Russia Defence and Security Industry Update Quarter 2 2012

  • February 2014
  • -
  • Business Monitor International
  • -
  • 114 pages

Russia has embarked on a long-term modernisation programme for its armed forces which is due to
conclude by 2020. Apart from performing a marked downsizing of its military, the major tasks of the
Russian government remain the professionalisation of the armed forces, and the procurement of new
materiel to replace outdated Soviet-era equipment.
Reorganisations are also occurring at the force level, with the Russian army looking to reconfigure its
Military District system. The force is also reportedly interested in phasing out division- and regimentalsized
formations in favour of adopting the brigade as the predominant level of military organisation.

Keeping one eye on future possible requirements to intervene either in Russia’s ‘near abroad’, or further
afield, the Ministry of Defence has pursued similar efforts to NATO, and the European Union, in terms of
organising standing forces that can be deployed at short, or medium, notice. Investment is also flowing
into Russia’s Special Forces, which are seen by the country's defence planners as an important capability
in counter-insurgency campaigns.

Another key aspect of Russia’s military modernisation is the overhaul of its nuclear deterrent. Along with
France, Russia is the only other European nuclear power performing an overarching upgrade of its
nuclear forces. The United Kingdom’s modernisation of its nuclear deterrent is expected to commence
later this decade. The importance of the nuclear deterrent to Russia is two-fold: not only is it essential for
Moscow to retain a credible nuclear force in terms of size and capability to balance the nuclear deterrent
of the United States, and to act as a deterrent vis-à-vis smaller declared nuclear powers such as China,
India and Pakistan; but the Russian nuclear force helps to balance the considerable reduction in the size of
Russia’s conventional military forces from the days of the Cold War.

It should also be noted that the possession of a nuclear arsenal continues to carry prestige on the
international stage as it does for the other original declared nuclear powers of the United States, France,
China and the UK. The modernisation efforts of the Russian nuclear force are focusing on the
introduction of new submarine-launched ballistic missiles, and intercontinental ballistic missiles, along
with new aircraft and nuclear-powered ballistic missile submarines. Although Russia will continue its
nuclear modernisation over the next decade, it will at the same time continue to work with the United
States to negotiate bilateral reductions in the size of the two countries’ strategic nuclear arsenals.

Away from the nuclear sphere, several important procurement initiatives are ongoing throughout the
Russian army, navy and air force. The latter service will begin receiving new multirole combat aircraft
over the next five years, and has recently received upgraded combat aircraft that had been destined for
assembly in China. The procurement of new combat aircraft is moving hand-in-hand with the
development of advanced air-to-air missiles to equip these platforms. Deliveries are ongoing of airborne
early warning platforms, and of new jet trainers. Existing platforms have not been neglected and the
Russian air force is, to this end, modernising some of its conventional bombers. New ground-based air
defence systems are being delivered to the air force, while the take over of new air-to-ground cruise
missiles currently in development is expected by 2020.

The Russian navy, meanwhile, will soon receive a new class of amphibious support ships based on a
French design, while construction programmes for new frigates and corvettes are underway. The
subsurface fleet is to receive new nuclear-powered attack submarines, alongside the ballistic missile boats
discussed above. Comparatively little news exists concerning the equipment being inducted into army
service, although as of early 2012, the force has taken delivery of new mine detection equipment, and
may yet take over a new assault rifle in the near future.

Russia is no longer locked in a conventional and nuclear arms race with the United States and NATO.
The government does not have the impetus to match equipment and personnel levels on a piece-by-piece
basis. That said, the country is determined to ensure that its armed forces remain capable and credible.
Since the end of the Cold War and the Soviet Union's collapse, Russia and the Confederation of
Independent States has suffered almost continued, albeit localised, conflict in some part of the former
Soviet Union’s territory. Modernisation efforts are aimed at ensuring Russian forces can prevail in similar
future conflicts, and project power far from Russia’s borders if required.

Table Of Contents

Executive Summary . 5
Industry SWOT Analysis . 7
Russia Security SWOT . 7
Russia Defence Industry Environment and Risk Analysis . 8
Russia Political Environment and Risk Analysis . 9
Russia Economic Environment and Risk Analysis 9
Russia Business Environment SWOT . 10
World Political Outlook . 11
Landmark Political Events Looming In 2012 . 11
World Flashpoints: Eurozone, Syria, Iran, Afghanistan, Korean Peninsula . 11
Data : Election Timetable, 2012 16
United States 20
Russia 21
China . 22
Wild Cards To Watch . 23
Europe Security Overview . 26
Europe In A World Context. 26
Europe's Key Security Issues Over The Coming Decade . 26
What If The Eurozone Collapses? Political Risks Assessed . 32
Security Risk Analysis . 37
BMI’s Security Ratings 37
Data : Europe Security Risk Ratings . 37
Data : Europe State Terrorism Vulnerability To Terrorism Index . 38
Political Overview . 39
Long-Term Political Outlook 44
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 World Force Or Paper Tiger? . 66
Internal Security . 71
Armed Forces . 78
Armed Forces 78
International Deployments . 79
Data : Russia’s Foreign Deployments 2008 80
Weapons Of Mass Destruction . 80

Market Overview . 85
Industry Trends And Developments . 87
Data : Key Players In Russia’s Defence Segment, 2005 . 87
Arms Trade Overview 88
Procurement Trends And Developments: . 88

Market Projection Scenario . 92
Armed Forces 92
Data : Russia’s Armed Forces, from 2000 to 2008 (’000 personnel, unless otherwise stated) 92
Data : Russia’s Available Manpower For Military Services, from 2009 to 2016 (aged 16-49, unless otherwise stated) . 92
Defence Expenditure 92
Data : Russia’s Government Defence Expenditure, from 2008 to 2016 . 93
Data : Russia’s Defence Expenditure Scenario - Changing % Of Gross Domestic Product, from 2008 to 2016 (US$mn) 94
Defence Trade 94
Data : Russia’s Defence Exports, from 2008 to 2016 (US$mn) . 95
Data : Russia’s Defence Imports, from 2008 to 2016 (US$mn) . 95
Data : Russia’s Defence Trade Balance, from 2008 to 2016 . 95

Macroeconomic Data 96
Data : Russia - Economic Activity, from 2011 to 2016 .101
Company Profiles . 103
Irkut 103
Kazan Helicopters 104
Rosoboronexport State Corporation .105
Russian Aircraft Corporation MiG (RSK MiG) 106
Sukhoi Aviation Corporation 107
United Aircraft Corporation .108
Uralvagonzavod 109
Country Snapshot: Russia Demographic Data . 110

Section I : Population 110
Data : Demographic Indicators, 2005-2030 .110
Data : Rural/Urban Breakdown, 2005-2030 111

Section II : Education And Healthcare .111
Data : Education, from 2002 to 2005 .111
Data : Vital Statistics, 2005-2030 .111

Section III : Labour Industry And Spending Power .112
Data : Employment Indicators, from 2001 to 2006 .112
Data : Consumer Expenditure, from 2000 to 2012 (US$) .112
Data : Average Annual Wages, 2000-2006 .113
BMI Methodology . 114
How We Generate Our Market Projections .114
Defence Market .114
Sources .115

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