The reports of the death of the Russian defence budget have been greatly exaggerated

No more new toys? (c) Mark Galeotti 2014

Yesterday HIS Jane’s (disclosure: I have written them for decades, and respect their work) came out with the eye-catching assertion that “Russia announces deepest defence budget cuts since 1990s.” It continues that the “Federal Treasury have [sic] confirmed that Russia’s defence budget has been cut by 25.5% for 2017, falling from RUB3.8 trillion (USD65.4 billion) to RUB2.8 trillion.”

A 25.5% cut? Even if “Despite the cut, the 2017 budget will remain about 14.4% higher than the level of defence spending seen in 2014 in nominal terms” that is still a massive story, and spells the end to planned modernisations, especially given the inelasticities in the budget (upkeep and maintenance, salaries, etc). And in December, it had been agreed to but the budget not by the 10% MinFin wanted but a moderate 6%.

So what happened? Needless to say, all is not quite what it seems. After all, it is important to note that the Federal Treasury (Federal’noe kaznacheistvo) is not so much a budget-setting as accounting office, essentially a comptroller, and operates under some quite strict parameters. It accounts funds allocated and spent along specific budget line items, and in the process its apparent defence spend tallies do not, it seems to me, reflect the impact of debt repayment. It is also worth noting that the Treasury tracks money spent, and if one looks at 2016, according to the Ministry of Economy, the State Defence Order was only 88% executed. That alone may look like a 12% procurement cut through the Treasury prism. So, the data may well not truly show planned so much as predicted spending.

Let’s note that even more so in the West, Russian defence and security expenditures often appear under different budget lines and obscure headings. Pre-conscription physical and skills training outsourced to schools through the revived GTO (Ready for Labour and Defence) programme comes out of the education budget, much support for military science is under education, science and research, and part of the aid and development budget is likely paying for mercenaries in Syria.

Finally, it is crucial to appreciate that much of the defence spend, especially on procurement, is not just about military power but economic and political necessity. Key industries, on whose health cities and regions depend, are kept afloat through military procurement. Any major cuts, which would inevitably have to be focused on buying new toys, would have a disastrous impact…and do so in the year-long run-up to the next presidential election, intended as something of a triumphant coronation and celebration of Putin.

So the upshot is, yes, under budgetary pressure (and the probable need to have money to spend on buying votes in 2018), the defence budget is being pruned. But not by a quarter.

Posted by Mark Galeotti on March 17, 2017

https://inmoscowsshadows.wordpress.com/2017/03/17/the-reports-of-the-death-of-the-russian-defence-budget-have-been-greatly-exaggerated/