Russia intends to allocate additional financial resources for aggressive military actions.
The ongoing conflict with Ukraine is putting a substantial financial strain on the Putin administration. In the upcoming year, the Russian government intends to boost its military expenditure substantially. The cabinet recently endorsed a preliminary budget draft for the years 2025 to 2027, as reported by the Institute for the Study of War (ISW). The budget proposal now requires parliament's approval.
Bloomberg previously disclosed that the draft budget includes substantial increases in military spending. As per the Putin regime's plans, approximately 13.2 trillion rubles (around 126 billion euros) will be allotted for the defense sector next year. This equates to an increase of 2.8 trillion rubles (around 27 billion euros). The Russian government is incurring significant expenses due to the conflict in Ukraine. The destruction of military equipment, particularly tanks and armored vehicles, is substantial. According to the open-source intelligence website Oryx, Russia has allegedly lost around 3400 combat tanks in the war so far. Recruitment drives and an expansion of the armed forces to 2.3 million personnel are ongoing. Particularly in the Donetsk region, many military vehicles are showing signs of wear and tear due to offensive operations. A significant portion of the budget for military equipment has already been utilized in the 2024 budget.
Financing the Increase
This increase in military spending will be funded, besides income from oil and gas reserves, primarily through higher taxes for companies and individuals. The draft budget anticipates a nearly 12% increase in state revenues compared to this year.
In total, Moscow is said to allocate around 40% of its entire budget volume for defense and national security. This budget sector therefore surpasses the combined spending on education, health, social policy, and the national economy.
However, the Kremlin asserts that it is fulfilling its "social obligations," as Prime Minister Mikhail Mishustin underscored last week. Meanwhile, the adoption of the budget draft highlights various flagship projects in the public infrastructure sector. The Kremlin's officials may be contemplating the war fatigue among the Russian population and are perhaps attempting to sustain public support for the war by emphasizing the Kremlin's focus on social projects, as assessed by the ISW.
The European Union could express concern over Russia's substantial military expenditure, given the financial strain from the Ukraine conflict. The European Union might also question the prioritization of defense spending over sectors like education and health, considering Russia's allocation of around 40% of its budget to defense and national security.
