While Russian military expenditure has been subject to analysis since the end of communism, the funding of other power ministries, in particular the security agencies, has suffered neglect. There is probably a simple explanation for this neglect, i.e. a perception that the lack of transparency of such funding effectively precludes any meaningful analysis. However, having for many years studied Soviet and Russian spending on the armed forces, the author has become convinced that similar analysis can be extended to the other power agencies and that in the process some of the non-transparency of the Russian budgetary process can be dispelled1. Furthermore, the degree of classification of budgetary funding of the power ministries has not remained constant over time. Even the years of Putin’s presidency have seen changes in the handling of spending on the power agencies. By 2006 there was somewhat greater openness than when he first took over presidential powers, but in the summer of 2007 there was a reversion to greater secrecy. Analysis of budgetary expenditure on the power agencies, using this as a generic term to cover a set of ministries, agencies, services and forces concerned with national security, public order and the defence of the realm, makes it possible to establish trends over time of some significance, helping to cast light on state priorities in Russia during the 1990s and the early years of the twenty-first century.

In this paper the power agencies of Russia have been separated into four categories: security services, public order agencies, provision for emergencies, and the armed forces of the Ministry of Defence. Little attention is devoted to the latter as their funding has been analysed elsewhere.

Federal Security Service (Federal’naia sluzhba bezopasnosti Rossii, FSB). Russia’s principal domestic security agency, successor to the Soviet KGB. In 1992 known as the Ministry of Security (MB), and from December 1993 to April 1995 as the Federal Counter-Intelligence Service (FSK). Subordinated to the President2.

Organs of the Border Service (Organy pogranichnoi sluzhby), from the end of 1993 to 2003, as the Federal Border Service, Russia’s armed security forces for border protection had an autonomous status, but were then subordinated to the FSB, although for budgetary purposes they are still granted a separate line of spending. Subordinated to the President.

Foreign Security Service (Sluzhba vneshnei razvedki RF, SVR). Created in December 1991 on the basis of first directorate of the USSR KGB. Subordinated to the President.

Federal Protection (or Guard) Service (Federal’naia sluzhba okhrany RF, FSO). The service responsible for the security of the Russian president and government. Prior to1996 known as the Main Protection Directorate (Glavnoe upravelenie okrany, GUO). By a decree of March 2003 it took over many of the responsibilities of the Federal Agency for Government Communications and Information (FAPSI). Earlier, in August 1996, it took over the Presidential Security Service (Sluzhba bezopasnosti prezidenta, SBP), which previously enjoyed a separate existence and was the power base of Eltsin’s security chief, Aleksandr Korzhakov. Subordinated to the President.

Federal Service for Technical and Export Control (Federal’naia sluzhba po tekhnicheskomu i eksportnomu kontrolyu, FSTEK). Until 2004 this government agency was known as the State Technical Commission (Gosudarstvennaia tekhnicheskaia kommissiia pri Presidente RF, Gostekhkomissiia), a highly secretive organisation subordinate to the President concerned, among other things, with the technical security of systems of information and communications. It is now overseen by the Ministry of Defence. However, it is funded under the budget subchapter ‘organs of security’.

To these security agencies should probably be added the Main Intelligence Directorate of the General Staff (Glavnoe razvedyvatel’noe upravlenie, GRU), but its funding is treated as part of that of the Ministry of Defence in the budget chapter ‘National Defence’ and as such is not separately identified.

Ministry of Internal Affairs (Ministerstvo vnutrennykh del RF, MVD). The MVD is subordinated to the President.

Internal Troops of the MVD (Vnutrennie voiska, VV MVD): the armed force of the internal ministry, now in the process of losing some of their military capability as their heavy weapons are being transferred to the Ministry of Defence.

Federal Service of the Tax Police (Federal’naia sluzhba nalogovoi politsii, FSNP) A uniformed, armed, service created in 1995 and treated as a power agency. In 2003 its functions were transferred to the MVD and on the basis of the structures of the FSNP a new anti-drugs agency was formed.

Federal Service for the Control of Drugs (Federal’naia sluzhba RF po kontrolyu za oborotom narkotikov, FSKON). Formed in July 2003 on the basis of the structures of the tax police. Headed by Viktor Cherkesov, a prominent ex-FSB official, this organisation is clearly regarded in Russia as a significant power agency, the brief of which may well extend beyond the control of drugs. Subordinated to President. In the budget, the line previously devoted to ‘organs of the tax police’ was simply replaced by a line for the new agency, the volume of funding being almost unchanged.

Federal Courier Service (Federal’naia fel’d"egerskiia sluzhba, FFS), formerly state courier service (GFS). Responsible for secure transport of goods and documents for government agencies. Subordinated to the President. Until 2000 included under the budget chapter “Transport and communications”, but from 2001 in the chapter devoted to security and public order.

Organs of the Procuracy (Organy prokuratury). Spending is reported under the Office of the Procurator-General (General’naia pokuratura RF).

Organs of Justice. Spending is now reported under three agencies: Ministry of Justice (Ministerstvo iustitsii RF), Federal Registration Service (Federal’naia registratsionnaia sluzhba, FRS), and Federal Bailiff Service (Federal’naia sluzhba sudebnykh pristavov, SFSP). Subordinated to the President.

The Penal System. Federal Service for the Implementation of Sentences (Federal’naia sluzhba ispolneniia nakazaniia, FSIN), overseen by the Ministry of Justice and, as such, subordinated to the President.

In this category the court system has been excluded. Until 1998 the Supreme Court, Constitutional Court and Higher Court of Arbitration were included in the budget chapter for security and public order agencies as part of the funding line “judiciary”, but from 1999 to 2004 were separated out to form a separate chapter devoted to the federal legal system, which from 2005 was absorbed into the chapter (1) “General public services”.

Ministry of Civil Defence, Emergency Situations and Liquidation of the Consequences of Natural Disasters (Ministerstvo Rossiiskoi Federatsii po delam grazhdanskoi oborony, chrezvychainym situatsiiam i liquidatsii posledstvii stikhiinykh bedstvii, MChS). Has armed forces which participate in peace keeping activities. Subordinated to the President.

Main Directorate of Special Programmes of the President (Glavnoe upravlenie spetsial’nykh programm prezidenta, GUSP). The Russian security agency shrouded by the greatest degree of secrecy and about which the least is known. The former 5th directorate of the administrative office of the Russian Federation Council of Ministers, first created in January 19774. Responsible for mobilisation preparedness of the organs of state power in the event of war or major national emergency, including the building and maintenance of secure alternative locations (bunkers) for the president and government agencies, for which it has a Service of Special Objects (Sluzhba spetsial’nykh ob"ektov). Believed to have some 20 000 personnel5. Subordinated to the President.

Before leaving security services and public order agencies it is necessary to consider two other organisations which in Russia have been conventionally grouped with them for budgetary purposes. Firstly, the Federal Customs Service (formerly State Customs Committee), which in the government reorganisation of 2004-2005 was converted into a normal civilian agency, first under the Ministry of Economic Development and Trade, and later under the direct oversight of the prime minister. It now appears in the budget chapter 1, “General public services”. Secondly, the Federal Fire Service, under the Ministry of Civil Defence and Emergencies and, as such, included in the budget chapter for security and public order. In most other countries the customs and fire services would not be regarded as security or public order agencies and they have not been granted this status in this analysis.

Armed forces of the Ministry of Defence (Ministerstvo oborony, MO). Here the concern is the budgetary chapter entitled “National Defence”, the scope of which has undergone minor changes over the years, but has always included spending on the MO forces, operations and maintenance plus arms procurement and R&D, including outlays of the nuclear weapons industry on the development and production of nuclear devices for the MO forces. The MO is now once again under Presidential subordination, having for a while been the structures of government, probably because the defence minister at the time, Sergei Ivanov, was a deputy prime minister.

Most of the expenditure on power agencies is included under two chapters of the federal budget, one devoted to “National Defence”, the other to “National Security and Public Order” (the title of this chapter has varied over time, before 2004 it was known as “Public Order and Providing for the Security of the State”). However, at various times some spending has been covered by other chapters, in particular allocations to provision for emergencies, to which a separate budget chapter, “Warning and Liquidation of the Consequences of Emergency Situations and Natural Disasters” (including civil defence), was devoted in the years prior to 2005. The most recent significant change in the Russia budget classification went into force in 2005, leading to a partial loss of continuity in analysis of year-to-year comparisons of funding.

The budgetary process for security and public order agencies is in essence the same as that for military spending6. The draft federal budget is drawn up by the Ministry of Finance on the basis of an economic forecast provided by the Ministry of Economic Development and Trade. The Ministry of Defence, FSB, MVD and other power agencies submit proposals on their desired spending for the following year, with account of the forecast development of the economy. The finance ministry takes account of these proposals, but is under no obligation to accept them if it judges them incompatible with economic possibilities. After initial approval by the government, a draft budget is submitted to the Federal Assembly, the Russian parliament. Details of the budget are presented in a set of appendices. With respect to budget expenditure, the principal documents are a summary of total spending in terms of functional chapters and main lines of funding (all in accordance with the prevailing statutory budget classification), a detailed summary of allocations to individual government departments, again by functional chapter, and thirdly a functional breakdown in detail for all spending explicitly allocated to specific government departments. In addition, there is an appendix setting out the ‘state defence order’ for arms procurement and military R&D for the MOD and other power agencies. Summary details of MOD procurement and R&D were made public between 1992 and 1997, but from 1998 classified. The more detailed appendix on the state defence order (for the MOD, MVD and FSB) was published for the budgets of 2002-05, but has been classified for since 2006. As discussed in more detail below, in 2007 there was a transition to a new three-year budget, the first form the period 2008 to 2010, and with this change the level of classification of the budget increased to a significant degree.

While all State Duma deputies are provided every year with the draft federal budget, the chapters on “national defence” and “security and public order” are presented in highly aggregated terms with little meaningful detail. More information is provided to a special commission of the Duma “for examining outlays of the federal budget directed to securing the defence and state security of the Russian Federation”. This commission has some forty members drawn predominantly from the Duma’s committees for defence, security, budget and taxes, and industry, with barely a quarter from the security committee, some of these having backgrounds in the FSB and MVD. The commission meets in camera and its members have to have appropriate security clearance. The commission can recommend amendments to the draft budget but in recent years it does not appear to have done this to any significant extent with respect to security or public order agencies. Once the budget has been adopted the commission stands down and plays no role in monitoring budget implementation.

Prior to 1995 the published federal budget contained limited information on the funding of the MOD and other power agencies. This was a time of severe economic contraction and high rates of inflation which meant that in practice the budget had little significance. However, for 1995 the budget law as published was unusually transparent and for this reason provides a valuable starting point. Between 1995 and 1998 economic conditions remained unfavourable; a modest recovery in 1997 being followed by a serious financial crisis in 1998. The approved budget had limited meaning as the government resorted to sequestration, starving the MOD and other agencies of funding. In these circumstances analysis of budget intentions has little meaning. Furthermore, very little was made public on actual budget implementation. The situation changed substantially from 1999. The economy began to recover, actual budget outlays became more closely related to the allocations set out in the budget law, and from 2001 the Federal Assembly began to approve laws on budget implementation on a regular basis, the first being for the budget of 1999. For this reason the following analysis first considers the budget for 1995, then actual budget implementation over the period 1999 to 2004, and finally, in the absence of detailed data on implementation, the budget laws of 2005 to 2007, and the three-year budget, 2008-2010.

For one year only, 1995, was there a large degree of openness in the federal budget on the funding of the power agencies. The law, adopted 31 March 1995, had an unusually detailed appendix on funding by government department. This provides a useful reference point for understanding the less transparent budgets of later years7.

The data (see Table 1) have been presented in a form comparable to that employed in the analysis of budget spending of later years. It can be seen that funding of the security services as such represented a modest share of total budget funding, so much so that the funding allocation to all the security services amounted to little more than 10 per cent of the funding of “national defence”. The principal domestic security agency, then know as the FSK, accounted for less than half of total spending on security services, but was allocated almost five times the funding devoted to the foreign intelligence service.

• 1. Budget chapter “Public order and providing for state security”. Note, in 1998 the rouble was revalued, one new rouble becoming equal to 1,000 old. The table presents funding in terms of the rouble of 1995.

• 2. Renamed Federal Security Service, FSB, in April 995.

• 3. Under chapter 1 of budget, “state administration”.

• 4. Then the Federal directorate of the courier service attached to Ministry of Communications; under chapter 9 of budget, ‘Transport and communications’.

• 5. In the 1995 budget this budget line also included funding for a number of state programmes (by far the largest a programme of measures for dealing with the Chernobyl disaster) and for mobilisation preparation, both to be financed by the Ministry of Finance. From 1999 these items were transferred to other parts of the budget so have been excluded here.

• 6. Then known as Directorate for planning and realisation of special programmes of Administration of President (later GUSP).

• 7. For compatibility with later years, pensions excluded.

More insight into the relative standing of the security services in the mid-1990s is provided by additional data released at the time the draft federal budget for 1995 was presented to the State Duma in October 1994. The author has in his possession a copy

of this draft which includes information on the authorised staffing levels of the principal power agencies as of the beginning and end of 1995. This permits estimation of funding per person for each agency. (Table 2)

• 1. Shtatnaia chislennost’, i.e. the number of personnel authorised for funding from the federal budget. In reality, agencies may have had more or less people actually on their payrolls. In Russian practice the authorised staffing level excludes various categories of so-called auxiliary personnel such as cleaners and office security staff.

• 2. Servicemen and civilians

• 3. Personnel funded from federal budget only, i.e. excluding personnel funded from regional/republican budgets.

• 4. Note: the Ministry of Security, the agency that preceded the FSK, had a staff of c.137 000, plus c.200 000 border troops (Izvestia, 7 December 1993, p.5).

On the assumption that the funding of the other security services was at a level similar to that for the FSK, i.e. 13.2 m.r. per person, the SVR would have had a staff of approximately 16 000, the Main Protection Directorate (GUO) some 36 000 and the Presidential Security Service (SBP) 2,500, giving a total staff of all security services of approximately 400 0008. This can be compared with the total staff of the KGB in 1991, a claimed 420 000, including border troops9.

The available laws on budget implementation, 1999-2004, permit a consistent analysis of the pattern of spending on power agencies since Vladimir Putin became, first, prime minister, and then President of Russia. The equivalent law on the implementation of the 2005 federal budget should be adopted during the first half of 2007. Actual funding is shown in Table 3 (See Annex).

It can be seen that during the six-year period spending on the power agencies as a share of GDP rose, with a more marked increase in allocations to the security services and public order agencies than for the armed forces. During the first two years of Putin’s presidency the share of budget spending devoted to the power agencies increased quite rapidly, reaching a peak in 2001. This was a time when the economy was showing strong growth and the government was also attempting to check the proportion of budget spending in GDP. In 2002 the share of the power agencies in total spending was checked, but their GDP share continued to increase.

In 2005 a new budget functional classification was implemented, bringing Russian practice into line with the widely-used Classification of Functions of Government (COFOG) originally produced by the OECD. At the same time, the budget was amended to take account of a major reorganisation of the structures of government, creating some new agencies and services. These changes introduced an element of discontinuity as the scope of the budget chapters on ‘national defence’ and ‘national security and public order’ underwent modification in part because spending on ‘civilian’ activities by the MOD and other agencies, mainly on education, health, and housing, was transferred to other relevant chapters of the budget. With respect to ‘national defence’, the new budget classification has been considered in detail elsewhere by the author10. Budget chapter 3, “national security and public order” now, like the “national defence” chapter (2), includes two additional lines, “applied research” and “other questions”, under which some allocations are classified. The “other” line also includes the allocation to the Federal Courier Service. For the purposes of the present analysis, these two budget lines have been excluded, apart from the inclusion of the courier service. It is not clear whether the funding under these two lines was included in allocations to the security services and public order agencies prior to 2005, the amounts involved are not very large (apart from the budget for 2005, perhaps a transitional year), and it is difficult to allocate the classified parts of these two budget lines as they could relate to either the security services or emergency provision under GUSP.

Spending intentions in the federal budgets for the three years 2005-2007 are shown in Table 4 (See Annex). This shows the budgets as originally adopted, without account of amendments adopted towards the end of the budget years of 2005 and 2006.

It can be seen that GDP shares for the security services and public order agencies have stabilised but have declined for the armed forces. Actual spending in 2005 revealed a check in the growth of spending on security, but in 2006 growth resumed.

In 2007 Russia made a transition to a rolling three-year budget framework, the first such budget being drawn up for the period 2008 to 2010. A first draft version of the budget, with total spending broken down by budget chapter and subchapter, was made available in March 2007. However, by the time the draft budget was approved by the government for consideration by the State Duma the usual appendix showing total funding by chapter and subchapter had disappeared. The only information presented on the functional allocation of spending was spending by chapter and subchapter excluding all classified expenditure. When the budget was finally signed into law by President Putin on 24 July it retained the same form. In effect, total spending according to the main budget chapters – not only “national defence” and “national security and public order”, but also “general public services”, “national economy”, “education”, “culture” and “health” – has been made a state secret. This extraordinary development, for which no explanation has been offered, complicates determination of spending intentions with respect to the power agencies. However, it can be established that, in the case of spending under the chapters “national security and public order” and “national defence”, the draft budget of March 2007, providing a breakdown of total spending by functional chapter and subchapter, almost certainly provides an acceptable approximation to the spending intentions embodied in the final budget law11.

The results of analysis of the three-year budget are shown in Table 5.

•  1. FSB, SVR, FSO.

•  2. Possibly GUSP plus some classified spending of MChS.

•  3. GDP forecast of Ministry of Economic Development on which the budget is based.

• Note: in the budget as adopted into law there is an additional budget subchapter (03 12) in the chapter ‘national security and public order’, namely ‘modernisation of the internal troops, troops of civil defence, and public order and other organs’. However, the spending now shown under this new subchapter appears to have been reallocated from the previous subchapters with the result that the data shown in table are not affected.

The table suggests that spending on security and other power ministries will be held fairly constant as a share of total budget expenditure and of GDP over the three-year period but it is possible that spending after 2008 is somewhat understated, especially for 2010. In both 2009 and to a much greater extent in 2010 the budget includes some unallocated spending and it cannot be ruled out that some of this will be allocated to power ministries. This may explain the decline in the GDP shares of the security services and national defence shown for 2010.

Trends over time are illuminated further in Table 6, which shows the changing shares of total budget spending on power agencies.

• B: as budget law, other years actual spending.

This suggests the possibility that in circumstances of strict budgetary constraints the growth of spending on security services and public order agencies over time has been to some extent at the expense of increased spending on the armed forces. In effect, the security services, public order agencies and the Ministry of Defence are rival claimants for a given sum of budget funding, the volume of which is determined by the Ministry of Finance. Some support for this hypothesis was a disclosure in 2006 that Putin had at some point signed an order (ukaz) to the effect that to 2015 32 per cent of non-interest payments of the budget will go to national defence and security/public order12.

This shows that the share of the security services increases to 2009 but then declines in 2010, possibly, as noted, because funding for that year is understated. The shares of “public order” and “national defence” stabilise.

Spending trends can be seen more clearly if the growth of allocations is shown in real terms. As has become normal for analysing military expenditure in real terms, in the absence of a deflator specifically designed to capture price changes as experienced by the power ministries, the GDP deflator is employed. The results are shown in Table 7 (See Annex).

The table shows clearly that the rate of growth of spending in real terms on national defence over the period 1999 to 2006 has been approximately in line with the rate of growth of GDP and, according to the three-year budget, this relationship will be maintained to 2010.  The rate of growth of spending on public order has been significantly higher than that of GDP and on security services even more so. Over the years 1999 to budget year 2010, GDP is set to grow at an average annual rate of 6.7 per cent, spending on national defence by 6.8 per cent, on public order by 10.5 per cent and on the security services by 12 per cent, far outstripping the rate of growth of the economy.

Throughout the 1990s, with the partial exception of the budget for 1995, there was very little transparency in the funding of the security services and public order agencies. After about 2001 the situation somewhat improved. As noted above, laws on budget implementation are now adopted on a regular basis and provide enough detail to establish the general trends of spending. Prior to the budget for 2002, the appendix providing details of  spending on a functional basis excluded the budget chapters on national defence, security and public order activities, and provision for emergencies, making it impossible to establish the classified component of spending. Between 2002 and 2007 both the functional appendix and the appendix on funding allocations by government department gradually became more detailed and open, but with some reversals back to reduced transparency, e.g. the reclassification from 2006 of the budget appendix on the state defence order. The three-year budget for 2008 to 2010 marks a much more serious retreat from transparency and if the practice of excluding from the budget total spending by chapter and subchapter is to become standard practice it will become increasingly difficult to establish the true scale of spending on power agencies and the trend of such spending over time.

From the 2003 budget, for the first time, some spending on security agencies and the border service was openly acknowledged in the appendix on funding by government department, but the proportion of total spending on these budget lines so acknowledged was extremely small. In the case of the border service, a major improvement in openness in the 2003 and 2004 budgets was reversed in 2005. The trend towards slightly greater openness has been reversed with the adoption of the three-year budget to 2008. The changing degree of openness of these two budget lines is shown in Table 8.

• 1. FSB 257.2, SVR 1,062.4 and FSO 1,568.2 (plus 80.8 Ministry of Finance).

In 2007, for the first time since 1995, the existence of GUSP was openly acknowledged by an entry in the appendix devoted to spending by government department, although a mere 16.5 million roubles funding was acknowledged, all for health provision.

With slightly improved transparency, there has been some acknowledgement of allocations under chapter 3 to non-security/public order agencies. As noted above in the footnote to Table 8, the budget now includes an allocation to the Ministry of Finance under the budget line “organs of security”, but in the 2007 budget there is also a much larger, unexplained,  allocation to the finance ministry, 2,878.6 m.r., under the budget line “other questions in the field of national security and public order”. The 2007 budget also includes chapter 3 allocations to the Russian Academy of Sciences: 19.7 m.r. for R&D and 8 m..r. “other”; and to the Federal Agency for Health and Social Development, 21.5 m.r. for R&D (14.5 in the 2006 budget).

In relation to the MVD and MVD internal troops, until the 2008-2010 budget, the only classified budget item was funding allocated under the “state defence order” (for arms procurement, the modernisation and repair of arms, and arms-related R&D). This funding is presented in a separate appendix, which in recent years has been classified. However, from the time when this appendix was published there is no doubt that the currently classified item of MVD spending relates to the state defence order. Its magnitude in recent years is shown in Table 9. Unfortunately, the higher level of classification of spending makes it difficult to establish the equivalent data for 2008-10.

The data suggest that in recent years there has been a steady improvement in funding of the supply of arms and other equipment to the interior ministry, but with a marked shift of funding to the advantage of the ministry as such at the expense of the Interior Troops. In part this growth of spending may relate to the ministry’s role in Chechnya.

However, in comparison to the Ministry of Defence the MVD’s funding under the state defence order is extremely modest. In the 2007 budget the equivalent total for the MOD is 300 billion roubles, 36 per cent of the total allocation to “national defence”13.

Analysis of the pattern of budget spending in Russia since the mid-1990s reveals that the power agencies have gained an increased share of GDP and that the principal beneficiary has been the security services, which have faired better than the armed forces. How can this be explained? One possibility is that the security services have been favoured as a matter of policy. Given the background of Putin and some key figures in his administration and government this would not be surprising. To those inclined to interpret present-day Russian politics largely in terms of the influence of the so-called siloviki this would seem a highly probable interpretation. “However, it is also possible that the security services and public order agencies have gained improved funding, at least in part, as an unintended outcome of the general policy process. In absolute terms the financial allocations to the FSB, SVR, FSO and the border service are not large, representing very small shares of total budget expenditure. Their allocations are also non-transparent. In comparison, the Ministry of Defence is a very large-scale recipient of funding and more exposed to scrutiny in the Federal Assembly and the press. In nominal terms the annual increases in funding of the armed forces appear to be very substantial. In discussion of the budget in parliament and the media little attention is devoted to spending trends in real terms. Actual budget implementation receives little analysis. The laws on budget implementation appear with a delay of more than two years by which time they have marginal impact on current policy. The author has seen little analysis of spending on the power agencies of the type presented here in Russian publications14. Indeed, it may be the case that even in Russian government circles there is little or no awareness of the pattern of spending on the power agencies and changes over time in real terms. However, the trends identified suggest that a legacy of Putin’s rule will be that Russia will possess better-resourced, and presumably more powerful, security services and public order agencies and this fact may have implications for Russia’s future development.