Russia Updates: Luzhkov, Rearmament, GDP

As you may have noticed, posting has slowed down in the past few days, mostly thanks to a combination of (1) Kindle, (2) 中文 and (3) the natural periods of apathy that afflict most non-pro bloggers. I don’t really see that changing until the end of the year…

1. Sayonara, Luzhkov. Props to Jesse Heath for predicting it, Patrick Armstrong for IMO the best summary, and STRATFOR for the most bizarre interpretation (they think Luzhkov was dismissed because the Kremlin no longer needs him to control the Moscow Mob). The best way of viewing this is not as a struggle between the tandem, or even Medvedev asserting himself, but as the latest stage in the campaign to replace entrenched regional barons with civiliki that are closer to the Kremlin. This appears to be part of the overall Kremlin drive towards greater centralization and technocratic management.

2. Structural Remilitarization? Of far greater long term import than the political scuffles around the Moscow mayoralty is the gigantic, even prodigal, plans and figures are being bandied around by senior members of the Russian leadership for the 2011-2020 rearmament program (1, 2, 3). The main points of the program are to spend 22 trillion rubles (c. $700bn) over the next decade to modernize Russia’s increasingly obsolete military hardware, complementing domestic items with imports from foreign countries like Israel, France and the US*.

These are huge sums for an economy with a nominal GDP of $1230bn in 2009 (the US has $14.3tn). To put this into perspective, taking into account changes in relative prices, $700bn of dollar spending in Russia would translate into about $1200-1500bn in the USA (e.g. just compare the unit costs of equivalent fighters, the higher salaries of researchers, etc). That’s $120-150bn in procurement and R&D per year. For comparison, in 2009 the US spent $219bn, and this figure is likely to decrease in the years ahead due to fiscal constraints and withdrawal from Iraq and Afghanistan. As Steven Rosefielde speculated back in 2004, we may see the start of a “full-spectrum, fifth-generation rearmament” next year. If so, the wisdom of this course must be questioned:

  • Thanks to peak oil and growing demand for natural resources, this is now fiscally feasible (unlike in 2000, or even 1990 for that matter). But Medvedev’s absurd claims that military modernization is going to be “a generator of innovation” to the contrary, these investments are more likely to distortive and misallocative.
  • The move towards professionalization has been a flop and it is now evident that the conscription system will be retained for the foreseeable future (with minor adjustments, such as stricter controls on waivers, to make up for the coming 40% reduction in the pool of conscript-aged men due to the fertility collapse of the 1990’s). This is unfortunate, not only becausededovschina remains as prevalent as ever (the cutdown in military service to one year has altered the pattern of hazing, from age-based hierarchy to alpha/beta-male in/out-group dynamics), but because Russia has no discernible need for a million-strong military.
  • What exactly is the use of so many soldiers with 5th-gen hardware? Countries like Georgia, Azerbaijan or Uzbekistan are already walkovers. In the South Ossetia War of 2008, the main problem wasn’t with the weaponry, but with “softer” factors such as unit coordination. There is a vast range of non-military levers that can be used against Belarus or Ukraine. War with NATO is almost entirely theoretical, and as with China, will probably have a nuclear endgame.
  • Another factor that is often overlooked is the danger of over-investing into the 5-th gen paradigm, and in doing so becoming locked into it (e.g. much like the USSR build thousands of tanks in the early 1930’s that were obsolete by the time 1941 rolled by). In reality, it is just a transitional step towards the real face of future war: drone fighters; all-electric ships with railguns and laser weapons; massively networked forces with a plethora of robotic platforms, etc.

* I suspect that the reason why Russia finally disallowed weapons sales to Iran, including of the S-300, was because of an informal deal with the US allowing it market access to some of its military technologies.

3. Heatwave Toll. The demographic stats are showing a big mortality spike in July-August 2010 due to the Great Russian Heatwave, especially in the central and Volga regions. The overall excess mortality during the period is now at around 55,000 – almost twice as much per capita as during the 2003 European heatwave in France. Detailed info on Rosstat’s demography page.

4. Russia’s GDP up 30% this year!!! That is, unless (1) the World Bank made a clerical error or (2) the IMF and CIA are more reliable. 😉

I was looking through Wikipedia’s latest GDP lists and observed that the World Bank’s estimate for Russia’s real GDP in 2009 was $2.7tn, which is $18,900 per capita. (The IMF and CIA estimates are unchanged at the usual $2.1tn.)

IF accurate, the World Bank revision would indicate Russia is the world’s sixth largest economy and within spitting distance of Germany’s $3tn economy. In per capita terms, it would put it in the same league as Poland, Estonia and Hungary or nearly 60% of the EU average.

So what gives? In your opinion, are the newer estimates more accurate? Were there any political motivations behind it, e.g. the reset?*

* The IMF and WB are not unknown to sometimes make drastic changes in
GDP estimates. For instance, two years back China’s real GDP suffered
a 40% cut. Perhaps not entirely coincidentally, China was within spitting distance of overtaking the US at the time of the revision!

5. Is Russia really more corrupt than Greece, let alone Pakistan? Stay tuned for the Karlin Corruption Index, a sequel to the Karlin Freedom Index.

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