RUSSIA MONITOR

Date: 11 May 2018

The truth about Russian defence spending

The latest news from the Stockholm International Peace Research Institute (SIPRI) about a drastic decrease in defence spending in Russia has caused a great stir. However, it seems to be unjustified for a number of reasons. Firstly, this reduction is not as big as the Swedish think thank describes. Secondly, it has no major impact on the modernisation of the Russian army, let alone on Moscow’s military policy. Thirdly, the reduction in defence spending should not be perceived in any way as a political move, but rather as a technical and financial one.

SOURCE: KREMLIN.RU

Western sanctions and a long-lasting economic recession (which has recently changed into stagnation) forced Russia to cut its defence spending by 20% in 2017 and this has been the first restriction on spending for almost two decades – such piece of information was provided by SIPRI, a Swedish analytical centre specialising in the field of global armaments and the arms trade. Such a rapid restriction on defence spending within the period of a single year could have ruined the Russian arms industry. Therefore, the defence budget was reduced – but only by 7%. As a matter of fact, the entire reduction process was prepared in advance in the form of a multi-annual plan – Russia has already reached the climax of its defence spending. In 2018 and 2019 there will be further reductions: by 3.2% and by 4.8%.

Still, the reduction of the defence budget does not necessarily mean cutting spending on new arms. It is rather about getting finances in order, debt repayment, the economisation of spending and financial co-operation with producers. The decrease in defence spending in 2017 is also due to the fact that in the previous year the budget was significantly higher, because at that time the state decided to pay all interest on loans and loans themselves in part, which arms companies had taken out earlier from commercial banks. In 2016, the situation became critical, because interest had to be paid back, but there were no funds for it. That is why, the state significantly increased the military budget in 2016, so that the arms companies were able to settle most of their debts. What is more, in 2017 there was a noticeable decline in defence industry production.

For almost two decades, defence spending has been increasing every year even by 20%. Such unprecedented growth must have reached its climax eventually. Indeed, billions were used for the wars in Donbass, Syria or the annexation of Crimea. After that, the sanctions were imposed against Russia. Finally, the price of petrol decreased. In March, the Kremlin announced that Russia will reduce the defence budget to less than 3% of GDP over the next five years. Generally, official defence spending is decreasing for two reasons. First, the necessary level of state security has been achieved – no one in their right mind will attack Russia, a fully recognised military power. Second, more and more funds for defence purposes are hidden in secret budget positions or put under completely different names, in other departments.

All texts (except images) published by the Warsaw Institute Foundation may be disseminated on condition that their origin is stated.

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