Defense Secretary Ash Carter says the budget the Obama Administration will release next week represents an “inflection point” for the Pentagon. The department will propose more spending on cyber and high-tech weapons capabilities, in some cases, at the expense of smaller numbers of personnel, ships and airplanes.

The budget is the first DoD has prepared under Carter’s watch and likely the last one the Obama administration will submit. Carter told the Washington Economic Club on Tuesday that it represented a look to a future in which he envisions the U.S. fighting different kinds of wars than the counterinsurgency campaigns it’s been engaged in for the past decade and a half.

Overall, DoD will ask for $583 billion in 2017 — $10 billion more than Congress approved for this year — and will focus on preparing for conflict against high-end adversaries, namely, Russia and China, or at least the countries that buy their technology. That means more spending on cyber capabilities, a plus-up in research and development and more U.S. forces in Europe.

“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. “We must demonstrate to potential foes that if they start a war, we have the capability to win. In this context, Russia and China are our most stressing competitors. They have developed and are continuing to advance military systems that seek to threaten our advantages in specific areas, and in some cases they are developing weapons and ways of war that seek to achieve their objectives rapidly, before, they hope, we can respond.”

Carter said DoD would ask for $71 billion in R&D spending in 2017, $1.6 billion more than Congress approved for this year. As to how the money would be spent, he pointed to DoD’s strategic capabilities office (SCO) as a likely venue.

Carter created the secretive SCO in 2012 while he was still the department’s deputy secretary and on Tuesday disclosed some of the projects it’s been working on since then, including one to place microscopic cameras and sensors on small diameter bombs to improve their targeting and tiny drones that operate in “swarms.”

“They’re really fast, really resistant,” he said. “They can fly through heavy winds and be kicked out the back of a fighter jet moving at Mach 0.9, like they did during an operational exercise in Alaska last year, or they can be thrown into the air by a soldier in the middle of the Iraqi desert. And for the water, SCO developed  self-driving boats which an network together to do all kinds of missions, from fleet defense to close-in surveillance, without putting sailors at risk.”

Carter said the office will also focus on using existing defense hardware in more creative ways. It’s been working on adaptations to the Navy’s destroyer-mounted guns and the Army’s Paladin artillery so that they can use technology initially developed for electromagnetic railguns to fire small “hypervelocity” projectiles to shoot down incoming missiles.

And then there’s a project called the “arsenal plane.”

“It takes one of our oldest aircraft platform and turns it into a flying launchpad for all sorts of different conventional payloads,” Carter said. “In practice, the arsenal plane will function as a very large airborne magazine. It will network with fifth-generation aircraft that act as forward sensor and targeting nodes, essentially combining different systems already in our inventory to create wholly new capabilities.”

On cyber, Carter offered few details other than to say the department would ask for $7 billion in 2017 and $35 billion over five years. The money, he said, would build more of  the scarce cyber ranges the department uses to test  cyber tools and train DoD’s cyber workforce and to develop new offensive cyber weapons.

In some ways, Carter’s budget will retrench from DoD’s previous positions. He said the department will not ask Congress to retire the Air Force’s A-10 as it did in the past two years, a request that became a topic of major friction between Capitol Hill and the Pentagon. The department now plans to keep the almost 40-year-old attack jet in its inventory through at least 2022.

And the department is partially reversing course after having removed two brigades of soldiers from Europe in in recent years and closing down bases there. Although DoD had already begun adding service members back to Europe on a temporary basis as part of the European Reassurance Initiative, Carter said the department will ask for a quadrupling of ERI spending in 2017 for a total of $3.4 billion.

“That will fund a lot of things: more rotational U.S. forces in Europe, more training and exercising with our allies, more preposition and war-fighting gear and infrastructure improvements to support all this,” he said. “All of this together by the end of 2017 will let us rapidly form a highly capable combined arms ground force that can respond across that theater, if necessary.”

Carter said given the basic budget paramaters DoD had to work with, the department decided to prioritize modernizing the military and building back readiness instead of overall size. He did not propose any changes, for example, to the Army’s budget-driven plan to draw down its active duty force to 450,000 soldiers, the smallest in recent memory.

“Budgets  require trade offs,” he said. “Our military has to have the agility and ability to win not only the wars that could happen today, but also the wars that could happen in the future. To put more money in submarines, Navy fighter jets and a lot of other important areas, one trade off we made was to buy only as many littoral combat ships as we really need. This is part of a broader effort in our budget to focus the Navy on having greater lethality and capability that can turn deter and defeat even the most high-end future threats.”

Carter’s budget preview left some ambiguity about how next week’s formal budget submission fits into the two-year budget deal Congress and the White House agreed on in November.

That’s partially because the deal itself was ambiguous: It allowed for a total of $610 billion in national security spending for 2017, but some of that total is shared with the Department of Energy because of its responsibilities to maintain the nation’s nuclear stockpile.

The deal also allowed DoD to use overseas contingency operations funds to pay for its basic operating expenses in 2017 as a workaround to sequestration. But it didn’t specify how much could be used for that purpose versus what the OCO account is actually intended for: military operations overseas.

Rep. Mac Thornberry (R-Texas), the chairman of the House Armed Services Committee, said in a statement Wednesday that the Obama administration should have requested more funding from the OCO account to pay for the roughly $11 billion it expects to spend on operations against the Islamic State militants and to bolster European allies. Not doing so, he said, violated the spirit of the budget accord.

“The agreement provided a minimum investment in national security,” Thornberry said in a statement. “It was the ‘lower ragged edge’ of what it takes to defend the country, plus an agreement that the rest of the OCO funding would reflect current operations and the current security environment.  The President’s response to a security environment that is quickly degrading is to further cannibalize our military capability.”

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