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As it turned out, simultaneously with the increase in the number of privates and non-commissioned officers serving on the contractual basis in formations and military units of constant combat readiness, in other formations and military units the decrease in the strength of such military personnel observed at the moment will continue. The decrease in the strength of the military personnel serving on the contractual basis in military units other than those of constant combat readiness results from lower money allowances they receive and inadequate housing conditions.

The key conclusions derived from the analysis of this part of calculations is as follows: in the case the pace of transition to the new system set by the FTP is maintained, even by 2112 the total number of contracted servicepersons would not reach the values required by the RF military organization. As the calculations demonstrate, in certain rather probable circumstances the number of contracted military personnel in the RF military organization may not increase at all, while the military units on permanent combat alert may loose a considerable part of specialists, what negatively affects their combat readiness. The same phenomenon may concern officers, since their money allowances remain at the same level.

4. The dynamics of future changes in the total number of drafted servicemen will also be negative. It is apparent that in the case the FTP is implemented in the designated years and after 2007, the strength of the military personnel serving on conscription terms will diminish only insignificantly. In this case, the reduction of the term of service will result in a sharp increase in the number of conscripts.

Such developments will either frustrate the transition, or require abolishment of the majority of current deferments of and exemptions from military service.

5. It should be noted that the effective strength of privates and non-commissioned officers is diminishing.

This indicator takes into account the heterogeneity of the total strength and different УweightФ of soldiers in the general combat capability of a military unit. For instance, those serving for less than six months demonstrate lower combat efficiency (according to the assessments made by experts of the chief directorate of combat training it makes about 0.1 of the fighting capability of a УmodelФ soldier), while the coefficient of those serving for one year makes about 0.3, and so on. The coefficient of combat efficiency exponentially reaches 1.0 for professional УmodelФ soldiers (serving over 5 years) and is considered to be constant until such a soldier is 30 to 35 years old, later the coefficient is lowering due to the age factors. As concerns the calculation of efficient strength of mixed groups of servicemen, there the number of persons serving for a certain term should be summed up with the УweightФ coefficient of this category.

As concerns this extremely important indicator, the variant envisaged by the FTP, which, no doubt, is useful from the military point of view for military units of constant combat readiness and, later, for other УmodelФ military units, does not produce any significant increase in the general combat capability of the RF military organization and after the transition to shorter terms of military service will result in reduced fighting efficiency.

6. Similarly, there will be no significant positive effect as concerns the mobilization human resources.

7. The social and economic consequences for the society calculated as the costs of drafting of the young people to the military organization borne by the society in the form of a Уtax,Ф as well as the costs of illegitimate draft dodging in comparison with the УrevenuesФ of the society generated by the contracted military personnel are also not to the credit of the variant envisaged by the FTP.

The IET evaluations indicate the following:

1) the long term consequences of the FTP implementation may be negative both from the military and economic, and social and economic points of view;

2) the task of a more active transition to the voluntary recruitment system stated in the report of the Defense Minister at the meeting of October 2, 2003, is vital, however, it should be formulated differently. The Minister has identified the Уmore active transition of the Armed Forces to the contractual basisФ with FTP and its implementation. However, proceeding from the mission of the RF military organization and the respective requirements set by the society, the problem should be formulated differently: the real intensification should be a more rapid transition to the voluntary recruitment system outpacing and supplementing the schedule set by the FTP.

It is only natural to put the question if there exists the potential required for the real intensification of the reform.

3.8.4. Evaluation of future military expenditures,
modernization trends, and potential to carry out planned measures

An analysis of military expenditures set by the federal budget for year 2004 taking into account the dynamics of national economic development and military expenditures borne in the preceding years (see Table 66 and Figure 61) permits on the whole to positively answer the question about the potential, although the growth in the respective expenditures demonstrate a clear downward trend. The statement of the top officials of the Defense Ministry about a 9 per cent increase in expenditures (as adjusted for inflation) included in the section УNational defenseФ seems to be unrealistic.

Table 66

Expenditures for defense and security: the dynamics

Sections of the federal budget / years	1999	2000	2001	2002	2003	2004
Expenditures in the УNational defenseФ section (in current prices / in comparable prices of 1999*), Rub. million	93 702 93 702	140 852 117 181	214 688 150 598	281 970 173 504	354 907 190 987	411 473 197 474**
Increase in % of the preceding year	–	25,1	28,6	15,2	10,1	3,4
Increase in % of 1999	0	25,1	60,7	85,2	103,8	110,7
Expenditures in the УLaw Enforcement and State SecurityФ section (in current prices / in comparable prices of 1999), Rub. million	51 324 51 324	79 802 66 391	131 621 92 329	165 999 102 144	249 799 135 618	310 577 149 068**
Increase in % of the preceding year	–	29,4	39,2	10.6	32,8	9,9
Increase in % of 1999	0	29,4	79,9	99,0	164,2	190,4

*Пересчет в сопоставимые цены проводился по ИПЦ.

** CPI of 2004 is assumed to make 1.11 relative to the figures registered in 2003, it makes about 2 relative to the figures registered in 1999.

Figure 61

Expenditures for defense and security: the dynamics

Yet another answer is of even greater importance: the experience of the states having completed the transition to the voluntary system of recruitment indicates that the increase in the efficient strength of the military personnel serving on the contractual basis in comparison with the efficient strength of drafted servicemen is not an abstraction. It may be transformed in a respective reduction of the total complement of the military organization. For instance, in France the transition to the voluntary system of recruitment did not require an increase in military spending, since it was accompanied with a proportional reduction of the total strength of the military personnel and the respective reduction of expenditures for it maintenance.

Therefore, the recommendation to follow the French example in the modern Russia seems quite feasible.

As concerns the trends of development of the RF military economy and military development in the next years, they seem to be positive due to the fact that the Government has already started and plans to further intensify its efforts aimed to repay its debts to all citizens, including servicepersons.

The fact that the RF President indicated the problem of the military reform as a priority in his annual Address to the Federal Assembly (2003) is a pledge of its successful completion.

At the same time, this fact indicates the necessity to continue independent research concerning the feasible ways to intensify the military reform and the necessity of initiative on the part of the legislature and public. In particular, it concerns the following.

Judging by the draft federal budget for year 2004 and the documents annexed to the draft, the developers of the budget believed that 2004 would see the further economic growth in Russia occurring simultaneously with the ensuring and strengthening of its military and other types of security.

According to the draft budget, the revenues are targeted to make Rub. 2742.9 billion (17.9 per cent of GDP), and the expenditures are planned at Rub. 2659.4 billion (17.4 per cent of GDP). The budget surplus will be used to complement the special Stabilization Fund aimed to parry the uncertainty of revenues, especially those related to oil exports. However, in the case revenues exceed the target level, as it occurred in 2003, the excessive amounts (exceeding the targets for the Stabilization Fund) could be used for intensification of the reform of the recruitment system. Such an item in the budget could be sufficient to reduce the outflow of contracted military personnel from the military units not included in the composition of military units of constant combat readiness.

The second circumstance to be taken into account both in the course of implementation of the federal budget for year 2004 and in the course of elaboration of the federal budget for year 2005: the explanatory note to the draft federal budget for 2004 does not contain any comprehensible substantiation of military expenditures, which could satisfy the public.

As concerns the budget revenues, the respective situation is not much better. For years, the Russian society has heard that the Russian defense industry with participation of representatives of the military organization successfully sells its products abroad thus bringing in the country Уforeign exchange earnings.Ф However, the revenue items of the federal budget contain no mentioning of such earnings, although the budget sets the expenditure targets for military and technical cooperation. The same situation exists with respect to utilization of armaments and military equipment: the federal budget indicates respective expenditures, but fails to show any related revenues. Much is also said about the economic efficiency of the use of the dual purpose technologies. This item is also absent in the revenue section of the federal budget. However, after the types of expenditures have been declassified, it became apparent that expenditures for military R & D are increasing. Therefore, there should have been visible also the growing role played by these expenditures in creation of dual purpose technologies and products.

Therefore, it is necessary to declassify the expenditures for military R & D. The success achieved with respect to declassification of military expenditures has been already noted above.

At the same time, even after the decision on declassification would be taken, the degree of transparency of RF military expenditures for domestic experts will be much less than for foreign military researchers. Russia annually furnishes foreign organization with the data not only related to aggregate expenditures of the Defense Ministry, but also on the distribution of funds among three components of the Armed Forces, what is not reflected in the budget. Therefore, it is recommended to include the information on the RF military expenditures presented to international organizations in the list of open supplements to the federal budget.

As concerns the purposes of detailed civil control over the RF military expenditures, the possibilities to obtain necessary information by further declassifying of the budget in the framework of the current budget>

As concerns the practices of military budgeting in other countries, there financial and economic indicators are presented in their inseparable totality:

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