The Russian Military Industrial Complex: An Unresolvable Discrepancy.

15th March 2011,

In our last article in our “Democracy and Innovation” series we looked at Crane and Usanov’s analyis of the relationship between Russian government policy and the main internationally competitive high-tech sectors of the Russian economy.

Among their (very measured) conclusions were that current policy to encourage growth in these industries through the creation of state-controlled agglomerates had not been effective, and that a favourable outlook was largely dependent on the extent firms were integrated with, and open to, the global economy. However, prospects for the Russian defence industry were limited in this regard, precisely because of its insularity.

In line with the “liberal” innovation model outlined by Wolf, Democratist maintains that, while the Russian state is continuing to make a concerted attempt to drive innovation through increased funding and R&D, contemporary corruption, lack of competition, problems with the rule of law and government accountability have all had a demonstrable impact on the ability (and willingness) of many Russian high-tech firms to innovate, commercialize their ideas, expand, and reach their full potential.

With regard to the military-industrial complex more specifically, in an article published todayin the World Politics Review  Dr. Richard Weitz (also of the Hudson Institute) provides some additional and very relevant detail about how such problems are affecting Russia’s current proposed, decade-long $650 billion rearmament programme (supposedly set to include the procurement of 100 ships, 600 aircraft, and 1,000 helicopters).

Here’s a sample;

“….although Russian designers can still develop first-class weapons, Russian defense companies — which have yet to recover from the traumatic disintegration of the Soviet military-industrial complex — remain unable to manufacture large numbers of some advanced systems. As a result, the Russian government has made the unprecedented decision to purchase expensive Western military equipment.”

“…the record of recent SAPs [State Armaments Programs] is not encouraging. They all envisaged providing the Russian armed forces with hundreds of new weapons, but their execution was undermined by insufficient financing, the inefficient and ineffective Russian defense sector, and pervasive corruption.”

“Estimates suggest that one-third of Russia’s defense companies are bankrupt, while another third desperately need an infusion of financial and human capital to modernize their aging production lines and work force. Pending modernization, many defense firms will prove unable to design and produce sophisticated weapons without frequent cost overruns and production delays.”

“…according to some observers, corruption absorbs as much as half of all Russian defense procurement spending due to the irresistible opportunities for graft that exist behind the veil of military secrecy. Serdyukov’s surprise 2007 appointment as Russia’s first civilian defense minister reflected the Kremlin’s hope that, as an outsider, he might be more willing to tackle defense inefficiencies and corruption. Unfortunately, some bad practices have become so ingrained in Russia’s defense sector that they could take more than a decade to root out. ”

From Democratist’s perspective, what is most immediately interesting about what Weitz says is that, while Russian weapons designers are apparently still coming up with the goods in terms of innovative ideas, the state of the country’s defence industry is such that it is unable to reproduce a proportion of the required systems in large numbers.

We see this inability as being at the core of the Russia’s “innovation deficit”; it isn’t that the ideas and the creativity aren’t there – they are. But the unreformed Soviet-era military-industrial complex lacks the competition, investment and flexibility that an advanced industrial economy – and an advanced defence industry require.

In our opinion, this unresolvable discrepancy between design and finished product, between planing and implementation, and subsequently in Russia’s military position in relation to the West (and therefore also the desirability of her military exports) can only become wider in the future, given the current politico-economic system.