By Murad Rakhimov | 2024-12-25

TASHKENT -- Russia's military budget continues to grow as expenditures on the army, war and defense will amount to a record 13.49 trillion RUB (almost €130 billion) next year.

A law on the 2025 budget and the 2026-27 planning period, approved by the State Duma in November in the third and final reading, will increase funding for the army but will reduce aid to needy citizens.

In 2025, the state will spend 16% less than in 2024 on social programs, including pensions and benefits. The money taken from retirees, disabled and other fixed-income recipients will be used to replenish the military budget, which represents 32.5% of spending.

Two motives

Two motives are causing this unprecedented growth in military spending, said Alisher Ilkhamov, director of Central Asia Due Diligence in London.

On the one hand, Russian President Vladimir Putin has tied his political dominance and therefore his fate as president, to the war in Ukraine, which he must now win to save face.

"On the other hand, suffering huge losses of military equipment (tanks, aircraft, air defense systems, etc.) and unable to make up for those losses with current budget expenditures, the country risks losing its defensive capabilities after the war, regardless of how it ends for Russia," Ilkhamov told Kontur.

However, squeezing the country to feed a bloated military "led to the collapse of the USSR," he recalled.

Secret budget

A major part of the budget is confidential. Discussing it may incur criminal prosecution, even for media outlets.

Analysts previously described those opaque state expenditures as spending on intelligence services, war and the "development" of territories captured from Ukraine.

The government will allocate almost 3.5 trillion RUB (€34 billion) for the "national security" line item, which includes the police, the Russian National Guard (formerly the Internal Troops), intelligence services, etc.

In the end, 16.9 trillion RUB (€160 billion) -- 40% of Russia's federal budget -- will be spent on the army and security forces.

Vyacheslav Volodin, speaker of the lower house of the Russian parliament, justified the high military spending.

"The law on the federal budget adopted by the State Duma provides for all social obligations, addresses development objectives and responds to the challenges that our country faces," he said in November.

50 billion RUB for 'patriotism'

Meduza, a Russian news site operating in exile, has drawn readers' attention to another significant expenditure in the Russian budget for the war years, namely, spending on propaganda.

The new budget law increases the Kremlin's spending on state media and various media projects.

As Meduza reported October 1, the explanatory note to the federal budget mentions the word "patriotism" 35 times.

The regime allocated funds for 16 initiatives related to the civic and patriotic indoctrination of youth, such as rewards for the winners of the "Best Cossack Cadet Corps" contest and similar competitions.

Total spending "on patriotism" in 2025–27 will amount to almost 50.5 billion RUB (€490 million), Meduza reporters calculated.

Kremlin preparing for long fight

Russia is burning up millions of dollars every day by launching missiles at Ukraine, Meruert Makhmutova, director of the Public Policy Research Center in Almaty, pointed out.

"Just one Oreshnik [missile] is estimated to cost $40 million [€38.5 million]," she told Kontur. "The war, which the regime expected to end in three days, has been going on for almost three years now."

"The number of victims and expenses is growing, but this does not stop the authorities. In driving up the military budget to 6.2% of GDP, they seem to be guided by the maxim 'in for a penny, in for a pound,'" Makhmutova said.

The new draft law concerns not only the budget for next year but also the 'planning budget' for 2026 and 2027.

"Russia will continue to spend heavily on defense to fight in Ukraine and rebuild its army so that it can withstand a long-term conflict with NATO," Richard Connolly, analyst and director of the British consultancy Eastern Advisory Group, told Novaya Gazeta in September.

"And yes, this is proof that the Kremlin not only will not stop but also that it has more financial mechanisms that it can use to escalate the war and to rearm for a future conflict with NATO."

Getting money for a protracted war and to compensate for the losses associated with aggression will not be easy, said Makhmutova.

"Even if combat stops in 2025, pressure from sanctions will remain. And after the war ends, reparations for the destruction of regions of Ukraine will have to be paid," said Makhmutova, provided that Ukraine wins the war.

In her view, the 16% reduction of social spending (including pensions and benefits), the increased taxes and the return of a progressive personal income tax show that the Russian economy is experiencing serious problems.

Moreover, from 2025, use of the National Welfare Fund to balance the budget will not be allowed. It will be used only if oil prices drop.

Helping war profiteers

One scholar differs on the amount that Russia is spending to fight in Ukraine.

In his view, Russia is devoting no more than 6.5% of its budget specifically on the war in Ukraine, said Dmitry Dubrovsky, a social scientist at Charles University in Prague.

However, he does not deny that, taken together with security spending and other budget items, these expenditures have increased.

Putin has his reasons, Dubrovsky told Kontur.

"For Putin, the war has proven to be a very convenient way of governing," said Dubrovsky. "He undoubtedly prefers the image of a country at war, constantly at war."

A second factor, according to Dubrovsky, is that large investments in military production do enrich Russians employed by the military-industrial complex.

This showering of rubles, too, benefits Putin. It demonstrates some success and the "financial viability" of the war.

"And third, we are dealing with the reformatting of the entire Russian state, which is becoming a nation of war," he said.

"The trend of decreased social spending on education, medicine, science and culture clearly shows that Putin believes that the country, which is constantly at odds with everyone, has greater need of cannons, tanks and planes."