The Russian government has had to scale back or cancel many of its programs for modernizing the security forces and providing work for the surviving defense manufacturers. There is not enough money, nor are there enough qualified Russians willing to design and build new weapons. This was not unexpected because Russia has encountered one problem after another since the dissolution of the Soviet Union in 1991. That event cost Russia half its population and much more as Russians would discover over the next two decades. Lower oil prices since 2013 and economic sanctions since 2014 have made the situation worse. 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 because even those cancelled orders were for quantities miniscule compared to Cold War era production. Before 1991, the Soviet Union would produce about 10 times as much gear annually compared to 2006 when, for the first time in 15 years, the Russian army began receiving significant quantities of new and refurbished equipment.
In 2006 the Russian army had been falling apart since the Soviet Union was dissolved in 1991. That's fifteen years of practically no new equipment and a vast downsizing. The Cold War force of 175 divisions dwindled to 25, plus 21 independent brigades (equivalent to another 5 divisions). These divisions were, for the most part, very under strength and poorly equipped. By 2006, the Russian army was smaller than the American army and much less capable.
By 2006 most of the 1991 era equipment has been scrapped or cannibalized to keep the new, now quite miniscule (320,000 troops) army going at all. Most of the trucks and tanks were twenty years old, or more. Tiny defense budgets during the 1990s were barely able to buy food for the troops, much less fuel for training exercises. For a generation tank crews trained in vehicles that rarely moved and engines were only started to see if they were still functional, not to move the vehicle around.
After 2006, the army was supposed to get enough gear to equip some rapid reaction forces and get the assembly lines going for a new generation of weapon. To that end, in 2006, the troops began receiving new T-90 tanks, refurbished, Cold War vintage T-72 and T-80 tanks, and some new BMP-3Ms, as well as lighter BMDs for the parachute and air-assault units. Noting the success of the American Stryker, a hundred new BTR-80 and BTR-90 vehicles were purchased. In addition, some 600 refurbished BMPs, BMDs, and BTRs were also put into service that year. Twenty anti-aircraft missile batteries received new, modernized missiles. Some of these batteries had not fired a missile in years because the only ones they had had "aged out" (became too old to safely fire).
The army received new radios, field uniforms, protective vests, and small arms. More powerful RPGs and grenades were purchased as well. Perhaps most telling, large quantities of small arms ammunition were made available for training. This is another side-effect of the war in Iraq, where Russian planners noted how the American army successfully dealt with training deficiencies by greatly increasing live fire training.
The tactical air force, which supports the army, received about 50 refurbished and upgraded aircraft (Su-24 bombers, Su-25 ground attack aircraft, plus some Su-27 and MiG-29 fighters). 10 new Mi-28 and Ka-50 helicopter gunships were purchased as well.
But most of the $11 billion being spent on new weapons and equipment in 2006 went for nuclear weapons systems, including missile carrying subs and new ICBMs. With such a miniscule army, and such ramshackle equipment, nukes are now the main defense of the largest country in the world. But the large and long-term drop in oil prices and sanctions for invading Ukraine have even been felt in the “strategic (nuclear) forces.” There were plans to build new ICBMs, all solid-fuel designs, including one to be transported and fired from a railroad car. This system, most of it built in Ukraine, entered service in the late 1980s. Ukraine agreed to give up the nuclear weapons it inherited when the Soviet Union dissolved and shut down (or converted) the factories that built ICBMs. But now the new rail mobile ICBM has been cancelled along with new aircraft and armored vehicle designs.
For many Russians this was particularly disappointing because the Soviet Union could come close to copying Western tech but never had the cash or able and willing personnel to build to Western standards and maintain quality while producing large quantities of world class weapons. Thus Russia was able to design and build working prototypes of a revolutionary new tank (the T-14) but recently admitted that vehicle could not be mass produced for much the same reasons as the Su-57 stealthy fighter. Instead Russia is doing what China did and producing much upgraded versions of the T-72, the best new Russian tank design after World War II and the one that proved easy to mass produce and upgrade.
Meanwhile Russia has never and probably will never recover from the fact that when the Soviet Union dissolved its defense spending fell from nearly $200 billion a year in the late 1980s to less than $40 billion a year by the mid-1990s. The Russian defense industry lost over 80 percent of its business after 1991 and managed to survive, for over a decade, on export orders. Only about a third of the Soviet era defense manufacturers is still in business and about half of them are faced with bankruptcy because of a shortage of orders and increased competition from China. This is complicated by the fact that the Chinese competition is mainly in the form of cheaper (and often improved) copies of Russian gear. Russia thought it had signed a deal to halt this plagiarism and technology theft, but the Chinese continued to sell copies of Russian stuff on the international market. The Chinese know that Russia will not go to war over this, and otherwise can do nothing. So the Chinese either ignore Russian complaints, or issue empty apologies, and continue stealing Russian secrets and reselling them.
China is not just copying Russian designs but Western ones as well and has been able to maintain more of the Western quality than the Russians ever could. China can manufacture lots of this high tech stuff. It is not lost on the Russians that most of the Apple iPhones are built in China and that the Chinese now build competitive and much cheaper smart phones and sell them worldwide.
With the end of the Soviet Union Russian scientific and engineering talent were free to find better paying and more satisfying jobs in the commercial sector. It the Russian firms were not able to provide jobs it was now possible to emigrate. Most of the best talent went to the West although some went to China. As it turned out China didn’t need much help from the Russians because economic reforms in the 1980s created massive growth in Chinese industry (and GDP). Not only that the Chinese were competing with, and learning from, Western firms. Initially Chinese firms could only prosper by exporting to the West and they had to maintain higher quality standards or go bankrupt. The Chinese adapted, as their communist government expected because of the recent experience of Chinese population in Hong Kong, Taiwan and Singapore. China still had corruption and a police state, but you could make a profit and it was no longer a crime to get rich.
Russia also did that, to a certain extent, after 1991 but burdened itself with failed efforts to maintain large armed forces it could no longer afford and a defense industry that was doomed. China in the 1980s had no tech edge and a primitive armed forces based on a few nukes and millions of troops ready to fight forever as guerillas. In three decades China surpassed the Russians in military tech and keeping doing it. While Russia quietly cancels or delays many new weapons and military tech China has no such problems. China is putting advanced (past anything Russia has) combat aircraft into service with more models on the way. While China has copied or stolen a lot of Russian and Western military tech China is in a position to do something never could during the Cold War; design and mass produce Western style military tech.
China, which now has a larger GDP than Russia and a lot more of everything else, has now become the Eurasian superpower that Russia once was. For several centuries Russia was dominant in the east but now that is all over and Russia seems unlikely to regain the economic and diplomatic dominance it long enjoyed. Actually Russia began losing in 1904 when they went to war with Japan and lost. These days Russia is minor power in purely economic terms, with a $1.2 trillion GDP compared to $12 trillion for China and nearly $20 trillion for the United States. For Russia, the economic news is even worse. Because of overdependence on oil and gas exports plus sanctions Russian GDP is still shrinking. In 2016 the decline was .2 percent of GDP and that turned barely positive in 2017 as Russia adapted to the lower export income and sanction related difficulties. The sanctions and corruption caused another serious problem that the Russian government would rather not discuss (but are well aware of); the flight of investors and talented people from Russia after 2013. The investors and talent are mainly seeking better opportunities. The corruption makes investors (be they Russian or foreign) uneasy because the lack or legal protections makes for a very unpredictable economic environment. The same incentives drive talent away. Since 2013 over a million such people (most of them Russian citizens the rest disillusioned foreigners) have gone and the exodus continues.
Current defense spending is nearly $70 billion a year and it is still not enough to replace all the Cold War era weapons still in use and rapidly wearing out. Russia also noted the success of the American military, and their Western allies. So most of the Soviet era thinking and weapons were discarded, and Western concepts adopted. But this was only partially successful because the Western style of warfare depends on using volunteers, screening and training them thoroughly and then paying what it costs to allow constant training. Add in good pay and benefits as well as the best equipment and you have a superior force that is very expensive to maintain.
Russia realized it would have to modify the American approach because of the expense. For example, U.S. military operations in Iraq, Afghanistan and elsewhere have, since September 11, 2001, cost over a trillion dollars. That seems like a lot, and it is. But it's not a lot like it used to be. For example, World War II cost the U.S., at the time (in current dollars) over four trillion dollars. That amounted to over 33 percent of U.S. GDP (at the time). World War II cost Russia more than half its wartime GDP, and they continued spending over 20 percent of GDP during the Cold War. The U.S. was able to spend much less of the national wealth on military matters. The current war on terror is costing about one percent of U.S. GDP. So while war may appear to be getting more expensive, relative to the amount of money available, it's actually getting cheaper.
The initial cost of World War II, and most wars that came after it, will eventually double because of the cost of taking care of the veterans. There were over a million casualties in World War II, many of them serious, with long range effects. The long range health problems were not anticipated, nor were the more expensive treatments. You have to pay. The vets are owned a debt that cannot be avoided.
As a percentage of GDP, American military spending continues a decline that has been going on since the 1960s (when, because of the $686 billion cost of the Vietnam War, defense spending was 10.7 percent of GDP). That went down to 5.9 percent of GDP in the 1970s and, despite a much heralded defense buildup in the 1980s, still declined in the 1980s (to 5.8 percent.) With the end of the Cold War, spending dropped sharply again in the 1990s, to 4.1 percent. For the first decade of the 21st century, defense spending is expected to average 3.5 percent of GDP. Most of the current defense budget is being spent on personnel (payroll and benefits), and buying new equipment to replace the Cold War era stuff that is wearing out and to pay for operations in Iraq and Afghanistan.
This trend is all because of the industrial revolution of the 19th century, which created a lot more money, much of which nations promptly squandered on wars they could not have afforded earlier. The American Revolution, for example, cost the United States less than $2 billion. The main reason for the low cost, compared to later wars, was that there simply was not a lot of wealth (money or goods) to scrounge up for the war.
The United States has always been enthusiastic about spending enormous amounts on weapons, ammunition, supplies and equipment for the troops, with the idea of keeping U.S. casualties down while still winning the war. Thus during World War II, U.S. combat deaths were 300,000 (plus 100,000 non-combat dead). The Soviet Union, on the other end of this scale, lost 10.7 million dead in combat (including 4.4 million captured and missing), and nearly 20 million civilians killed as well. Of all the major combatants in World War II, the U.S. had the lowest casualty rate (about 2 percent). Russia lost about 15 percent of its entire population during the war and Russians do not want to go through that again. But to fight the Western way costs more than Russian afford.
The U.S. kept its losses down partly because of the amount of money spent per person in the military (over $250,000). By 2013 the American casualty rate was a third of what it was during World War II, and the amount spent per person has more than tripled (exact comparison is tricky, as all military expenses were counted during World War II, while the current war is being fought with only a small portion of American military might, and the navy and air force continue to take care of many non-war-on-terror responsibilities.) While the dollar cost of war is good for a hot headline on a slow news day, the fact that the money saved lots of American lives, never seems to make it to the front page.
Russia wants to achieve the same efficiency, and low casualty rates, as the Americans, but on a lower scale. The Russian leadership is trying but Russia still must depend on a lot of conscripts who do not want to be in the military, even for a year or less. Russia improvises by maintaining about ten percent of their troops to something near Western standards and using them sparingly. Russia could no longer mobilize a large army quickly, as it had been able to do for over a century, until 1991. Russia can still issue deceptive press releases and masterful misinformation. But when you add it all up there is not much there anymore and given the current state of Russia they have all they can handle trying to not lose more ground.