By Thomas Grove 

NIZHNIY TAGIL, Russia--The Russian military has shown off its new fighting power during its airstrikes in Syria, releasing slick videos of cruise-missile launches and satellite-guided bombs hitting their targets.

But at the same time, parts of the military-industrial complex at home are faltering. Russia's economy has been hit hard by plummeting oil prices and Western sanctions over Ukraine, and some of its biggest arms makers fear dwindling government support.

The Armata tank, produced in a town in the Urals, is a case in point. The next-generation tank--designed to beat anything the North Atlantic Treaty Organization has on the battlefield--is considered a centerpiece of Russia's $300 billion plan to rearm its military by 2020.

Russian President Vladimir Putin visited the factory in 2012 and again this week to give it a personal endorsement. Last year, however, the Armata became an object of rare public criticism as it ran behind schedule and over budget. Now the military is slashing its initial orders.

"The government can't pay for everything. These are new times, because of the fall in oil prices," military analyst Alexander Golts said.

Russia has already deployed one of its top air-defense systems at its base in Syria in response to Turkey's downing of a Russian jet on the Syrian border this week, which underscored the limits of its forces in the Middle East, military experts said.

Russia's military has undergone painful restructuring in its fighting forces to move away from a conscript army toward professional, contract-based service. But the defense industry is still plagued by Soviet-era problems of inefficiency and corruption, Mr. Golts said, leaving in doubt its capacity for mass producing some of its most powerful weapons.

"Unfortunately, the Russian defense industry has not passed though the same severe reforms as the armed forces, which is why the Russian arms industry looks like a parody of the Soviet military-industrial complex," he said.

Russia is eager to play up large-scale plans. This month, state television--supposedly inadvertently--leaked military plans to create a submarine that could launch a nuclear torpedo that would irradiate an enemy's shores.

But some of the more traditional programs have fallen behind schedule.

This year, Deputy Defense Minister Yuri Borisov said the Russian military was reducing its first purchases of the newly designed fifth-generation T-50 jet fighter to around a dozen. A person close to the defense ministry said the initial order was for as many as 100.

The navy is expecting at least eight next-generation Borei nuclear submarines to be produced by 2020, but Andrey Frolov, an analyst at Moscow-based defense think tank CAST, said it is likely only six would be completed by the deadline.

While Mr. Putin has publicly protected the armed forces from budget cuts, defense industry officials say firms have been asked privately to make voluntary cuts in expenditures.

That has raised questions about the industry's ability to fulfill 2015 procurement orders.

"For the first half of the year, Russia's arms industries only fulfilled 38% of their contracts," Mr. Borisov said in July, adding that state companies that failed on their contracts would be punished. Even Kalashnikov, maker of Russia's noted assault rifles, had fallen behind and was in arrears of $78 million to the ministry, Interfax quoted him as saying.

The Russian technology on display in Syria also has its limitations. The defense ministry has defended the accuracy of its airstrikes, but it has mostly been dropping old-fashioned bombs, according to the International Institute for Strategic Studies.

Russia's financial crisis, along with the devaluation of the ruble, has hit its spending power. Ahead of the crisis last year, Russian military spending was ranked as the third-highest in the world in dollar terms. Now, expenditures rank seventh or eighth globally, CAST says.

The flaws of the Armata tank program were painfully on display when one of the units intended for Moscow's annual military parade on Red Square on May 9 broke down during a rehearsal.

The tank's producer Uralvagonzavod, among the companies on the U.S. and European sanctions list, is also facing difficulties. The factory, which owes around 87 billion rubles--more than $1 billion--has been called to court by its creditors, including Alfa Bank, one of Russia's largest privately held banks.

A court order this year to seize more than $7 million in UVZ bank accounts was later lifted. The company's management says it has obtained a government guarantee to help refinance its debt. Those difficulties have translated to slower output and Nizhniy Tagil, where UVZ's headquarters are, is feeling the squeeze.

In 1941, the main factory pumped out more than 1,000 T-34 tanks a month for the war effort, making it at the time the biggest producer of tanks in the world. During the Cold War, UVZ produced the T-44 and T-62, both formidable battle tanks.

While the factory's workers wait for serial production of the Armata to begin, they are being kept busy with a large contract to modernize Russia's T-72 tanks. Even so, frustration is mounting.

Walking out of the UVZ factory after a seven-hour shift, Yevgeny Prodany, 28 years old, said business is slowing because of the U.S. sanctions. "No one wants to see a strong Russia that is going to defend its interests," he said. "The U.S. wants to keep Russia on its knees and it needs sanctions to do it."

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

 

(END) Dow Jones Newswires

November 26, 2015 19:37 ET (00:37 GMT)

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