State Armaments Program 2011-2020

I wonder how devaluation of Rouble affected the armament program , when rouble was 34 to a dollar the 20 trillion spending was around 650 Billion USD.

Today the rouble at 60 its around half of that value and inflation too is much higher.

So how does it affect the purchase and spending ?

Austin wrote:I wonder how devaluation of Rouble affected the armament program , when rouble was 34 to a dollar the 20 trillion spending was around 650 Billion USD.

Today the rouble at 60 its around half of that value and inflation too is much higher.

So how does it affect the purchase and spending ?

badly but it is managable so long nothing gets importet from the producing companies, as soon as a factory needs to import somthing the price will skyrocket under such a inflated rubel

Austin wrote:I wonder how devaluation of Rouble affected the armament program , when rouble was 34 to a dollar the 20 trillion spending was around 650 Billion USD.

Today the rouble at 60 its around half of that value and inflation too is much higher.

So how does it affect the purchase and spending ?

60 Rub to USD isn't half first off (of what it was.  35rub/USD would make 70rub/usd half).  Second, inflation is at 0% so far these last months.

As well, a huge portion of tech has been import substituted or found a cheaper alternative source (mostly China, South Korea, etc compared to USA, France, Germany).  So the devaluation but finding much cheaper source balanced it out.  Thirdly, since production is done by state run companies, costs of military goods for Russia is significantly less.  It was estimated that Su-3S for example may cost Russia in the $30+M range per aircraft, which is a lot cheaper than estimated export cost.

As well, costs of the goods are in Roubles, so like NationalRus said, only parts that gets imported.  Domestic ones don't change or barely changes at all.  Major issue is cost of labour, and that still isn't a problem for Russia.

NationalRus wrote:

Austin wrote:I wonder how devaluation of Rouble affected the armament program , when rouble was 34 to a dollar the 20 trillion spending was around 650 Billion USD.

Today the rouble at 60 its around half of that value and inflation too is much higher.

So how does it affect the purchase and spending ?

badly but it is managable so long nothing gets importet from the producing companies, as soon as a factory needs to import somthing the price will skyrocket under such a inflated rubel

Are you sure it affects it badly?  Because we are not seeing it so far.  Orders are still huge, import substitution is now a thing, and they have increased drastically the modernization of the armed forces.

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I suggest some people here start to familiarize themselves with concepts of GDP Nominal, GDP Purchasing Power Parity, and things like exchange rates.

https://en.wikipedia.org/wiki/Purchasing_power_parity
Important quote:

For example, suppose that two countries produce the same physical amounts of goods as each other in each of two different years. Since market exchange rates fluctuate substantially, when the GDP of one country measured in its own currency is converted to the other country's currency using market exchange rates, one country might be inferred to have higher real GDP than the other country in one year but lower in the other; both of these inferences would fail to reflect the reality of their relative levels of production. But if one country's GDP is converted into the other country's currency using PPP exchange rates instead of observed market exchange rates, the false inference will not occur.

and

For example, if the value of the Mexican peso falls by half compared to the US dollar, the Mexican Gross Domestic Product measured in dollars will also halve. However, this exchange rate results from international trade and financial markets. It does not necessarily mean that Mexicans are poorer by a half; if incomes and prices measured in pesos stay the same, they will be no worse off assuming that imported goods are not essential to the quality of life of individuals. Measuring income in different countries using PPP exchange rates helps to avoid this problem.

Effectively, if Russia is successful for even half or a tad more in import substitution, they can drop costs significantly.  Probably to more than what they were when Rouble was 35Rubs/USD.

Are you sure it affects it badly? Because we are not seeing it so far. Orders are still huge, import substitution is now a thing, and they have increased drastically the modernization of the armed forces.

i didnt say thing were not getting bought anyway, but that doesnt mean that the bill isnt is higher now, so if a product is 100% made at home it isnt critical but if parts are imported or even materials are imported to make ourselfs parts = much higher bill with a weak rubel

NationalRus wrote:

Are you sure it affects it badly?  Because we are not seeing it so far.  Orders are still huge, import substitution is now a thing, and they have increased drastically the modernization of the armed forces.

i didnt say thing were not getting bought anyway, but that doesnt mean that the bill isnt is higher now, so if a product is 100% made at home it isnt critical but if parts are imported or even materials are imported to make ourselfs parts = much higher bill with a weak rubel

That is true, but the question is, which parts exactly? Now that the parts can no longer be purchased from the west, they have to be purchased elsewhere. I'll give an example: The MIPS processor for the Radar on Irbis-E was coming from a US based company. But since they can no longer purchase such processor, I imagine they will end up using their own MIPS (Be it Baikal processor), or the Elbrus 2C+ (which was proposed apparently for N036) or some other one from China or Taiwan.

Many components before, were coming from the west. Now that a lot of those are pretty much none purchasable, I imagine they had to find alternatives. And in many cases, the alternatives from China/Taiwan/S.Korea are much cheaper than coming from the west.

Then there is the fact that many components are still making its way from Ukraine to Russia. But the Hyrvina is doing pretty bad in itself (and they don't get the benefits behind a devalued currency since Ukraine barely produces much these days), so shouldn't be much more or any more expensive than before.

BTW, I suggest people to go on over to the Economic thread that I started, and give your opinion as to if we should close all other economic threads to have just 1 thread.

Thank you.

Looks like the naysayers, the fear-porn peddlers, the panic-mongers are eating humble pie... The Central Research Institute "Electronics", a institute that's main focus is studying the past, present, and future of the domestic science and technology industry, including Russia's Military Industrial Complex. It's a leading institute in Russia, it produces '6' research papers per scholar, which is better than the '1-2' research papers per scholar which is the average efficiency of other research institutes in the same field, within Russia. They've probably done the most extensive analysis and research about currency devaluation/fluctuation of the Rouble and the MOD's state armaments modernization/procurement, and their findings are quite intriguing. Apparently it's the complete opposite of what some monetarists have claimed.

According to the The Central Research Institute "Electronics", the devaluation of the Rouble is set to increase the total volume of supplies of modern weapons for export as well as domestic procurement of arms by a minimum of 20%, all the way to a maximum of 60% depending on the level of the exchange rate, the duration of the planning period and the minimum level of supply of products to the domestic market and for export.

CRI "Electronics" became the leading center for interdisciplinary research DIC economy
Institute for the year showed the best results among similar organizations



Employees of Central Research Institute "Electronics" for the year showed the best results among all research institutions of the military-industrial complex.

According to the results of testing conducted by research institute figures totaled approximately 6 reports at the same scientists working in the Central Research Institute "Electronics". According to this indicator Institute significantly superior to other research organizations DIC, which over the same period presented at international and national conferences on the average on 1-2 subjects to report similar to one scholar.

Employees of Central Research Institute "Electronics", for example, tested the hypothesis that the shortage of investment and reduce the cost of the national currency is useful to increase export sales of products, which should contribute to a speedy modernization of the defense industry.

A study conducted by experts of the Institute, has shown that the maximum increase of exports in a few years may be appropriate.    

According to experts, the implementation of such a strategy can increase the total volume of supplies of modern weapons for the needs of national defense by 20-60% depending on the level of the exchange rate, the duration of the planning period and the minimum level of supply of products to the domestic market and for export.

As the number of published scientific papers and monographs published by academic economists Institute also became the best in Russia.

According to preliminary results of the "Best Director of a research organization Defense Industry of Russia" can become CEO of CRI "Electronics" Alena Fomina.

On the title "best scientist-economist Russia's defense industry," claims Advisor to Director General Research Institute "Electronics", Ph.D. AM Batkovsky.

CRI "Electronics" became the leading center for interdisciplinary research DIC economy

Russian Monetarists, The Business Insider, The National Interest, The New York Times, The Wallstreet Journal, The Washington Post, The Economist, The Daily Telegraph, The Daily Mail, The Guardian, The Sun, Defense News, The Diplomat, The Christian Science Monitor, Die Bild, Sky News, Fox News, CNN, BBC, MSNBC, etc....left face flat on the ground, with their dicks in the dirt!!!

Do we what new equipment will be delivered to the Russian Army, the Russian Air Force and Russian Navy in 2016? What new things will happen in 2016 for the Russian Army?

One of the news agencies a day or two ago stated that there is talk ongoing and work for state program from 2016 to 2025.  I would wager though it is smarter to wait till near end of 2020 to determin the next 5 years of spending and what is needed, rather than throwing money around.

franco wrote:Russia to continue rearming at ~200 aircraft and ~600 AFV's per year;
http://tass.ru/en/defense/843801

Good news. 

As for the equipment that is waiting for spares from import substitution, any clue what they may be?

franco wrote:No it didn't specify. Just felt it was an important piece to share.

Very important.  It shows the need for import substitution and doing things domestically.

I still am gloating over how I mentioned importing and JV for military was dangerous for Russia and how I was lambasted for it.