Zephyr Net

Russia Has To Slash Military Spending To Balance The Budget

This is not going to make Vladimir Putin happy: it appears that the only way that the Russian government can balance the budget over the next few years is by slashing spending upon the military. And this right in the middle of a surge in such spending in an attempt to modernise the armed forces. And it should be said that the state of the Russian conventional forces is pretty shoddy at present: it’s always a source of amusement that the aircraft carrier cannot go anywhere outside of Russian territorial waters without a deep sea tug to deal with the likely occasion of the engine breaking down. However, this spending is simply too large a burden on the strained finances as a result of the fall in the oil and gas prices. It could even be said that it was too much of a strain before that. For the amount being spent upon that Russian military is truly horrendous:

Spending will be cut 10 percent next year but Finance Minister Anton Siluanov said last week that this was not enough to balance the budget. Expenditure is dominated by social and defence commitments, and Putin had set military investment as a priority even before the stand-off with the West began when Russia annexed Crimea from Ukraine in March.

Out of total spending of 13.96 trillion roubles (154 billion pounds) in 2014, social benefits account for over 33 percent, and defence and security 32.5 percent.

Next year, military spending will rise to 35 percent of the 15.51 trillion rouble budget. That means about $100 billion for defence and security at today’s exchange rates.

Of course we need to be careful with these numbers. The US is spending very much more in total on matters military in the same year. But then the US is a very much richer country, too. And we can bandy about various numbers, like military spending is 42% or so of US discretionary budget spending. But there’s caveats with that number. For example, that’s of the Federal budget and in the US federal system that’s not all government spending. Further, that distinction about “discretionary” is somewhat artificial. All and any spending is discretionary in that Congress can change it if it really wants to. The division into discretionary and non-discretionary is really into “we get vote on this and change it all the time” and “we’ll only change this if we really, really want to” rather than Congress not actually having the power to change it.

But do note that that 35% is of Russia’s total government budget. Which is some 36% of GDP meaning that that military spending is some 12% or so of GDP (the more standard NATO measures of defence spending are a bit backward looking and also don’t include the recent vast run up to pay for new equipment and weapons programs). Compared with the 5 or 6% of US GDP that the Pentagon disposes of.


Essentially Russia is finding itself back where the Soviet Union was. Not as extreme, to be sure, for back then a useful estimate was that 25% of GDP was being spent on defence. But we’re still back in the guns and butter debate. Sure, it’s possible to grow an economy over time but at any one point there’s only so much of anything to go around. And the more you spend on guns and the people who carry them then the less you’ve got to spend on that butter, which is a handy catchall for all of the things that people like to get from government, like pensions, health care and so on.

And when budget revenues plunge as they have done, when there’s a defence budget of that sort of size, then that defence budget is simply going to have to be cut or there just won’t be any room for any butter at all.

The Russian economy is in full collapse... Rubles are about worth as much as a bottle top.

This economic downturn is also effecting China which was already in a contracting economy.

The spiral is expected to continue with the US being the country that gains the most with less transfer of wealth due to lower oil importing and passing along the increase in the dollar that comes from it.

Military programs in both Russia and China are now suffering slowdowns of either extended delivery dates of program freezes. Some with outright cancellations. Russian in particular is suffering the loss of its planned rebuilding of its Soviet era tool and die industry to allow tooling manufacturing at home to replace the loss of imported tooling due to the sanctions and the still birth of the proposed ship building industry to build new amphibs to replace the lost French Mistrals.

From here it just gets worse... Couldn't of happened to a better pair of militaristic countries.