Tag Archives: Finance Ministry

Military Medicine Gets an Unsat

Valentina Matviyenko

We’ve seen reports of what reforms have done to Russian military medicine, but what follows is the first comprehensive review of its condition.  Cuts and reorganizations are on Defense Minister Serdyukov, but, to be fair, infrastructure deficiencies long predated him.  Military medicine is an area where he deserves some criticism.  But it’s unclear why it was the weak point chosen for an attack on his management, or why Valentina Matviyenko was the one to deliver it.  In any event, with the most recent chief of military medicine now in prison awaiting trial, it’s easy to conclude there are some pretty significant systemic problems.

Nezavisimaya gazeta reported Monday that a Federation Council panel on the social defense of servicemen has, not surprisingly, given military medicine an unsatisfactory evaluation.  It came despite a positive self-assessment from the Main Military-Medical Directorate (GVMU).  NG’s Sergey Konovalov said Federation Council Speaker Valentina Matviyenko, who conducted the session, repeated everything critical about military medicine heard recently from social organizations, parties, and the media.

Responding to the main report given by acting GVMU Chief, Colonel Anatoliy Kalmykov, Matviyenko said:

“You gave a positive assessment, you said that military medicine is coping with its missions.  And at the same time your own slide shows a growth in illnesses among servicemen . . . .  It’s higher than illnesses in the civilian population . . . .   Is it forbidden to evaluate yourself more critically?  Stop with this nonsense, comrade Colonel . . . .”

Konovalov notes for readers that Kalmykov’s only been at his temporary post for three weeks.  He’s taking the spot of General-Major Aleksandr Belevitin who’s in jail awaiting trial on corruption charges as well for an alleged attempt to arrange the murder of a witness.

He continues with Matviyenko’s remarks:

“. . . today we face an imbalance between the state’s obligations in the military medical sphere and the real financial resources allocated for this purpose.  Cuts in military hospitals, polyclinics have created problems in giving medical assistance.  In 17 regions, military-medical departments are lacking, in 30 military units, they are deployed very remotely from them, and the great distance is becoming an insurmountable obstacle to treating military service veterans.”

Matviyenko expressed concern about cutting officers and replacing them with civilian workers in military medicine.

An Audit Chamber auditor told the FC panel more than 1,000 Defense Ministry medical units and departments (38 percent of the total) occupy buildings and spaces which don’t meet technical and sanitary norms.  And 735 medical facilities (27 percent) need capital repair.  New medical equipment the Defense Ministry languishes because there aren’t medical buildings and centers in which it’s possible to treat patients.

The military’s representatives apparently claimed a lack of money.  But the Finance Ministry’s Director of the Department for Budget Policy in Military and Law Enforcement Services and State Defense Order, Aleksey Kaulbars rejected this:

“Just purely for health care, on the order of 39 billion rubles are allocated for the Defense Ministry.   A little more than 60% has been expended according to the situation as of today.  And what kind of grievances that it is insufficiently financed are possible in connection with this?  For health care facility construction, the assimilation is 30%.  Colleagues, what are we talking about?”

First Deputy GVP Andrey Nikulishchin is afraid unfinished construction and other military medical problems are connected with corruption.  He suggests that military medical units get only 20-50 percent of the medicines they require.  He blames elevated prices and “nontransparent” trade in them (presumably in addition to corruption).

Is the GPV Doable?

This post is dedicated to a friend and mentor who highlighted the source material . . . .

Do I Look Happy About the GPV? (photo: RIA Novosti)

Is Russian Finance Minister Aleksey Kudrin on-board with plans for increased military spending contained in the State Program of Armaments, 2011-2020?  The economic press seems to think he’s not, and his reticence leads one to ask if the new GPV will fit Russia’s economic and budgetary realities in coming years.  One thing’s certain (if you read on), 2011 is the first year of this GPV, and already, for a variety of reasons, many new arms will be bought with state-backed credits and loans.

The GPV came into the headlines last spring when Kudrin and his ministry offered 13 trillion rubles, and the uniformed military replied that 36 trillion would be about right.  Not much was heard about negotiations over the GPV until mid-July, when First Deputy Defense Minister Popovkin announced the figure would be about 20 trillion.

Then, President Medvedev described the GPV in his annual Federal Assembly address (Poslaniye) on 30 November:

“Today the fundamental task of creating a new high-technology mobile army stands before us.  We are setting out to spend more than 20 trillion rubles on these aims.”

The same day, Moskovskiy komsomolets published Kudrin’s reaction from RIA Novosti:

“The country is living with a deficit . . . .  The redistribution of expenditures from other areas is required.”

And from a television interview:

“The task of strengthening defense capability was set down very seriously, and a figure of 20 trillion rubles was named, and it will need to be directed at strengthening defense capability over the course of 10 years.  This is a new task, financial sources still haven’t been considered sufficiently, this could be an additional burden for the economy.  In this case, the president believes it’s essential.”

Kudrin didn’t mean new as in news to him, but in the sense that it hasn’t been factored into the federal budget. 

On 3 December, in MK, Nikolay Vardul critiqued Medvedev’s explanation of the GPV.

Vardul said we’ve heard about the high-technology army and using defense industry as an economic locomotive before, but this no longer fools anyone.  Large military expenditures ruined the Soviet economy, although falling oil prices were the coup de grace.  He continues:

“And here again is Medvedev talking about how investments in military technology will pay for themselves in the production of ‘dual-use products.’  Stepping on the same rake, as if we didn’t have sad experience.  The army passage in the Poslaniye is generally contradictory.  Medvedev drew an alternative:  either Russia and NATO manage to agree on joint missile defense, or a new arms race.  And then how do expenditures of 20 trillion rubles on military-technological needs by 2020 present themselves?  Is this just a running start?  In order to understand the scale of the spending, the entire Russian GDP in 2010 is on the order of 51 trillion rubles, and all federal budget expenditures for 2011 should be 10.8 trillion. There you have it.  But the questions continue:  who is now the potential enemy?  Can it be NATO again?  Too many questions and very few answers.”

“There is, by the way, one clear answer.  From the point of view of the economy, the main threat to its relative equilibrium is precisely inflated military, not social expenditures.”

“And there’s no doubt:  the higher the state expenditures, the greater the chances of inflation.  But military expenditures are distinct from investments in education or health care by the fact that the path to recouping them is more thorny and tortuous, if it’s even possible.  On the other hand, the road leading from them to inflation is as straight as a pipe.”

He concludes it’s true Russia’s economy needs a more modern engine to replace oil and gas revenues, but: 

“Instead of this, huge resources  are diverted to military spending, even though armaments not only won’t lift the economy, but drain it further.”

On 10 December, Nezavisimaya gazeta’s Anatasiya Bashkatova addressed Kudrin’s comments that redistributing federal budget to the regions and increasing the country’s defense capabilities will be very difficult to do simultaneously.  As Bashkatova put it, “there isn’t enough money for everything,” and “a high-technology defense sector interferes with regional development.”

Kudrin also said: 

“This program [GPV] is now being prepared.  It will soon be adopted, and the main expenditures will fall not in 2011, but in subsequent years.”

NG chief military correspondent Viktor Litovkin explained that it was simply too late for changes in the defense budget for 2011 with expenditures already starting according to the adopted budget law.

Then President Medvedev met with Kudrin meeting on 13 December.

Medvedev and Kudrin (photo: Kremlin.ru)

Medvedev told him his priorities are economic modernization and social spending, and regarding the latter:

“I consider that this is very important for preserving social peace and stability in our country.”

But with his very next breath, Medvedev said:

“And, of course, we must devote attention to issues of guaranteeing the security and defense of our state.”

And, of course, after wishing it weren’t necessary, he said:

“Therefore, the corresponding state program of armaments, and the Armed Forces modernization program need to be fulfilled in the specified parameters.”

The same day, Prime Minister Putin conducted a government conference in the submarine-building capital Severodvinsk to review the GPV, and even he confessed:

“For me it’s terrible even to say this amount [20 trillion rubles].”

Later in December, Vedomosti quoted one of Kudrin’s deputies who said, many expenditures which have “already been announced – and first and foremost these are defense expenditures” have not been figured into the 2011-2013 budgets, and it’s “still unknown” how these obligations will be financed.

Dmitriy Butrin in Kommersant quoted Duma Defense Committee Chairman Zavarzin to the effect that, in 2011, 30 percent (about 500 billion of 1.5 trillion rubles) will be financed by state-guaranteed credits rather than by budget funds.  Butrin went on to repeat Kudrin’s warning that the GPV can’t be covered by the projected budget income level, and the 20 trillion could make increased taxes unavoidable.

The Kudrin deputy also said that, without growth in the income portion of the budget, new budget obligations – like the APEC summit, Sochi Olympics in 2014, Skolkovo, World Cup soccer in 2018, and the State Program of Armaments – appear unrealizable.  He concludes, “We’ve set out on a trajectory for higher taxes.”

So where does this leave the GPV.  These economic commentators describe the same general picture . . . the GPV is extra spending for which financing has not been identified, at a time when key categories of budget income (i.e. oil and gas revenues) will decline (from 17 percent in 2009 to 13 percent by 2020) and the prospect of higher deficits already looms.

Russia also faces lower receipts and more payouts for pensions and health care over this period.

Kudrin and company are looking at possibilities, mainly increasing some taxes, but also maybe raising the retirement age.  None of this will help economic growth or make people happy.

No wonder the Finance Minister has resisted extra military spending to the extent that he can.

This GPV, if implemented, will impede the economic modernization President Medvedev wants.

But history says this GPV’s not likely to happen.  Even its most recent predecessor, started under favorable economic conditions, was superceded rather than completed.  And now is definitely not a favorable time like that.