The world is changing, and the transformations underway could hide various risks, often unpredictable risks. In a world of economic and other upheaval, there is always the temptation to resolve one’s problems at another’s expense, through pressure and force. It is no surprise that some are calling for resources of global significance to be freed from the exclusive sovereignty of a single nation, and that this issue will soon be raised as a “matter-of-course.”

There will be no possibility of this, even a hypothetical one, with respect to Russia. In other words, we should not tempt anyone by allowing ourselves to be weak.

It is for this reason that we will under no circumstances surrender our strategic deterrent capability, and indeed, will in fact strengthen it. It was this strength that enabled us to maintain our national sovereignty during the extremely difficult 1990s, when, lets’ be frank, we did not have anything else to argue with.

Obviously, we will not be able to strengthen our international position, develop our economy or our democratic institutions if we are unable to protect Russia – if we fail to calculate the risks of possible conflicts, secure our military-technological independence and prepare an adequate military response capability as a last-resort response to some kind of challenge.

We have adopted and are implementing unprecedented development programmes for our armed forces and for the modernisation of Russia’s defence industry. All in all, we will allocate something like 23 trillion roubles for these purposes over the next decade.

Frankly speaking, there have been plenty of discussions regarding the size and timeliness of such sizable allocations. I am convinced that they fully correspond to the country’s potential and resources. And, most important, we cannot put off the goal of creating modern armed forces and of comprehensively strengthening our defensive potential.

It is not a question of militarising Russia’s budget. In effect, allocating these funds now means we are “paying our bills” for the years when the army and the navy were chronically underfunded, when we procured very few new weapons, while other countries were steadily building up their military might.

A smart defence against new threats

We need a response system for more than just current threats. We should learn to look “past the horizon,” and estimate threats 30 or even 50 years away. This is a serious objective and requires mobilising the resources of civilian and military science and reliable standards for long-term forecasting.

What kinds of weapons will the Russian army need?

What technical requirements will be established for our defence industry? In effect, we need to develop a qualitatively new and smart system for military analysis and strategic planning, for prescribed approaches with prompt implementation by our security-related agencies.

So what is the future preparing for us?

The probability of a global war between nuclear powers is not high, because that would mean the end of civilisation. As long as the “powder” of our strategic nuclear forces created by the tremendous efforts of our fathers and grandfathers remains dry, nobody will dare launch a large-scale aggression against us.

However, it should be borne in mind that technological progress in many varied areas, from new models of weaponry and military hardware to information and communications technology, has dramatically changed the nature of armed conflicts. Thus, as high-precision long-range conventional weapons become increasingly common, they will tend to become the means of achieving a decisive victory over an opponent, including in a global conflict.

The military capability of a country in space or information countermeasures, especially in cyberspace, will play a great, if not decisive, role in determining the nature of an armed conflict. In the more distant future, weapons systems based on new principles (beam, geophysical, wave, genetic, psychophysical and other technology) will be developed. All this will, in addition to nuclear weapons, provide entirely new instruments for achieving political and strategic goals. Such hi-tech weapons systems will be comparable in effect to nuclear weapons but will be more “acceptable” in terms of political and military ideology. In this sense, the strategic balance of nuclear forces will play a gradually diminishing role in deterring aggression and chaos.

We see ever new regional and local wars breaking out in the world. We continue to see new areas of instability and deliberately managed chaos. There also are purposeful attempts to provoke such conflicts even within the direct proximity of Russia’s and its allies’ borders.

The basic principles of international law are being degraded and eroded, especially in terms of international security.

Under these circumstances, Russia cannot fall back on diplomatic and economic methods alone to settle contradiction and resolve conflict. Our country faces the task of developing its military potential as part of a deterrence strategy and at a sufficient level. Its armed forces, special services and other security-related agencies should be prepared for quick and effective responses to new challenges. This is an indispensable condition for Russia to feel secure and for our partners to heed our country’s arguments in various international formats.

Together with our allies, we should also strengthen the capabilities of the Collective Security Treaty Organisation, including the Collective Rapid Response Force. The CSTO is ready to fulfil its mission as a guarantor of stability in Eurasia.

The rapid development of its armed forces, nuclear and space industries, the defence industry, military training, fundamental military science and applied research programmes will remain a key priority in Russia’s future policies.

The army saved Russia

The break-up of a single unified country, as well as the economic and social upheaval of the 1990s, dealt a serious blow to all of the state’s institutions. The Russian armed forces also faced serious challenges. Combat training programmes virtually disappeared. Elements of the First Strategic Echelon were hastily withdrawn from Eastern Europe and then deployed in areas lacking infrastructure. The full-strength units that were the most combat-ready were disbanded because the country lacked funding to maintain them and for the construction of military cantonments, bases, training centres and housing.

Officers received no wages for months on end. To be honest, the country even had trouble feeding its military personnel. Tens of thousands of officers and soldiers were being discharged. The number of generals, colonels, lieutenant colonels and majors exceeded that of captains and lieutenants. Many defence industry companies stood idle, accumulated debt and lost their most valuable and unique specialists.

The media was harsh with the armed forces. Day after day, a few “activists” considered it imperative to “kick” and humiliate the army in the most painful manner and to defile everything linked with such concepts as the oath of allegiance, the call to duty, service to the Motherland, patriotism and this country’s military history. Actually, they believed that any day when this wasn’t done, was lost in vain. I have thought about this, and I still consider it a real moral crime and an act of treason.

We must always remember that the country owes a lot to the officers and men who preserved the armed forces in the extremely difficult 1990s against all odds, and who facilitated the combat readiness of military units in times of crisis. Those officers and soldiers fought whenever necessary. They lost their comrades and won. That’s the way things were in the North Caucasus, in Tajikistan and in other “hot spots.” These people preserved the army’s spirit and honour, as well as Russia’s territorial integrity and sovereignty. Moreover, they defended the safety of Russian citizens making it impossible to humiliate this country and to “write” it off.

Still, the country had to pay dearly for the mistakes made during the numerous and inconsistent reforms, which frequently stipulated nothing more than automatic reductions.

In 1999, terrorist gangs unleashed a direct aggression against Russia, a tragic situation. We had to put together a 66,000-strong military formation virtually piecemeal from combined battalions and separate detachments. Although the basic Russian armed forces had more than 1,360,000 personnel, they lacked full-strength units capable of accomplishing their objectives without additional training.

But the army accomplished its objective. Russian officers, sergeants and soldiers fulfilled their duty. They considered their oath of allegiance to the Motherland to be more important than their lives, health and well-being. And, most importantly, Russian society once again came to realise the simple truth that it must support its armed forces. We must strengthen them otherwise we will end up feeding a foreign army on our soil, or we will even become slaves to thugs and international terrorists.

On the road back, we first prioritised the most urgent projects. We reinstated the system of elementary social guarantees for military personnel and eliminated those ignominious wage arrears. Year after year, we spent increasingly more on the development of the Army, the Navy and the Air Force. This was in sharp contrast with those periods when high-priority projects lacked funding.

I remember in 2002 when the Chief of the General Staff proposed liquidating a base for strategic ballistic missile submarines on the Kamchatka Peninsula. Understandably, this proposal was motivated by dire circumstances. This would have deprived Russia of its naval presence in the Pacific Ocean. I decided against this. Due to the lack of the required budgetary funding, we had to ask private companies for help. I would like to thank them for that. Both Surgutneftegaz and TNK stepped up to provide the required funding for the base’s initial reconstruction. Budgetary allocations were later disbursed. Today, we have a modern base in Vilyuchinsk where next-generation Borei class submarines will soon be deployed.

Permanent readiness units comprising contract soldiers were established in every strategic sector. Self-contained formations were also deployed. It was one such formation that forced Georgia to sue for peace in August 2008 and who defended the people of South Ossetia and Abkhazia.

But previous experience proved that the potential for developing the military system inherited from the Soviet Union had become depleted. And by the way, what did that system look like? It comprised thousands of bases, depots, arsenals, numerous headquarters and cadre-strength units. In effect, all of that system’s elements were needed to deploy a mobilisation-type 20th century army with millions of officers and soldiers.

It was not possible to build up the military simply by adding personnel and equipment partly because it didn’t solve the inefficiency problem and partly because the country lacked both the human and financial resources. Most importantly, that system did not meet contemporary and long-term requirements. We could eventually have lost our entire military potential, and we could have lost our armed forces as an efficient mechanism.

There was only one way out. We had to build a new army. We had to establish a modern and mobile army which could maintain permanent combat readiness. This is a very difficult process affecting tens of thousands of people. The inevitable mistakes, grudges and disagreements are all linked with this process. This resulted in a negative public response, including from some military personnel. This reform is not being implemented by one or two people. A very complex institution, which had amassed many problems, is now being overhauled. Setbacks, excesses on the part of “executors,” inadequate informational support, the lack of proper “feedback” channels and the formalistic fulfillment of specific directives can all be called real problem areas in the ongoing reform. Our task is to understand these problem areas and to modify our decisions accordingly, while facilitating a system-wide transformation of the armed forces.

Achievements to date

There are no undermanned units in the Russian armed forces any more. The Army has over 100 combined and special brigades. These are full-scale military units with the requisite personnel and equipment. Their alert reaction time is one hour and they can be deployed to a potential theatre of war within 24 hours.

In the past, it took up to five days to prepare for combat readiness. The deployment and equipment of all the armed forces to wartime conditions could take nearly a year, even though most armed conflicts now last from a few hours to several days.

Why have we chosen the brigade as the main tactical unit? First of all, we have relied on our own experience in the Afghan and other wars, where mobile combat and assault groups reinforced with air and other support units have proved more efficient than regiments and divisions.

The new brigades are smaller than divisions in the number of personnel but have a bigger strike capability, better firepower and support, including artillery, air defence, reconnaissance, communications, and so on. Brigades can operate both autonomously and jointly with other units. I admit that the quality is not perfect in all instances. We need to achieve the required standards in the near future.

The Russian army is getting rid of economic management, community service and other non-core and auxiliary functions. Military personnel now spend nearly all their time on combat training. This is the only way to turn new recruits into professional soldiers, since they are only conscripted for 12 months. Soldiers and officers should carry out their direct duty – intensive combat training. This should also have a positive effect on discipline and law and order in the armed forces and will ultimately improve the prestige of conscription military service.

We are overhauling the system of military education. Ten research and education centres are being formed as a rigid vertical system where officers can improve their professional qualifications. In doing this we are relying both on our own traditions and on global experience.

It is only by relying on military research that military and military technical doctrines can be effective and the General Staff can work efficiently. We must restore the lost authority of our military institutions and integrate them into the system of military education, just as we are doing in the civilian sector of the economy. Military science must have a decisive influence on the formulation of the goals of the defence industry. Competent procurement mechanisms and the Defence Ministry departments responsible for military orders must ensure the efficient development of technical specifications for the design and production stages, as well as the specifications of weapons and military equipment.

There is no question that military research cannot develop properly without partnership with civilian science and without exploiting the potential of our leading universities and state research centres. Scientists must have sufficient information about the current status and development prospects of the army and weapons systems to be able to steer their prospective research in the right direction, and in particular to provide potential military uses for their products.

It should be added that the command agencies in the armed forces have been reduced by half. Four enlarged military districts – Western, Southern, Central and Eastern – have been established and have assumed command of the air force, air defence and naval forces. These are in fact operational and strategic commands. A new arm of the armed services, the Aerospace Defence Forces, became combat operational on December 1, 2011.

The Air Force now has seven large air bases with a powerful infrastructure. The network of airfields is being modernised. In the past four years we have upgraded 28 airfields, the first time this has happened in 20 years. Modernisation projects are planned at a further 12 military airfields.

We have greatly increased the capabilities of our early missile warning system. Tracking stations have been launched in the Leningrad and Kaliningrad Regions and in Armavir, and a similar facility is undergoing tests in Irkutsk. All aerospace defence brigades have been equipped with the Universal-1S automation systems, and the Glonass satellite group has been deployed.

The land, sea and air components of our Strategic Nuclear Forces are reliable and sufficient. The proportion of modern land-based missile systems has grown from 13% to 25% over the past four years. The rearmament of 10 missile regiments with the Topol-M and Yars strategic missile systems will be continued. Long-range aviation will maintain the fleet of strategic Tu-160 and Tu-95MS bombers; work is underway to modernise them. They will be equipped with a new long-range cruise missile system. Russia’s strategic aviation resumed combat patrols in their zone of responsibility in 2007. A new aircraft is being designed for strategic long-range aviation.

New-generation Borei class strategic submarines are being put on combat duty. These include the Yury Dolgoruky and Alexander Nevsky which are undergoing state trials.

The Russian Navy has resumed patrols of the strategic areas of the world’s oceans, including the Mediterranean. We will continue with these displays of the Russian flag.

Goals for the coming decade

We have begun a large-scale programme to re-equip the Army and Navy and other national security forces. Our number one priorities are nuclear forces, aerospace defence, military communications, intelligence and control, electronic warfare, drones, unmanned missile systems, modern transport aviation, individual combat protection gear, precision weapons and defence capabilities against such weapons.

The training of combat and command personnel should become more intensive, comprehensive and of higher quality. Efforts will be focused on building effective inter-service groups of troops and forces and improving combat readiness.

Our professionals will have to work out a forward-looking ideology for the development of the different branches of the armed forces, and define clear goals and objectives for each of them in the relevant conceptual documents. It is already clear that nuclear deterrence will retain its leading role and importance in the structure of the Russian armed forces, at least until we develop new types of weapons, new-generation assault systems, including high precision weapons. These weapons, as I have already said, are capable of meeting combat goals that are comparable with the current role of the nuclear deterrence forces. In addition, the role of the Navy, the Air Force and the Aerospace Defence Forces will grow significantly over the coming years.

Today’s challenges require us to take resolute steps to strengthen Russia’s air and space defence system. We are being pushed into action by the U.S. and NATO missile defence policies.

A global balance of forces can be guaranteed either by building our own missile defence shield – an expensive and to date largely ineffective undertaking – or by developing the ability to overcome any missile defence system and protect Russia’s retaliation potential, which is far more effective.

Russia’s strategic nuclear forces and air and space defence are designed to serve precisely this purpose. One cannot be “overly patriotic” about this. Russia’s military technical response to the U.S. global missile defence system and its segments in Europe will be effective even if disproportionate. But it will fully match U.S. steps in missile defence.

We aim to restore a blue-water (in the full sense of the word) navy, primarily in Russia’s North and Far East. The activities of the world’s leading military powers in and around the Arctic are forcing Russia to defend its own interests in the region.

In the coming decade, Russian armed forces will be provided with over 400 modern land and sea-based inter-continental ballistic missiles, 8 strategic ballistic missile submarines, about 20 multi-purpose submarines, over 50 surface warships, around 100 military spacecraft, over 600 modern aircraft including fifth generation fighter jets, more than 1,000 helicopters, 28 regimental kits of S-400 air defence systems, 38 battalion kits of Vityaz missile systems, 10 brigade kits of Iskander-M missile systems, over 2,300 modern tanks, about 2,000 self-propelled artillery systems and vehicles, and more than 17,000 military vehicles.

More than 250 military units, including 30 air squadrons, are already using advanced military equipment. By 2020, the proportion of new armaments should rise to at least 70%. The systems remaining in service will also be significantly upgraded.

So the goal for the next decade will be to equip our armed forces with advanced armaments, which have better visibility, higher precision, and faster response times than similar systems used by any potential enemy.

The social dimension

A modern army must employ qualified personnel with the skills to operate the most modern weapons systems. These professionals must have in-depth knowledge and a high level of education and culture. The individual requirements for each officer and soldier are increasing significantly today.

At the same time, servicemen are entitled to receive a full package of social benefits to match the huge responsibility that they bear. This includes access to healthcare services, rehabilitation treatment, health insurance, a decent pension and employment opportunities after retirement. In addition, their salary should be at the same level as for qualified professionals and managers in the leading industries, or even higher.

In 2007, we decided to increase military pay and pensions. At the first stage of the reforms, in 2009, the government launched a major initiative to raise the pay for those who shoulder a special responsibility for upholding Russia’s defences.

We have now taken the next step: from January 1, 2012 military pay has almost tripled. The Armed Forces have become much more competitive as an employer. This has improved the situation significantly. It has created an additional incentive to join the military forces.

Also on January 1, 2012, officers of the Interior Ministry were given a pay raise. Other branches of the military, law enforcement and special services will see their pay rise from January 1, 2013.

The pensions of all retired military servicemen, regardless of the sector of the forces they served in, went up by 60% from January 1, 2012. In the future, military pensions will go up every year by at least 2% above inflation.

In addition, we will introduce a special education certificate so that every retired serviceman will be able to receive education or enrol in a retraining programme at any Russian educational institution.

Housing is another major issue, which has been poorly addressed over many years. In the 1990s, at best the government provided only 6,000-8,000 flats or housing certificates a year. Very often, people retired without receiving any housing at all; they were simply put on the same waiting list along with civilians and had to wait their turn.

Looking back, we can see that housing for military servicemen started increasing significantly from 2000, up to an annual average of 25,000 flats for servicemen. Doing this however required a dramatic change in government policy and a shift to focus financial and organisational resources on to this problem.

The 15+15 Presidential Programme carried out in 2006-2007 was the first measure in this respect. Around 20,000 additional flats were provided to servicemen in the regions where the housing problems were more serious.

Between 2008 and 2011, some 140,000 flats were purchased or built for military personnel employed by the Defense Ministry, with another 46,000 service personnel properties provided beyond that. Nothing of this kind had happened before. We allocated money even during the financial crisis. However, despite the scale of the programme, which was even larger than initially planned, the problem has yet to be resolved.

We should be honest about the reasons for this. Firstly, the Defense Ministry has not kept proper records of the servicemen who need housing. Secondly, staffing arrangements were not directly linked to housing availability. We have to adjust this.

In 2012-2013, the provision of permanent housing to military personnel should be complete. In addition, a modern service housing fund must be created by 2014, which should resolve the “never-ending” problem of military housing.

By the end of 2012, we will provide flats to those service personnel who were discharged in the 1990s but never received housing and are still on municipal waiting lists. That’s over 20,000 people.

The personnel that signed contracts after 2007 will be provided with housing in accordance with plan through the savings and mortgage lending system. The number of people participating in this programme exceeds 180,000, with over 20,000 flats already purchased.

Another crucial issue is the fate of military towns and the thousands of people who live there. They are former service people and their families, pensioners and non-military professionals – all those who have served the armed forces, and thus, the country for many decades.

It is unacceptable that these towns with their problems are just discarded by the Defense Ministry and have to be handled solely by the regional or municipal officials. We must carry out a thorough inventory audit of real property that is owned by the armed forces and is to be transferred into the ownership of the civilian authorities. In other words, residential blocks, kindergartens, public utilities now owned by the Defense Ministry must be transferred to their respective municipalities, after renovation, and when they are fully functional, and – this is particularly important – funds should be supplied for their current maintenance.

Serious changes are planned for military strength acquisition. Currently, 220,000 officers and 186,000 soldiers and sergeants serve under contract. An annual increase of 50,000 service personnel is expected within the next five years. They will serve as sergeants, sergeant majors and military equipment specialists.

Selection will be strict and will consist of several stages. Marshal Georgy Zhukov used to say, “It’s me and the sergeants who command this army.” These “junior commanders” are the backbone of enforcement in the army. They follow through on order, discipline and proper military training. We need respectable people with the appropriate background, moral values and physical qualities for these positions. Not just the junior officers but all contract soldiers will be trained at special training centres and sergeant schools.

We expect that by 2017, 700,000 service personnel out of one-million will be “professionals” and include officers, military students, sergeants and contract soldiers. By 2020, the number of conscripts will decrease to 145,000.

The rationale behind these changes clearly shows that our objective is to create a fully professional army. At the same time, we need to be aware of the fact that a professional army is expensive. If we continue manning the armed forces with contract personnel and conscripts, we will be compromising between this objective and our national capabilities.

But compulsory military service will require qualitative adjustment as well. This is a mandatory requirement for military reform.

Military Police will be introduced to oversee discipline among the personnel. Public, veteran, religious and human rights organisations should be actively involved in the education of the servicemen and the protection of their rights and interests and for forming a healthy moral environment.

I believe we should think about developing the military clergy. Each military unit will have a military chaplain within the next few years.

We understand that there is an issue of social inequality within the current draft system. Conscripts are usually boys from low income and working class families or those who were not admitted to universities and could not apply for deferred service. We need to enhance the prestige of compulsory military service. It should become a privilege rather than a duty.

These measures could include additional privileges for those who serve in the army and want to enroll in the country’s best universities. Another option could be government support for those who want to take professional exams, or government scholarships for the graduates who served in the army and want to continue their education in the best business schools in Russia or abroad. They could also be eligible for preferential terms in applying for civil service posts or being included in the management reserves. The army should be returned to its traditional status as the most important social mobility engine.

In the long term, we should consider introducing stand-by reserve forces. As in many countries, this category of personnel would undergo regular drills and be prepared to serve in combat units if required.

There is no clear idea of a national reserve now. Our immediate task is to conceptualise this and suggest it for discussion. In particular, I would like to speak about the Cossacks. Millions of our fellow citizens today say that they are members of this social class. The Cossacks have historically been in the service of the Russian state, defending its borders and participating in the military campaigns of the Russian Army. After the 1917 revolution, the Cossacks were subjected to harsh reprisals that in essence amounted to genocide. But the Cossacks have survived and preserved their culture and traditions. The government’s task now is to help the Cossacks in every way it can. We must also get them involved in military service and the military and patriotic education of young people.

I think it important to stress the following. The army should definitely become a professional contract army. But we cannot eliminate the notion of honorable military duty for men. They must be ready to defend their Motherland when it comes under threat.

We need to raise the level of our work in organizing the military patriotic education of schoolchildren and promoting military-based sports and physical culture in general. Active military service lasts for twelve months, and a soldier has to concentrate exclusively on combat training. This means that he should join the army physically fit and tough, and better still, knowing how to handle motor vehicles, computers and information technology. In this connection I would like to emphasise the importance to the state of the work done by Russia’s Voluntary Association for Assistance to Army, Air Force, and Navy (DOSAAF).

The federal, regional and municipal authorities should do all they can to help this organisation achieve its goals. Government and public agencies should join hands. In this context, I am in favour of the idea of establishing a voluntary movement of the popular front in support of the army, navy, and the defence industry.

Our aims in the sphere of defence and national security cannot be achieved unless both servicemen and defence industry employees are highly motivated – and unless, let me add, the Russian public shows respect for the Armed Forces and military service.

New requirements of the Russian defence industry

The defence industry, our pride, boasts powerful intellectual and scientific capabilities. But we must also be honest in speaking about the problems that have built up. Russia’s defence research centres and production facilities have been slow to modernise over the last 30 years.

In the coming decade, we need to close this gap. We must regain the technological lead in the entire spectrum of modern military technologies. I would like to stress once again that we will put the task of re-equipping the armed forces firmly in the hands of Russia’s defence industry and scientific infrastructure.

We will have to address several interconnected tasks at the same time: to increase by an order of magnitude the delivery of advanced and next-generation equipment; to form forward-looking scientific and technological capabilities, to develop and master technologies of critical importance to the manufacture of competitive military products; and, finally, to upgrade the technological base of the industries that specialise in the production of advanced weapons and military equipment. We should also build, modernise or re-equip our experimental and test infrastructure.

Today, Russia is firmly integrated into the global economy and open to dialogue with all its partners, including on matters of defence and in the sphere of military-technical cooperation.

But learning from the experience and trends of other countries does not mean that Russia will switch over to using borrowed models or give up the concept of self-reliance. Quite the contrary: to achieve steady socioeconomic development and guarantee national security, we must, while borrowing the best experience, build up and maintain Russia’s military-technological and scientific independence.

In this context, let me address the sensitive topic of buying military equipment from abroad. As is evident from global practice, all the key suppliers of the global arms market, all the most advanced technological and industrial powers are at the same time purchasers of various parts of systems, models, materials and technologies. This makes it possible to quickly solve the most pressing defence problems and, let us be frank, to stimulate domestic producers.

Besides, there is a fundamental difference between buying in order to own something and buying in order to abandon one’s own designs. I am convinced that no amount of “pin-point” purchases of military and scientific equipment can replace the production of our own weapons; these purchases can only serve as a source of technology and knowledge. Incidentally, a similar thing happened in the past. Let me remind you that an entire family of Russian tanks in the 1930’s was based on U.S. and British armoured vehicles. This experience led to the development of the T-34, the best tank of WW II.

In order to really improve this country’s defence capability, we need the world’s best state-of-the-art military equipment, not spending billions and trillions of roubles. It is unacceptable for the army to become a market for morale-sapping obsolescent weapons, technologies and research and development, especially if it is being paid for out of the public purse.

That is why we have made our defence plants and design bureaus comply with stringent requirements, have been encouraging competition and investing heavily in the modernisation of the defence industry, advanced technologies and training of specialists.

The activities of defence industry enterprises should concentrate on the mass production of high-quality weapons with the highest performance characteristics to meet both current and projected defence challenges. Moreover, it is only the latest weapons and military equipment that will enable Russia to strengthen and expand its foothold in the world arms markets, where the winner is the one who can offer the most advanced designs.

Reacting to present-day threats and challenges alone means being doomed to the role of someone who is always playing catch-up. We must do our best to gain a technological and organisational edge over any potential adversary. Such a stringent requirement should become the key criterion for us as we set targets for the defence industry. This will enable industries to engage in long-term planning and know for certain where they should direct resources allocated for technological modernisation and development of new types of weapons. Scientific centres and institutes will be given incentives and clear guidelines for the development of basic and applied research in the military and related areas.

We have made great headway in reforming the army. Now we must revise the principles behind the planning and implementation of the state weapons programme. To enable defence companies to make long-term plans, we have decided to stagger the state’s defence order over three to five or even seven years. But I think that taking this step is not enough on its own.

We must start by linking military planning to the task of providing the army with weapons, military equipment, and other resources. Along with this we should consider establishing a single body responsible for the placement of and oversight of defence contracts. This body would be responsible for the execution of state defence orders in the interests of all agencies concerned.

Adjustments in the government defence order after it has been approved by the government must be kept to a minimum. We should also bear in mind that the purchase price in all cases has to be fair and sufficient to recover the costs of investments and also pay for development, modernisation, recruitment of skilled labour and staff training.

Another problem is that businesses and institutes in the defence industry lack a common database and often duplicate various research projects. We must do our best to create a “search engine,” a common database, common standards and a transparent mechanism of pricing for defence industry projects. We should work for more integration and cooperation between various companies, and we should also standardise production facilities.

At the same time, we need to promote competition, while making state purchases. We must reasonably encourage rivalries for increased quality, primarily during the conceptualisation and research stage. At the same time we must prioritise successful research projects during the creation of ready-made products, so as not to duplicate specific weapons systems.

The defence industry is in no position to calmly try to catch up with the latest developments. We must facilitate breakthroughs and become leading innovators and manufacturers.

To attain a leading global technological position in weapons manufacturing, we must reinstate the entire industrial cycle from modeling and design to commercial production, while specifying troop-level quality and subsequent elimination.

The lack of incentives for the development of companies that might generate breakthrough ideas, the receding relationships between universities, departmental institutes and defence industry businesses creates a lag in defence industry research, as well as the disintegration of science institutes and science-intensive sectors. All this cannot evolve by itself. The state is unable to simply hold tenders and to award contracts.

The state must persistently look for breakthrough R&D projects and find teams of researchers who can implement the respective backlogs in a given sphere. Moreover, the state must promote a healthy competition during R&D projects. This includes unorthodox ideas that might be generated by teams of young enthusiasts.

All countries with a well-developed defence industry prioritise defence-related research as a powerful driving force of innovation growth. It is precisely defence-related research projects receiving large and sustained state funding, which make it possible to implement many breakthrough technologies which would never exceed the profit margin in the civilian sector. The civilian sector manufactures such ready-made products and adapts them to its own needs.

We need modern companies acting as a kind of broker between military, industrial, scientific and political circles. Such companies must be able to single out and support the best aspects of national innovation projects, while circumventing excessive bureaucracy involving too many discussions. Optimal models for these kinds of companies are currently being developed and will soon be initiated.

Several days ago, I met with telecommunications and IT specialists in Novosibirsk. Notably, we discussed leading US universities which have won a reputation for themselves by implementing defence contracts and research projects. I think we must also more actively involve the potential of civilian universities in implementing programmes for the modernisation of the defence industry. Large-scale defence contracts can be another source of university and research centre development.

Sometimes critics claim that rebuilding the defence industry is a yoke for the Russian economy and a back-breaking burden which ruined the Soviet Union in its time. I am confident that this is a misconception.

The Soviet Union collapsed because it suppressed natural free-market development in the economy, and because it neglected people’s interests for too long. It disintegrated as a result of a fruitless attempt to force the entire country to work as one single factory. This inevitably resulted in the loss of control even in the defence industry. In Soviet times, they would simultaneously test and adopt several rival weapons systems. Moreover, the government even failed to facilitate the transfer of elementary technology to civilian use.

We must not repeat our past mistakes here. The huge resources invested in the renewal of the defence industry and in the rearmament programme must facilitate the modernisation of the entire Russian economy. They must serve as a major incentive for quality growth where state spending creates jobs, facilitates market demand and “feeds” science. This implies the accomplishment of the very same effects being stipulated by current modernisation programmes. The only thing is that the defence industry will facilitate a much larger effect than we have previously attained.

The renewal of the defence industry will facilitate the development of the most diverse sectors, including metallurgy, engineering, the chemical and radio-electronic industries, as well as the entire range of information technologies and telecommunications. Enterprises in these sectors will also receive the required resources to renew their production facilities. They will receive new engineering solutions. This will promote the stability of many research teams, as well as their presence in the civilian research market.

A balance has developed in the modern world of the mutual influence of defence and civilian technologies. In certain industries, such as telecommunications, innovative materials and information and communication technologies, it is the civilian technologies that are the driving force behind the burgeoning development of military equipment; in others, such as aviation and space technology, military designs lead the way for innovations in civilian sectors. This situation calls for innovative approaches towards the principles underlying the exchange of information and the revision of obsolete approaches to the protection of state secrets. We should be very rigorous about protecting a limited number of truly important secrets, while at the same time exchanging all other scientific and technical information between all those who are able to use it effectively.

In so doing, it is crucial to ensure the availability of a counter flow of innovations and technologies between the defence and civilian sectors. The intellectual property created in the defence sector should be properly assessed. Such an assessment should take into account the potential of civilian commercialisation and prospects for the transfer of technology. We should manufacture civilian products at defence plants, but avoid repeating the sad experience of the defence industry conversion, in which defence plants were making titanium saucepans and shovels. We already have a good example in the serial production of the first digitalised Russian civilian aircraft, the Sukhoi Superjet.

Clearly, we need to thoroughly revise the economic activities that military and industrial complex enterprises are pursuing. They are plagued by numerous inefficiencies, such as vast unjustified expenses, overhead costs which often run into the thousands of percentage points, as well as tangled and obscure relations with contractors, where a parent company is balancing on the brink of bankruptcy and its subsidiaries and suppliers are generating profits running into two or three figures.

We will aggressively combat corruption in the defence industry and the Armed Forces and hold fast to the principle of the unavoidability of punishment. Indeed, corruption in the sphere of national security amounts to no less than high treason.

Excessive protectiveness has already resulted in our reduced competitiveness, sharp increases in prices for defence products, generation of windfall profits that are being used for personal enrichment of individual businessmen and officials rather than the upgrading of the industry. Open auctions should be held in all instances where they don’t contradict national interests and pose no threat to the safety of state secrets. Defence purchases should be carried out under close public control, and punishment for violations in the sphere of defence government contracting should be toughened.

We will be building the single operating algorithm for vertically integrated entities which shouldn’t be headed by lobbyists representing a particular enterprise. At the same time, we should start breaking departmental stereotypes and engage civilian enterprises and private businesses in the manufacturing of military equipment and defence engineering.

The development of the military-industrial complex by the state alone is already ineffective and will cease to be economically viable in the mid-term. It is important to promote the partnership between the state and private businesses in the defence industry and make the procedures involved in establishing new defence enterprises less complicated. Private companies are prepared to invest their capital, expertise and know-how in the defence industry. We believe that we will have our own entrepreneurs of the calibre of Demidov and Putilov.

The leading manufacturers of armaments and military equipment in the United States and Europe are not run by the state. A fresh look at the industry and innovative business approaches to the organisation of manufacturing processes will give Russian weapons a new breath of life and improve the competitiveness of Russian weapons on international markets. Certainly, employment at privately-run defence enterprises should require security clearance. However, this should not become a barrier to establishing such enterprises or to their participation in state defence contracting. It is precisely such new private companies that may provide technological breakthroughs capable of drastically changing the industry.

The problem is that our private investors do not know exactly which of their capabilities may be used by the defence industry or areas where they can apply their energy or capital. An open information source must be established that clearly states the current needs of the defence industry for private businesses and investment.

Legacy enterprises that were established in Soviet times need to be upgraded. Manufacturing processes should be streamlined in order to be able to use advanced technologies. This work should be performed by highly skilled managers, process engineers and technical officers from private business. Quality management at defence enterprises should be enhanced and reporting should be introduced on spending under state defence contracts.

In addition, national mobilisation needs should be reviewed. The existing system is in many ways antiquated. Today, we don’t need production facilities that just churn out old armaments and ammunition. The defence industry and the mobilisation reserve should be based on the latest high-tech manufacturing facilities capable of making competitive high-quality products. They can be based on existing plants and enterprises that need to be upgraded, or built from the ground up.

Of course, we need to raise the prestige of defence industry occupations. Therefore, it would be wise to provide additional social guarantees, or even privileges, to defence sector employees. In addition, average salaries at state-run defence enterprises and R&D centres should be comparable to military service pay.

Education and on-the-job personnel training should be a focus of particular attention. Many enterprises have run into an acute shortage of technicians and highly skilled workers, which interferes with the timely execution of government orders and with the expansion of manufacturing capacities.

Specialised higher education institutions, including applied bachelors programmes, and vocational schools of general education, whose graduates often go on to work at defence enterprises, should play the key role in resolving this issue. I believe that future employment can be arranged through three-way agreements signed between the educational institution, a sectoral concern and a student. Work at an enterprise should begin when students are still pursuing their studies in college and should take the form of practical training and on-the-job training. In addition to gaining working experience, students will have the opportunity to earn good money and will be motivated to acquire necessary skills. Of course, such on-the-job training should be integrated into curricula.

The prestige of technical specialties is on the rise. Defence enterprises should become the focus of attraction for talented youth and should provide – as was the case in the Soviet Union – broad opportunities for creativity in the sphere of engineering, research and technology.

I believe that we should consider sending young employees of the defence sector and senior students of technical colleges to receive on-the-job training at leading Russian and international labs, institutes and enterprises. Managing modern equipment calls for superior skill sets, deep knowledge, and ongoing training. Therefore, professional advancement programmes at enterprises should absolutely be maintained and supported.

* * *

In the process of building our defence policy and modernising the Armed Forces, we should keep up with the latest trends in the military sphere. To fall behind these trends means becoming vulnerable and putting at risk our country and the lives of our soldiers and officers. We cannot afford repeating the tragedy of 1941, when a lack of readiness of the state and the Army for war led to the vast loss of human lives.

The unprecedented scale of the armaments programme and upgrading of the defence industry re-affirms the seriousness of our intentions. We understand that Russia will have to spend a lot in order to be able to implement these plans.

Our goal is to build an Army and a defence industry that will strengthen, not deplete, our national economy, and that is capable of securing Russia’s sovereignty, the respect of its partners and lasting peace.

Vladimir Putin