MOSCOW—Fighter jets roared overhead this week as Russian arms firms showcased their new wares, including drones, helicopters and surface-to-air missiles, in a biennial air and space extravaganza.

But even as the country projects a muscular image, a falling ruble and weaker economy has forced the Kremlin to scale back its ambitious plans for a multibillion-dollar military modernization.

In just one example, Russia's Defense Ministry has cut the number of Sukhoi T-50 stealth fighters it will buy in its initial order from as many as 100 to 12, an official close to the defense industry said.

Opening this year's International Aviation and Space Show at an airfield outside Moscow, President Vladimir Putin promised Russia would push ahead with revamping its defense sector and equipping its armed forces with better and more powerful technology. It has already restructured its army to make it a more mobile and flexible fighting force.

"We will continue developing our country's unique capabilities in the space sector, and will bolster our leading position in the production of defense-sector aviation technology," Mr. Putin said on Tuesday.

But while Russia hasn't officially cut its budget for arms procurement or research and development, industry officials say state defense and security firms have been asked to reduce their expenditures by 10%.

Just as importantly, the rubles allocated are worth less when it comes to buying foreign parts and acquiring Western technology; Russia's currency has slumped some 20% against the dollar over the past month.

"The budget hasn't shrunk, but we can only do less and less with what we are being given," said Rafel Mirzoyan, an engineer at Concern Radio-Electronic Technologies, based in southern Russia's Stavropol region.

Russia, of course, remains a formidable power. U.S. military leaders including Gen. Joe Dunford, President Barack Obama's nominee to become the Pentagon's top military officer, have recently named Russia as the biggest threat to U.S. national security, due to its nuclear arsenal and recent aggressive behavior toward its neighbors.

In 2011, Russia started on an ambitious rearmament program to equip at least 75% of its armed forces with more powerful technology by 2020, a spending plan worth $680 billion when it was announced.

The modernization has encompassed a range of space projects, rocket programs and the next-generation fighter jet, the T-50.

But a sharp drop in oil prices has sent shock waves through Russia's economy, while Western sanctions have added additional strain on some of Russia's largest businesses, including some defense firms now on Western blacklists.

It is unclear how much Russia's plans depend on imported parts and technology that are now off limits because of Ukraine crisis. But in one high-profile blow, France this month broke a €1.2 billion ($1.35 billion) contract to deliver two warships, cutting Russia off from a much-needed glimpse at Western weapons technology.

"You can't do everything: [There are] not enough resources financially, not enough intellectual resources, not enough technological partners," said Ruslan Pukhov, director of CAST, a Moscow-based defense think tank. "You can name up to a dozen project but you can realize a maximum of five."

The International Aviation and Space Show started in 1993 and gained force over the 2000s as Russia benefited from rising oil revenues and arms importers looked to diversify away from Western weapons systems.

The Russian leader used the venue this week to host Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed al-Nahyan and Jordan's King Abdullah II.

One item on display has become Russia's perhaps most-infamous piece of military equipment—the BUK 2ME, a missile system the U.S. government says downed Malaysia Airlines Flight 17 last year above pro-Russian separatist territory in eastern Ukraine. Russia's Defense Ministry disputes Washington's assessment and has put forth evidence it says shows the civilian airliner was downed by a Ukrainian fighter jet.

A salesman from the Russian defense firm Almaz-Antey, the BUK's manufacturer, described the system's finer points this week to a delegation of Tanzanian officers, dressed in dark blue military uniforms heavy with gold braid.

"It will lock on to 24 targets at once," the salesman said, pointing down at the model of the mobile surface to air missile system. The visitors were then led out to see the real thing, parked at the far end of the airfield.

A delegation of Chinese officers was also led past models of other Russian aircraft, including a Yak-130 and a MiG-35.

Since the start of tensions with the West, Russia has touted what it calls a strategic alliance with China, which may develop into plans to build a joint aircraft carrier.

A defense industry official, however, said China is raising its demands, and wants a controlling stake in the project.

"We both tout the benefits of our friendship," the official said. "But the truth is, the Chinese are playing hardball."

Write to Thomas Grove at thomas.grove@wsj.com

 

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(END) Dow Jones Newswires

August 28, 2015 01:25 ET (05:25 GMT)

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