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                                                                                COVER STORIES, Page 48

THE NEW RUSSIA: THE MILITARY

An Army Out of Work


Defense conversion will produce a painful metamorphosis

By BRUCE W. NELAN/MOSCOW


    In the calculus of world politics, the Soviet Union had
only one credible claim to superpower status -- its immense
military strength. The country's domestic economy was always a
shambles, and its Marxist-Leninist ideology has long been
threadbare. But for decades Moscow relentlessly built up its
armed forces to defend communism at home and advance its cause
abroad. The military had first call on the nation's resources,
and civilians got what was left.

    When it came to forging Soviet power, Joseph Stalin and
his successors more than fulfilled their plan. Now Boris
Yeltsin and, presumably, his successors have to undo it. The
country simply cannot afford such oversize armed forces, and the
civilian economy desperately needs the money, talent and
productive power locked inside the military-industrial complex.
But demobilizing on such a scale poses an especially Herculean
challenge to a country that barely has a functioning economy and
has no national consensus on how cutting down the troops, the
arsenal and the production lines ought to occur.

    At their peak in the late 1980s, Soviet forces, if they
did not actually dominate the world, were certainly capable of
destroying it. Moscow boasted an army of more than 4 million
soldiers, an air force with thousands of planes, four surface
fleets and the world's largest flotilla of submarines. Most
formidable of all were its 1,400 land-based intercontinental
missiles tipped with nuclear warheads. While most of the world
regarded this arsenal with dread, Soviet citizens proudly viewed
it as a symbol of national greatness.

    The panoply and the pride behind it collapsed with the
Soviet Union itself. In Russia, which inherited most of the
former state's military, 2.2 million troops are officially still
in uniform, but with many young men dodging the draft, the
actual number is probably only 1.8 million. The former
far-ranging Soviet navy is staying close to its home ports, and
much of the air force is grounded.

    Russia has removed all tactical nuclear warheads from
neighboring republics and is dismantling them. Ukraine, Belarus
and Kazakhstan -- the three other states where intercontinental
missiles are based -- have agreed to hand over those warheads
to Russia for destruction as well. Ukraine is dickering for
better terms, including a share in any profit from sales of the
nuclear material taken from the missiles, but Western officials
are still confident all three will live up to their pledges.

    Russia does not intend to eliminate its armed forces
entirely, of course, but it does not know precisely what
external dangers it will have to defend against or what it might
need for the purpose. Military planners in Moscow say they want
to organize a relatively small, fast-moving high-tech force that
could react swiftly to security threats along the troubled
periphery. The generals expect to bring troop strength down to
1.5 million officers and men sometime after 1993. How soon
depends on finding ways to house and employ the hundreds of
thousands of professional officers who will be demobilized. The
housing shortage is severe: more than 200,000 officers and their
families are already living in run-down barracks and drafty
tents in Russia.

    More soldiers are pouring in all the time from former
outposts in Central Asia, Eastern Europe and Mongolia, and
80,000 are still stuck in the Baltic states, where they are
treated as foreign occupiers. In Russia too, returning officers
are often resented because they compete with civilians for
scarce apartments. "It's not the same army," says Colonel Vitali
Moroz, deputy editor of the defense daily Krasnaya Zvezda.
"Everyone was proud of it. They don't feel that way anymore."

    In fact the whole of Russian society is shifting gears in
what reformers call konversiya, or conversion. It means the
resources that were poured into the armed forces and defense
production are to be redirected to boost the struggling civilian
economy. The potential for such a transformation is gigantic:
the military-industrial complex directly employed 10 million
people, including the most highly trained scientists and
best-educated workers, and accounted for 25% of the Soviet
Union's gross national product. In the Russian republic, half
of all manufacturing was for the military.

    A year ago, when the Soviet Union broke up, konversiya
took on a whole new meaning. As central price controls were
lifted, costs soared. Inflation of 25% a month makes government
budgets almost meaningless. Defense procurement has dropped 80%,
and many military factories now have no orders.

    Yeltsin's government and defense industrialists agree that
the most modern and advanced plants must be maintained to
provide for security needs and keep a competitive edge in world
trade. "It is vital to preserve high-level technology," says
German Zagainov, director of the Central Aero-Hydrodynamic
Institute, a modern installation outside Moscow. "If we try to
convert to producing garbage cans, we will disappear."

    But the bulk of the giant enterprises turning out ordinary
ships, tanks and munitions face a different choice. They can
either shut down or find new sources of financing. The
government has its own ideas. Mikhail Malei, Yeltsin's chief
adviser on conversion, proposes switching these factories, in
whole or in part, to civilian production over the next 15 years.
The problem is that Malei estimates the plan will cost the
equivalent of $150 billion -- money Moscow does not have.

    Until then, Russia's leaders have seized on arms sales as
a magic wand to turn surplus weapons into cash. Though it may
irritate the U.S. and other Western countries, Russia is
eagerly fulfilling the arms contracts it inherited from the
U.S.S.R. -- and looking for new customers. It is selling planes
and ships to China, Iran, India and most other applicants who
can pay in hard currency. "Arms are exported by highly moral
Germans and by Americans concerned about human rights," says
Malei. "Why can't we do the same thing now that we are hit by
a crisis?" Even Yeltsin claims such sales, if properly
controlled, are "one of the best ways to solve the defense
sector's problems."

    Washington does not see it that way. "We differ," says a
concerned U.S. official, "on who is an eligible, responsible
buyer. We have real differences on Iran, for example." Sergei
Karaganov, deputy director of the Academy of Sciences' Institute
of Europe, responds, "Overseas sales of weapons, which the West
does not like, earn more hard currency than aid from the West
provides."

    Possibly so, but the international arms market is
overflowing with surplus supplies, and sales are down
dramatically. Few of Russia's traditional customers can pay
cash. Malei hopes to earn $10 billion a year from weapons sales,
but Russia's sales last year were worth only $5 billion. That
kind of income will not approach the level Malei estimates the
factories need. "The rest must come from elsewhere," says Moroz.
"Where? No one knows."

    Most directors of defense enterprises hope to make up the
shortfall from foreign investments. They have little faith in
government promises and are looking for joint ventures, foreign
partners and funding from overseas. Russian oil and gas
companies, the aviation and aerospace industry, optics and other
advanced technologies have had nibbles from abroad; perhaps two
dozen enterprises have attracted some investment.

    But the great majority of the 1,500 arms factories, and
the millions they employ, will probably have to go out of
business. American executives who have inspected the plants say
too many of them are old, overstaffed and unsafe. They believe
it would be better to shut them down and start over on new lines
like toxic-waste disposal or efficient energy and
transportation systems, rather than retool the existing plants.
"To reform the Russian economy," says a senior U.S. official,
"the military-industrial complex must be closed. You can't
rationalize it." Many leading Russian reformers agree. "The
energetic people will survive and convert their industries,"
says Alexei Pankin, a specialist on security issues at the
monthly Mezhdunarodnaya Zhizn. "The unsuccessful will fail, and
their industries will die."

    This is a bitter prescription but surely the right one.
The days of centrally planned economic programs are over, and
Russia is setting loose the market forces that will remake its
economy. The highly trained engineers and managers being
released from the uniformed services will lose their feelings
of resentment when they begin to find jobs where they can use
their technical skills. The military-industrial complex, like
the rest of society, will not be transformed by some master plan
from Moscow but by Russians free to seize the new opportunities
of the nascent marketplace.