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​​​​Yuriy Dolgorukiy, the first of Russia’s new nuclear-powered ballistic missile submarines, was rolled out of the construction hall at the Sevmash shipbuilding company in April 2007. Foto: Scanpix NTB.
Russia’s defence industry
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01.03.2017
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Together with scholars from leading research institutions in Sweden, Russia and the UK, FFI has explored how Russia’s ongoing extensive investments in military equipment are affecting the country’s economic development.

​​The project is called Russian Economic Growth (RUECGRO). It was funded by the Research Council of Norway’s programme for research on issues related to Russia and to the High North (NORRUSS) and went from September 1th 2013 to August 31 2016.

 

Results

The RUECGRO project has found that the high defence spending has distorted the public spending away from education and health, which normally could have led to higher economic growth in the longer run.

 

The Russian defence industrial performance has developed well, but is still very dependent upon the government’s orders. The high defence spending has raised total demand in Russia, led to more work places and higher total production. In the short run, this spending has contributed positively to economic growth. However – even though the new defence equipment could become ever more popular on the world market, foreign orders will not be even close to Russia’s domestic orders.

 

This means that if the domestic orders are not sustained in the longer run, Russia will have excessive production facilities. Thus, the high investments in the defence industry may become a significant source of economic inefficiency.

 

The money spent on defence industrial modernization could thus have made a stronger contribution to GDP-growth in another sector. In addition, the low levels of technological spin-offs suggest that the current contribution to GDP-growth is not sustainable in the longer run.

 

About the project

Russia is planning to spend 22 000 billion roubles – one and a half federal budget – on modernization of the country’s military-industrial complex and a full-scale rearmament of the Armed Forces this decade. Only seven countries in the world are currently spending a higher percentage of their GDP on defence than Russia. 

 
The investments will without doubt improve Russia’s military capabilities. But military might is not the only claimed reason for Russia’s massive increase in defence spending. According to President Vladimir Putin, money invested in modernizing the Armed Forces and the military-industrial complex will incite economic growth and create new jobs, scientific developments and innovation.  
 
The assumption that defence spending may have a positive impact on economic development is, however, disputed in economic theory.  Putin’s critics have warned that putting guns before healthcare services and education may lead to economic stagnation. 
 

Objectives

This project has examined the role of the military complex in the contemporary Russian economy.

  • Why did modernizing Russia’s military-industrial complex become a top political and economic priority?
  • Does Russia’s defence industry have the capacity to stimulate economic growth and innovation?
  • And, how is defence spending affecting the overall development of the Russian economy?

 

Participants

The project was coordinated by Dr. Tor Bukkvoll, Senior research fellow at FFI and involved researchers with background in economics, political science and Russian area studies from FFI, Swedish Defence Research Agency (FOI) and Centre for Analysis of Strategies and Technologies (CAST) in Moscow, as well as two associated scholars from University of Birmingham and Cranfield University in the United Kingdom.
 

 
Contact

Tor Bukkvoll

Una Hakvåg

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