By Andrea Shalal and David Alexander
WASHINGTON (Reuters) - U.S. Defense Secretary Ash Carter said on Tuesday the Pentagon would seek a $582.7 billion defense budget next year and reshape its spending priorities to reflect a new strategic environment marked by Russian assertiveness and the rise of Islamic State.
Carter, speaking to the Economic Club of Washington, said the Pentagon's funding request would be in line with last year's congressional budget deal but spending would be refocused to address five big challenges facing the U.S. military: Russia, China, North Korea, Iran and Islamic State.
"Today's security environment is dramatically different than the one we've been engaged with for the last 25 years and it requires new ways of thinking and new ways of acting," said Carter, whose remarks came a week ahead of the formal rollout of the administration's 2017 budget. The Pentagon's budget for the current fiscal year is $585 billion.
Carter said the Pentagon would seek $7.5 billion for the war against Islamic State in the 2017 fiscal year that begins Oct. 1, a 50 percent increase over spending on the conflict this year.
He said the increase was critical because the United States has used so many smart bombs and laser-guided rockets against the militants in Iraq and Syria that it is running low on the weapons and needs to invest $1.8 billion for 45,000 more.
Concerned about Russian aggression against Ukraine and Chinese assertiveness over disputed islands in the South China Sea, the Pentagon plans to increase its investments in advanced weapons to counter the military developments in those countries, Carter said.
"Key to our approach is being able to deter our most advanced competitors," he said. "We must have - and be seen to have - the ability to impose unacceptable costs on an advanced aggressor that will either dissuade them from taking provocative action or make them deeply regret it if they do."
Carter said the Defense Department also planned to invest $71.4 billion next year in research and development, much of it aimed at boosting the military's strategic capabilities.
He said the Pentagon would spend $8.1 billion on undersea warfare in fiscal 2017 and more than $40 billion in the next five years.
The initiative is aimed at giving the United States the most lethal undersea and anti-submarine force in the world, funding nine Virginia-class submarines built by General Dynamics Corp (N:GD) and Huntington Ingalls Industries Inc (N:HII), and increasing their capacity from 12 Tomahawk missiles to 40.