Russia Boosts Arms Spree to $613 Billion, Seeks U.S. Technology

Russia plans to spend 19 trillion rubles ($613 billion) over the next decade to equip its armed forces with the latest weaponry, including what may be the first purchases of U.S. military technology since World War II, according to Defense Minister Anatoly Serdyukov.

The Defense, Finance and Economy Ministries are in the final stages of approving a plan to increase the 2011-2020 arms budget by 46 percent from the previous estimate of 13 trillion rubles, Serdyukov said yesterday, after returning from talks with U.S. Defense Secretary Robert Gates in Washington.

“This is the minimum we need to equip our armed forces with modern weaponry,” Serdyukov, 48, said in an interview at his Moscow office. “We could ask for a bigger number, but we need to understand that the budget cannot afford such spending, so 19 trillion is a serious amount of money that will provide considerable orders for our defense industry.”

Serdyukov is looking abroad for arms Russian companies can’t provide, breaking with predecessors who sought to keep the country autonomous in weapons procurement. He has been lobbying for a bigger budget since at least May, when President Dmitry Medvedev said the military should triple the ratio of “state- of-the-art” equipment in its arsenal to 30 percent by 2015.

The Defense Ministry’s proposal will push that figure to 70 percent by 2020, Serdyukov said.

To achieve the targets, Russia wants to acquire technology from its former Cold War adversaries in the North Atlantic Treaty Organization, including the U.S., Serdyukov said.

Helicopter Carriers

The Defense Ministry will seek bids for helicopter carrier ships by the end of this month and expects companies from France, Spain and the Netherlands to compete against domestic defense contractors, Serdyukov said. The ministry has said the winner may sell two carriers to the Russian navy and agree to help build two more in Russia.

“We are not interested in buying finished products,” Serdyukov said. “We want to gain know-how in the technologies and produce them on Russian territory.”

Serdyukov became the first Russian defense minister with no military or intelligence background in February 2007, when then- President Vladimir Putin asked him to reshape the country’s 1.13 million-member armed forces. Prior to that he was federal tax chief for three years and ran a furniture company in St. Petersburg, where Putin was deputy mayor in the 1990s.

Serdyukov, who has reduced military personnel by about 130,000 since taking office, said he’s seeking to build “a compact and mobile army” and plans to use all the tools at his disposal, including foreign weapons. Medvedev called for an overhaul of the armed forces and their communications systems after the five-day war with U.S.-ally Georgia in August 2008.

‘Revolutionary Development’

“We are interested in many things, most importantly in communications, in everything that has to do with information technology,” Serdyukov said. “We would also be interested in some high-precision weapons.”

The Center for Analysis of Strategies and Technologies forecast in June that Russia, the largest arms exporter after the U.S., would spend as much as $12 billion to buy defense technologies from European and Israeli companies over the next five years. That estimate may be increased if Serdyukov gets more money, said Ruslan Pukhov, director of the Moscow-based research firm and an adviser to Russia’s Defense Ministry.

“Just having the Russian defense minister publicly expressing interest in acquiring U.S. military technologies is a revolutionary development,” Pukhov said by phone. “The military hasn’t bought anything legally from the U.S. since the lend-lease program in the Second World War.”

U.S.-Russia Discussions

Serdyukov said he and Gates talked about the issue on Sept. 16 in Washington, during the first official visit by a Russian defense minister to the Pentagon since January 2005. The two men signed agreements on future talks, including a revision of a 1993 memorandum outlining defense ties between the two countries

“We discussed that our cooperation in the military and technical sphere isn’t developing,” Serdyukov said. “We, of course, have an interest in some American technology and, I think, they have an interest in some of ours.”

The biggest hurdle to a U.S. deal is American legislation banning the transfer of sensitive technologies, Serdyukov said. Even if Russia can’t overcome these legal limitations, it will pursue talks with other countries, he said.

Russia has reached understandings with France and Germany and is building relations with Italy and Israel, Serdyukov said.

“Here we’re not talking about import but about organizing some production on Russian territory,” he said.

To contact the reporter on this story: Ilya Arkhipov in Moscow at iarkhipov@bloomberg.net

To contact the editor responsible for this story: Willy Morris at wmorris@bloomberg.net

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