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Memri
a day ago
- Business
- Memri
Can Russia Cut Its Military Spending?
Last month, Russian President Vladimir Putin made headlines as he admitted that Russia may cut its military spending,[1] which had reached a post-Soviet high of 6.3-7.7 percent of GDP this year. Official allocations for the Ministry of Defense stay at 13.5 trillion rubles, or 6.3 percent of projected GDP,[2] while some alternative assessments put them – usually together with a part of those used for "security policy" – as high as 16.5-17 trillion rubles, or 7.5-8 percent, especially if some funds originating from regional budgets[3] and those used for military purposes by the Interior Ministry are counted as well. (Source: X) "The Special Military Operation" Will Remain The Federal Budget's Priority For 2026 The scope of military expenses has been a source of quarrels inside the Russian government for some time, and this summer, as top bureaucrats assembled in St. Petersburg for an annual economic forum, their discontent with the Kremlin's policies became almost obvious as many officials claimed that the current economic strategy seems to be "exhausted."[4] I had argued that the "technocrats" in the government actually attempted to limit the amount of funds predestined for the military for 2026, or at least not to allow the amount to grow significantly from what it would become in 2025. No one actually knows how much the Kremlin will spend by the end of the year.[5] While Russia's war against Ukraine has been ongoing, the Russian military budget has been marked by two distinctive features. The first was the overall amount of the spending – every year it had exceeded the previously approved amount enshrined in the country's federal budget for one or another year. For 2022, the State Duma approved the military allocations at a mere 3.51 trillion rubles,[6] but the final spending for the year reached, by the lowest estimates, 5.8 trillion rubles, which was at least explicable since the deputies had voted for the budget at a time when it was never forecast that a full-scale war would break out.[7] However, in 2022, a new budget for 2023 presupposed that 4.98 trillion rubles would be spent on the military,[8] while heavy fighting on the frontline together with the "commercialization" of the Russian army, which I used to call "deathonomics,"[9] had pushed up the amount of money needed, with the actual expenses reaching at least 7.2 trillion rubles.[10] For 2024, another hike was approved – the Duma released a budget that channeled 10.77 trillion rubles for the military,[11] and, during the year, more than 13.1 trillion rubles were spent clearing a path for the adoption of the record 13.5-trillion-ruble military budget for 2025.[12] As of today, no one actually knows how much the Russian army will spend in the current year, but one may be sure that the financial backing of the war remains almost the single part of the budget that has been financed without any delays or excuses. Russian Finance Minister Anton Siluanov, addressing quite recently Putin's appointees at the Federation Council, reiterated that "the Special Military Operation" will remain the federal budget's absolute priority for 2026, putting[13] this objective before all others. The second feature has been the budget "promises" for a more distant future. Since 2007, the government in Russia has presented the State Duma with a budget proposal not for a one single year, but for three years at a time:[14] For the first one, the figures have become a kind of a law (often amended several times during the following year), while those for the second and third remain "indicative," reflecting the general dynamics and direction of the evolution of the state finances. Here, it should be noted that, every year since 2022, the government in fact presented its military spending for the upcoming year as extraordinary, assuming that later they would be cut – and this makes Putin's remark not too original. His government, as can be seen, actually made the same promises for many years so far. For example, the budget for 2023-2025, approved in October 2022, stated that the military spending would reach 4.98 trillion rubles in 2023 before decreasing to 4.65 trillion rubles in 2024 and further to 4.21 trillion rubles in 2025.[15] The next budget, however, enacted 10.77 trillion rubles in military allocations for 2024 (or 2.32 times higher that was expected just a year before),[16] but also forecast a later decrease to the much lower level of 8.5 trillion rubles in 2025.[17] To finalize the picture, I would remind the reader that the most recent 2025-2027 budget has popped the military funding up to 13.5 trillion rubles for 2025, but once again promised it would go down, even while much less dramatically – to 12.7 trillion rubles in 2026 and to 13 trillion rubles in 2027.[18] The Current Magnitude Of Russia's Military Expenses Might Become Unbearable In The Coming Years I am sorry to say that not one of these optimistic predictions has come true, devaluing Putin's projections about cutting the military funds amid the overall context of his words allowing one to believe he just wanted to present a "peaceful" Russia to Europe (and, more generally, to the West), which, citing the Russian threat as the main reason, has already started to seriously increase its own military funding.[19] However, as many experts have started evaluating Putin's words, I would say it seems necessary to try to understand whether there is some meaning behind them or one should treat them as pure propaganda. To my mind, these days the situation is not as simple and straightforward as it has been in recent years. First, it should be mentioned that the overall military allocations have reached extremely high levels – especially if one compares them to budget revenues. Historically, Russia has been critically dependent on its commodity exports, with the budget being filled with what is called "oil and gas revenues" comprised of a tax levied оn oil and gas extraction (НДПИ) and of "additional revenue tax" (НДД) introduced in 2018 and constituting a kind of a special profit tax applied to the oil and gas sector (export duties that constituted a large part of the revenue were abolished by 2023).[20] In the last ten years, these proceeds accounted for between 28 and 52 percent of all federal budget revenues.[21] Yet, what looks like a major change since 2024 is that the military spending started to skyrocket as a share of "oil and gas revenues": While between 2006 and 2013, the combined military allocations accounted for just 29.3 percent of these revenues, between 2014 and 2021 the ratio rose to 44.3 percent – and in 2025 the budget approved by the State Duma last year (with 13.5 trillion rubles for the military and 10.93 trillion expected in late 2024 to come in as "oil and gas revenues")[22] the level has, for the first time ever, been pushed over 100 percent. Moreover, it seems that by the year's end it may well exceed 160 percent as the current "oil and gas revenues" projection has remained at 8.32 trillion rubles after the "correction"[23] in late April (and the real figure might be even smaller if the adjusted "oil price cap" recently introduced by the 18th European sanctions package proves effective, not to mention U.S. plans to undermine Russia's oil exports by implementing 100-percent tariffs on the nations where those exports go most)[24] while no plans have been announced for cuts to military expenditure in the coming years. Second, during the years of the war, all the other groups of revenues collected by the Russian authorities rose in a robust way: The "non-oil and gas revenues" were up 25 percent in 2023 and by 26 percent in 2024 – in both cases compared to the previous year.[25] In the first half of 2025, their growth slowed to 12.7 percent,[26] even while the tax burden on both the Russian citizens and businesses was significantly elevated starting January 1.[27] Therefore, the overall budget revenues were up by a mere 2.8 percent in the first half of 2025 compared to the same part of the previous year while the spending skyrocketed by 20.2 percent. This trend caused a lot of doubts concerning the government's financial soundness, especially as the economy slows and the National Wealth Fund may be exhausted as early as in 2026.[28] I would add that there are few chances for a serious nominal rise in Russian federal budget revenues in 2026 as inflation has seemingly begun to calm and the growth rate of nominal disposable incomes also decreases due to the cooling of the national economy. So, I would expect that the current magnitude of the military expenses could become unbearable in the coming years and may cause irreparable damage to state finances starting if not from 2026 then definitely from 2027, if the Russian leadership does not change its course. This was one of the main reasons I and my colleague, Dmitry Nekrasov, argued recently that the Russian economy these days strongly prefer any move toward peace over an "endless war."[29] Putin Cannot Afford A Genuine Peace At This Time What should one expect under such circumstances for 2026? To my mind, the government will try to find a kind of compromise that may be reached if the military expenses are formally increased, but in a proportion that remains lower than official inflation figures or corresponds to them. Hence, it would not go higher in terms of Russia's GDP and would almost certainly reflect a decrease in market dollar terms since the ruble is poised to weaken significantly in 2026 compared to the excessively high levels it had achieved in recent months. Nevertheless, Russia's military spending will still remain close to its post-Soviet highs of 7-7.5 percent of GDP if allocations from all sources are considered. But this would mean that the Kremlin is still financing its war machine as much as it can, but also trying not to undermine Russia's economic capabilities or diminish the country's potential – and, by no means, seeking recourse from a "total war" that might need a forced mass mobilization. Such an adjustment, I would argue, cannot be seen as a turn toward de-militarization. Even while the resources of Russia's "military keynesianism" look mainly exhausted (and here one should agree with some of the Kremlin's advisors), President Putin cannot afford a genuine peace at this time. For him, the war with Ukraine had brought a lot of advantages – with getting a "real" enemy, he succeeded in governing his country with an iron fist, further limiting not only civil and political rights of his subjects, but also enjoying almost total control over Russia's economy, where no rules and laws seem to exist anymore. This, at least in theory, gives him another source of revenue he might use for funding the war. So one could say that after the "deathonomics," or monetization of Russian people's lives, the Kremlin might, at least for some time, monetize its capabilities of redistributing business assets, thus sucking more money from the ailing economy (there is not a coincidence that many officials are starting to call for a "big privatization" of recently confiscated properties – the major problem here is, however, that few entities and oligarchs, except, maybe, the state-controlled banks, would become enthusiastic enough to buy anything that the state may take away from them another day). When Putin says he might consider cutting the military allocations, one should realize that Russia is – as it has been for most of its history – a country not governed by an economic rationale. The state has been inventing illusionary goals and landmarks for decades, if not centuries, subjugating to them all the economic interests of its citizens, not to say sacrificing their lives for those doubtful "achievements." Therefore, I would be extremely cautious about predicting significant changes in Russia's budget policies even while it looks obvious that fiscal deficits will rise in the coming years. I will remind the reader of a popular Soviet joke from the times when the government increased the retail price of vodka to meet its ends since the proceeds from alcohol sales contributed greatly to budget revenues. The joke goes: a child rushes into the kitchen with a newspaper containing another announcement of a price hike, and says "Dad, I presume you will drink less from now on?" His father responds "No, my dear, rather you will not eat as much as before." The same can be applied to Russian military spending – there are few chances we will see them being cut: Maintaining them at current levels now looks like the best possible option for at least 2026 and 2027. *Dr. Vladislav Inozemtsev is the MEMRI Russian Media Studies Project Special Advisor, and founder and director of the Moscow-based Center for Post-Industrial Studies.
Business Insider
10-07-2025
- Business
- Business Insider
Russia has seized around $50 billion of assets as its wartime economy comes under pressure
Russia has confiscated nearly 3.9 trillion rubles, or around $50 billion, worth of assets since its full-scale invasion of Ukraine in 2022, according to a report by Moscow-based law firm Nektorov, Saveliev and Partners. The analysis found that Russian authorities have seized 102 private assets over the past three years. They spanned a variety of industries, and some were resold to owners including the state. Targets included foreign and domestic companies, such as Danish brewer Carlsberg and French food giant Danone. The Kremlin has cited reasons ranging from corruption to extremism to justify the asset seizures. In 2024, Russia's federal budget received 132 billion rubles from property sales, per Russian news outlet Interfax. Roughly a quarter of that total came from the sale of Rolf, the country's largest car dealership. The company was previously owned by the family of a Kremlin critic now living in exile. Russian Finance Minister Anton Siluanov said in March that the government aims to raise at least 100 billion rubles from sales of seized assets this year. The aggressive asset seizures come as signs emerge that Russia's post-invasion economic resilience may be faltering as sweeping Western sanctions take hold. A recent S&P Global survey showed a sharp contraction in manufacturing activity in June. Just last month, Russia's economy minister, Maxim Reshetnikov, warned that the country was "on the brink" of a recession. Russia's GDP grew 1.4% in the first quarter of the year from a year ago, according to Rosstat, the country's official statistics service. This is a steep slowdown from the 4.5% growth it posted in the fourth quarter of last year. In 2024, Russia's economy grew 4.3% for the full year. In January, a prominent Swedish economist said Russia could run out of liquid reserves as soon as this fall.
Russia Today
08-07-2025
- Business
- Russia Today
Partnership with Russia ‘resilient and steadfast'
New Delhi's strategic partnership with Moscow remains 'resilient and steadfast,' Indian Finance Minister Nirmala Sitharaman said on Sunday. The minister's comments came after a meeting with her Russian counterpart, Anton Siluanov on the sidelines of the BRICS summit in Rio de Janeiro. 'The Union Finance Minister observed that India and Russia enjoy exemplary levels of mutual trust and understanding and our Special and Privileged Strategic Partnership remains resilient and steadfast,' the Indian Finance Ministry said in a post on X. During the talks with Siluanov in Rio, Sitharaman also expressed gratitude for the support extended by Russian President Vladimir Putin to India after the April terror attack in the Indian Union Territory of Jammu and Kashmir that claimed 26 lives. Sitharaman also congratulated Russia for its successful chairmanship of BRICS in 2024 and said that India would continue to leverage the multilateral platform to build South-South cooperation in areas of common interest. The finance ministers discussed modalities of various initiatives recently taken up by BRICS members, Sitharaman said in her post on X. Union Minister of Finance and Corporate Affairs Smt. @nsitharaman met H.E. Mr. Anton Siluanov, Finance Minister of Russia, on the sidelines of the BRICS Finance Ministers and Central Bank Governors meeting #BRICSFMCBG, in Rio de Janeiro, two leaders discussed… The two sides also reviewed cooperation in the financial sector, along with matters related to the New Development Bank (NDB). The NDB was founded by BRICS in 2015 to address the needs of developing countries that, according to its members, are not equally represented in the international financial architecture. The Rio BRICS summit concluded with a joint declaration that criticized unilateral tariff actions and condemned 'indiscriminate' trade measures, without directly mentioning the United States. A few hours later, US President Donald Trump threatened to impose an additional 10% tariff on any country which 'aligns itself' with BRICS, accusing the grouping of adopting 'anti-American policies.' New Delhi's long-standing ties with Moscow have irked Washington. In June, US Secretary of Commerce Howard Lutnick said India's relations with Russia are a point of contention in its relationship with the US.
Russia Today
07-07-2025
- Business
- Russia Today
National currencies free BRICS from Western pressure
Settling trade in national currencies offers BRICS countries a reliable alternative to the Western financial institutions, which can suspend transactions at any moment, Russian Finance Minister Anton Siluanov has said. Members of the economic bloc have accelerated efforts to reduce reliance on third-party currencies in bilateral trade in recent years, especially after Western sanctions led to the freezing of Russia's reserves held in dollars and euros following the escalation of the Ukraine conflict in 2022. Speaking to RT on Sunday on the sidelines of the 17th BRICS summit in Rio de Janeiro, Siluanov said Moscow is ready to offer mechanisms to reduce the risks posed by sanctions. The issue was discussed earlier in the day at a meeting of the New Development Bank (NDB) governors. The financial institution was established by BRICS in 2015 to address the needs of developing countries. Such mechanisms 'would not involve Western financial infrastructure or settlement in currencies of those countries that imposed sanctions on Russia and would secure the New Development Bank from possible risks,' Siluanov stated. Commenting on the growing use of national currencies in BRICS trade, he said such settlements 'have proven their reliability and independence from Western lending institutions that at any moment, as it turned out, can suspend payments.' Siluanov noted that transactions are being handled through reliable banks with direct correspondent ties, bypassing Western-controlled systems. Expanding these links, he said, is key to maintaining trade turnover and ensuring smooth settlements. Since major Russian banks were cut off from SWIFT in 2022, Moscow and many of its trading partners have stepped up efforts to reduce exposure to the Western financial system. Banks and businesses have sought to use alternative financial and banking platforms, such as non-SWIFT money-messaging systems, and increasingly use national currencies in trade settlements. As one example, Siluanov cited trade with China, saying turnover has increased and will likely continue to grow. Bilateral trade hit $245 billion last year, with nearly all transactions now conducted in rubles and yuan. BRICS was founded in 2006 by Brazil, Russia, India, and China, with South Africa joining in 2010. Over the past year, Egypt, Ethiopia, the United Arab Emirates, and Indonesia have also become full members. At the group's summit in Kazan, Russia, last year, BRICS approved a new 'partner country' status in response to a growing membership interest shown by more than 30 countries.
The Print
07-07-2025
- Business
- The Print
FM discusses issues of bilateral cooperation with Russian, Chinese counterparts
During a meeting with Anton Siluanov, Finance Minister of Russia, Sitharaman expressed gratitude for the support extended by President Vladimir Putin after the Pahalgam terror attack, the finance ministry said in a post on X. These meetings were held on the sidelines of the BRICS Finance Ministers and Central Bank Governors meeting in Rio de Janeiro. New Delhi, Jul 6 (PTI) Finance Minister Nirmala Sitharaman held a series of bilateral meetings, including with Russian and Chinese counterparts, and discussed issues of bilateral cooperation and interests. The two leaders discussed India-Russia long-standing partnership. The finance minister observed that India and Russia enjoy exemplary levels of mutual trust and understanding and our Special and Privileged Strategic Partnership remains resilient and steadfast, it said. The two sides also discussed issues of bilateral cooperation, including cooperation in the financial sector, along with matters related to NDB. In another bilateral meeting with her Chinese counterpart Lan Fo'an, both leaders discussed strengthening collaboration across a wide range of areas due to the common rich human capital, deep civilisational ties, and expanding economic influence. The two leaders recalled their last meeting in Samarkand in September 2024 on the sidelines of the AIIB Annual Meetings, another post by the finance ministry said. Sitharaman underlined that India and China are uniquely positioned to drive inclusive global growth and innovation as the two nations are the largest and fastest-growing economies in the world. The finance minister suggested that deeper engagement between the two countries can help amplify the voice of developing economies, and shape global narratives that reflect the priorities and aspirations of the global South, it said. During bilateral meeting with Thomas Djiwandono, Vice Finance Minister of Indonesia, Sitharaman said India looks forward to hosting the Indonesia Economic and Financial Dialogue soon. She also thanked Indonesia for their support in the aftermath of the Pahalgam terror attack, a separate post on X by the finance ministry said. The two leaders also discussed BRICS, UPI, and RuPay, G20, MDB Reforms, bilateral trade, tourism, FinTech and financial markets, it said. In the bilateral meeting with Finance Minister of Brazil Fernando Haddad, she discussed issues of bilateral interests. The two leaders discussed issues of mutual interest, including South-South cooperation, amplifying the voice of the Global South, COP30, and climate finance issues, and engagement in regional and global forums such as the United Nations, G20, BRICS, WTO and IBSA, the finance ministry said in another social media post. Appreciating the deep work by Brazil during its BRICS Chairship, including commitment to a multipolar world order, and expansion of BRICS, Sitharaman said India supports the agenda and priorities set by Brazil, and hopes to carry forward the outcome-oriented cooperation when India takes over the Chairship in January 2026. She said India and Brazil, as strategic partners, share warm and cordial ties spanning across multiple sectors, and are cooperating closely in multiple sectors to further strengthen strategic partnership. PTI DP TRB This report is auto-generated from PTI news service. ThePrint holds no responsibility for its content.
