Russia Bucks Defence Spending Trend with Increased Outlay and Exports

Russia is the eighth largest defence spender globally and is forecast to spend $387.7bn during 2010 – 2015, finds Strategic Defence Intelligence.

New research* from the defence business intelligence platform has revealed that during 2010 – 2015 Russia’s overall defence expenditure is estimated to grow at a compound annual growth rate (CAGR) of 17.71%. By 2015, defence expenditure will account for 2.7% of its GDP, with an average per capital spend of $464.7 during the forecast period.

Berenice Baker, editor of Strategic Defence Intelligence (SDI), said: “Russia is showing a growth in spending, which bucks the international trend for cuts, especially in Europe. In part, this is driven by the need to protect its borders, the longest in the world, as well as meet international military commitments.”

With a defence export market estimated to be worth $9.5bn, Russia is the second largest arms exporter after the US. Russia’s biggest customers China and India have reduced the amount they procure from the country and Russia is now focused on expanding its target market to South Africa and Africa.

SDI believes that despite Russia’s export success, exports are primarily outdated Soviet-era grade weapons, and therefore some are outdated. Furthermore, many items of domestically-produced advanced arms technology are shelved as the prototypes tend to fail ministry tests. This has driven the armed forces to look overseas to procure sophisticated weapons technology.

Baker continued: “Russia has already bought unmanned aerial vehicles from Israel, Mistral-class assault ships from France and vehicle armouring technology from Germany. With many countries undertaking significant cuts to their defence budgets, such as those set out in the UK’s recent strategic defence and security review, Russia represents a significant opportunity for export.”

There are currently no foreign original equipment manufacturers (OEMs) in the Russian defence sector as federal law prohibits foreign investors to hold a controlling stake in defence firms. However, as Russia begins to import defence technologies, the entry barrier for foreign OEMs is expected to reduce in the forecast period.

* The Russian Defence Sector – Market Opportunities and Entry Strategies, Analyses and Forecasts to 2015.

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