Russia’s military budget is set to fall for the first time since the full-scale invasion of Ukraine more than three years ago. The slight reduction reflects the country’s growing economic strains but does not significantly alter its course in prosecuting its war of attrition against Ukraine.
State spending on national defense is projected to go down next year to around $156 billion from more than $163 billion, under the current exchange rates, according to a draft budget submitted to parliament Monday. The decrease is larger when projected inflation of up to 7% is factored in.
Russia is locked in a grinding war in which its army has advanced slowly on the battlefield. Russian President Vladimir Putin is trying to demonstrate that Russia can outlast Ukraine despite Kyiv’s fierce resistance and eventually achieve its goal of fully occupying all the Ukrainian regions he declared annexed in 2022.
Ukraine is hoping that Russia’s limited battlefield gains and mounting economic pressures will eventually convince Putin that further fighting is futile. But in recent months, he has signaled his determination to continue the war until his expansive conditions for peace are met, even if that determination is increasingly at odds with Russia’s economic reality.
Russia’s budgetary figures show that it intends to continue conducting the war largely with soldiers who are effectively mercenaries, fighting only for the relatively high pay. This approach has helped widen a budget gap, and the government is responding by increasing taxes on Russians, with the rate of the value-added tax going up to 22% next year from 20%.
Even as Russia moves to slightly slow war spending, its military budget remains nearly quadrupled from the levels of 2021, and the budget of more than $160 billion this year represents a post-Soviet high. Russia’s military budget is nearly three times that of Ukraine, which is facing its own looming budget crisis, still needing some $20 billion to cover next year’s expenses.
If Russia decided to expand the war budget again, it would most likely need to increase the economic pain for Russians, either by raising taxes further or by ramping up domestic borrowing. That could damage the government’s efforts to carry out the war while shielding the Russian people from its effects and heading off any pushback.