen and policemen has been planned in ONBP-2012 (between 2013 and 2014). But this did not happen and this circumstance became one of the reasons of resignation of Alexei Kudrin from the post of the finance minister. He warned then that growth of military expenses would slow down development of the economy and would have negative effect on social economic parameters of living standards of Russians. We see this today. Now Kudrin practically repeats his forecasts although with corrections for the fact that militarization of the economy has already happened and its further accelerated growth with regard to events in Ukraine, as well as Western sanctions "may cost Russians up to one-fifth of their incomes" and real decrease of the GDP.

Source: Nezavisimaya Gazeta, July 23, 2014, p. 1

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