Russia will spend $63 billion, or roughly one-fifth of its overall budget, on national security and defense in 2011, Defensenews.com cited Russian Finance Minister Alexei Kudrin as saying at a meeting Monday with Prime Minister Vladimir Putin.

The figure is much higher than the previously announced $49 billion and a sharp increase from the $42 billion Russia is to spend on defense and security this year. Around $15 billion will go directly into arms purchases, Russia's Vedomosti newspaper reports.

Russia's Deputy Prime Minister Sergei Ivanov recently said that Russia plans to spend as much as $730 billion during the next decade to modernize the weaponry used by its armed forces and other armed government-paid forces.

Observers say much of the money will go into innovative military research and the structural reform of the armed forces, with Moscow planning to radically the cut the number of officers and overall troops to create a more modern and mobile force.

In a bid to allocate that money efficiently, Russian President Dmitry Medvedev reportedly wants to create an agency modeled after the U.S. Defense Advanced Research Projects Agency. A direct response to the launch of the Soviet Sputnik satellite, DARPA was launched in 1958 to coordinate and push technological modernization of the U.S. defense portfolio. It reports directly to senior Department of Defense management.

"I think our country also needs an effective organization to work on placing orders for breakthrough research and development in the interests of our defense and security, including promising new research that in some cases can be very risky," Medvedev was quoted as saying by the RBC Daily in September.

Eager to completely overhaul the Russian armed forces and to replace its Soviet-era equipment, the Kremlin has in the past voiced its frustration with the domestic industry. Arguing that some of the Russian-made products aren't up to date, Moscow has urged firms to step up their product portfolio and internal procedures to become more competitive.

Russian Defense Minister Anatoly Serdyukov said last month Russia might have to buy weapons abroad and could even purchase equipment from its former Cold War foe United States.

Russia is locked in negotiations with France over one or several Mistral class helicopter carriers with the price tag for one vessel reportedly at $380 million.

It has to be noted, however, that Russia still is one of the world's most successful arms exporters, with Russian-made tanks and helicopters among the best-sold products.

The costly overhaul of the Russian military comes as forces in Europe face severe budget cuts because of the recession.

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