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2.8 Five reasons why Russian military spending will grow
The Russian government this week began discussing next year’s budget. In last year’s budget, the assumption was that the situation would already be returning to “normal” by this point in 2024 and it expected that military spending would drop almost by a third in 2026. However, as the war in Ukraine drags on, this seems highly unlikely. Russian President Vladimir Putin shows no sign of backing down militarily, or politically, and Russia’s economy is fast becoming entirely dependent on record levels of military spending.
What’s going on?
Russia passes annual budgets covering a three-year period, and discussions about this year’s budget (which will cover 2025, 2026 and 2027) began this week in the government.
Last year’s budget envisaged that total revenue in 2025 would be 33.5 trillion rubles ($368 billion) and that there would be 34.3 trillion rubles of spending (which meant a deficit of 0.83 trillion rubles). Since then, Finance Minister Anton Siluanov has said that another trillion rubles will need to be spent in order to carry out the pledges Putin made in his state-of-the-nation address earlier this year. And that’s unlikely to be the only unplanned expense. We don’t have up-to-date figures, but there are lots of reasons to think the 2025 spending figures will have to be drastically revised in this year’s budget.
Last year’s budget also assumed there would be a reduction in military spending in 2025. Expenditure on “national defense” was supposed to drop a third in two years: from 10.3 trillion rubles this year to 8.4 trillion rubles in 2025, and then fall to 7.36 trillion rubles in 2026. Expenditure on “national security and law enforcement” was supposed to remain at 3.2 trillion rubles a year for the entire three-year period.
Even if Russia sticks to last year’s plans, expenditure on the army and security services will account for about a third of total spending. However, this is extremely unlikely to happen. It’s far more likely that the military will require more money. We have identified five reasons why we think Russia’s defense spending has a long way yet to rise:
1. The war continues
The war in Ukraine shows no sign of ending. Kyiv is currently taking delivery of $61 billion worth of U.S. military aid signed off by Congress in April, and Europe is still approving weapons shipments. Neither analysts nor policymakers anticipate a swift end to the fighting. If Putin wants Russian military success, this will require funding.
In one example of the costs of war, military salaries are rising rapidly. The Defense Ministry recruits about 30,000 soldiers a month, and their salaries are skyrocketing. At the start of the war they were on about 200,000 rubles a month, whereas now they can get up to 400,000 rubles a month. In addition, regional authorities are hiking the one-off bonus payments they make to new recruits. In St. Petersburg, the authorities are currently offering a 1.3 million
25 RUSSIA Country Report July 2024 www.intellinews.com