The Russian government has tallied up the costs of modernizing their aging military forces equipment and concluded that it will total about $700 billion. To pay for this, the military wants another 1.5 percent of GDP, meaning 5 percent of GDP will be devoted to defense. The military may get it.
This modernization plan has been underway for most of the last decade, as the government realized it had to do something about rapidly aging military equipment. In many cases, these purchases are essential, because buying new gear basically halted (with a few exceptions, like ballistic missiles) during the 1990s. So most of the armed forces are still using Cold War era gear manufactured in the 1970s and 80s. Fortunately, even older (50s and 60s era) equipment was junked as the armed forces shrank 80 percent in the 1990s.
According to the new government plan, in the next decade, at least a third of current gear will be replaced, and in some categories (usually high tech), over 80 percent. President Dmitry Medvedev is going around giving speeches to the troops, featuring these promises. If the government does not deliver, morale will take a big hit. This will happen quickly in the navy, for they have been told that more ships, will spend more time at sea, and very soon. Existing ships can't handle that kind of workload. Thus there is some grounds for optimism in the fleet, for in the last five years, the air force has resumed long range air patrols over areas off the Russian coast, which have not seen Russian navy or air force activity in over a decade. Since 1991, Russian warships have spent most of their time tied up at dock, meaning an entire generation of sailors have little experience at sea. This spells defeat in wartime, and the sailors, especially the senior commanders, know it.
The global recession is over for Russia. GDP is growing again. In response, the government is keeping defense spending up (to about $50 billion, or 3.6 percent of GDP, a rate similar to that of the U.S., which has a GDP about ten times larger). Keeping the new promises will boost spending to over $70 billion a year.
The Russian armed forces has already come to grips with the fact that it will never return to the glory days of the Soviet Union (which dissolved in 1991). The military was called "the Red Army" back then. A sign of these changes is the sale of military owned property. The military has auctioned off lots of very valuable property. The armed forces had acquired, during the Cold War, some 135,000 square kilometers of land (including 7,640 bases and 175,000 buildings). A lot of it eventually became prime real estate, much in demand in a booming economy. It's estimated that all this real estate is worth at least $12 billion. Much of it has been sold off to raise money for construction of housing for the million military personnel still in service.
Back during the Cold War, the armed forces had five times as many troops (over five million) and dibs on over ten percent of the national GNP (no one is sure of the exact amount, as the communists were not big fans of accountants and accurate financial reporting.) Currently, Russia is playing by West European rules when it comes to military spending, meaning no more than 3-4 percent of GDP going to the military. With a $1.7 trillion dollar economy, growing at 7 percent a year, the generals can expect a lot more cash to work with. But most of this money is going to replace Cold War era weapons, which are now considered out-of-date and of limited usefulness.