Russia Boosts Defense Budget to Record $50 Billion (Update2)

Sept. 11 (Bloomberg) -- Russia, which fought a five-day war with neighboring Georgia last month, will boost defense spending 26 percent to a post-Soviet record next year as it adds weapons and raises salaries, Finance Minister Alexei Kudrin said.

Defense spending, including arms purchases and pay raises, will reach 1.28 trillion rubles ($50 billion) in 2009, Kudrin told lawmakers in Moscow today. The increase was approved before the conflict with Georgia, said Kudrin, who is also a deputy prime minister.

Russia sent warplanes and troops into Georgia on Aug. 8 for the country's biggest foreign military operation since the Cold War. The invasion followed a Georgian attack on the Russia-backed breakaway region of South Ossetia.

``Some of the extra funding may be spent on intelligence gathering and communication devices, which Russia's armed forces had problems with during the war with Georgia,'' said Andrei Frolov, a defense expert at the Moscow-based Center for the Analysis of Strategies and Technologies. ``The main focus will still be on the strategic forces,'' Frolov said.

The bulk of non-payroll spending will go toward funding the Topol intercontinental ballistic missile program, upgrading nuclear-weapons-equipped Tu-160 bombers and completing the Borei- class submarine Yuriy Dolgoruky, Frolov said.

Kudrin said the new weapons component of the budget will advance 30 percent, though he declined to give exact figures because that information is classified by the military.

New-Found Self-Confidence

``Russia's new-found self-confidence, supported by revenue from its natural resources, is allowing it to assert itself more on the international stage,'' the Stockholm International Peace Research Institute said in its Yearbook 2008, published in June.

World military spending totaled $1.3 trillion in 2007, or 2.5 percent of the global GDP and a six percent increase on 2006, SIPRI said.

Russia ranks eighth this year with $36.7 billion in defense spending, after the U.S., Britain, France, China, Japan, Germany and Saudi Arabia, according Jane's Industry Quarterly published Sept. 3. The U.S. is spending $696 billion this year and China $58 billion, it said.

To contact the reporter on this story: Maria Levitov in Moscow at mlevitov@bloomberg.net Lyubov Pronina in Moscow at lpronina@bloomberg.net;

To contact the editor responsible for this story: Chris Kirkham at ckirkham@bloomberg.net