Procurement: China Passes Russia On The Inside

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May 4, 2017: The Russian government has successfully adapted to lower oil prices and economic sanctions. Since oil prices collapsed and sanctions were imposed in 2014 the defense budget has been cut 25 percent and the government is trying to prevent any further cuts. Russia admits that this will slow the rate of replacing Cold War era technology and the development of modern military technology. The biggest loss has been access to Western technology. While Russia could not buy the latest military tech they did have access to non-military tech and that enabled them to build modern commercial aircraft and upgrade their manufacturing industries. Until 2014 it also enabled them to buy some Western weapons systems often including licensing agreements to assemble and partially manufacture armored vehicles, warships and other Western weapons in Russia. The main reason for doing that was to upgrade the Russian defense industries, which remained largely state-owned and inefficient after 1991. There was a lot of resistance to buying foreign weapons, mainly from those running the defense industries. The more pragmatic generals and Defense Ministry officials were able to force these changes to be made, until the sanctions and low oil prices made these deals impossible. This was difficult for Russian military reformers to accept and the government initially pitched it as an opportunity for Russian defense firms to do better. It soon became obvious that the reformers had a point about the Russian defense industries being resistant to change.

It was also soon noted that China was still had plenty of cash and access to Western tech and were making great strides. Russian defense experts had long dismissed Chinese efforts as little more than copying (often with stolen tech) Western and Russian designs. But now it became obvious that the Chinese were facing the same problems as the Russians since the Cold War ended and were adapting more effectively. Because the Soviet Union began developing modern military tech in the 1930s and the Chinese didn’t really get going until fifty years later the Russians believed they would be ahead of the Chinese for a long time. But now the Chinese are gaining on Russia even faster because of the low oil prices (which are a plus for major oil importers like China) and far fewer sanction restrictions.

Thus China is moving ahead on developing fifth generation stealth warplanes while Russia has had to scale back their effort. China is building a new, and very modern, navy while Russia is watching its modern (in the 1980s) Cold War fleet die of old age and neglect with fewer replacements. But the most painful loss is the inability to modernize defense industries that are clearly being outclassed by their Chinese counterparts.

Thus the numbers do not tell the whole story. On paper Russia has gone from number four on the list of largest defense spenders to number eight. But in terms of potential to do better Russia has slipped even further and that trend shows no sign of reversing itself anytime soon. Russia has also accepted the reality of permanent lower oil prices (because of fracking and more use of other energy sources) and, for the moment, shows no signs of ending the aggressive policies towards its neighbors that triggered the economic sanctions. Russia has, for the moment, chosen to downsize itself economically and militarily.

 

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