The Kremlin is drastically increasing spending on the military. This mainly has to do with the war in Ukraine. The consequences include high inflation.
According to a draft law, Russia wants to spend 13.5 trillion rubles (around 135 billion euros) from the state budget on its military next year. This is an increase of a quarter compared to the current year, reported the independent business portal “The Bell”. 2024 is already an absolute record year for the defense sector with 10.4 trillion rubles (around 104 billion euros). Military spending should actually fall significantly from next year to 85 billion euros.
Last week, the financial service Bloomberg reported on increasing military spending in Moscow. However, its estimate of the equivalent of 132 billion euros was somewhat lower than the actual estimated value, reports “The Bell”, citing an explanatory appendix to the budget law introduced into parliament.
Because of Russia’s war of aggression against Ukraine, a third of the budget goes to the armaments and defense sector. The money is used to purchase new weapons and equipment, but also to recruit and pay soldiers. Together with the equally high expenditure on national security, the figure is even more than 40 percent. In public, Prime Minister Mikhail Mishustin and other cabinet members have avoided providing information about increasing the defense budget.
In 2026 and 2027, spending on the military is expected to fall only slightly – to 128 and 131 billion euros, respectively. Against the background of record spending on the war, Russia is reducing its social spending by around nine percent to 100 billion euros in 2025.
In recent years, Russia has increased its military spending to the highest level since the end of the Soviet Union. The goal is to ramp up production of rockets, cruise missiles and drones and increase the pay of units in combat.
Since 2022, the Russian state has been pushing ahead with the transition to a war economy, including through the rapid development of new defense plants with hundreds of thousands of additional employees. The longer-term effects of this development include a strong dependence of the economy on the country’s military leadership – and an inflation rate of now nine percent. However, the Kremlin seems to have paid little attention to these developments so far.
Before submitting the draft budget to parliament, the government in Moscow said that in addition to military spending, funding for social policy measures and investments would also be increased. The “top priority” of the budget is “social support for citizens,” Finance Minister Anton Siluanov said last week.
According to the figures now published, military spending is more than twice as high as that in the social sector – and higher than spending on any other sector of the economy.
Ukraine, for its part, will spend around 60 percent of its budget on defense and security next year. At the equivalent of around 48.4 billion euros, Kiev’s defense budget is only a third of that of the Russian government. Ukraine relies heavily on military and financial support from its Western allies.
