Russia's Defence Spending Set for Historic Increase Amid Ongoing War Efforts
Russia is poised to significantly boost its defense spending by 25% in 2025, marking the highest level since the Cold War. President Vladimir Putin has reiterated his intentions to escalate military efforts in Ukraine and maintain pressure on Western powers. According to draft budget documents released on Monday, the planned increase will elevate Russia's defense budget to an unprecedented 135 trillion rubles (approximately $109 billion) in 2025, an increase of around 3 trillion rubles over this year's record allocation.
In a broader context, spending on defense and security is expected to comprise around 40% of Russia's total government budget, amounting to 415 trillion rubles in 2025. This shift aligns with what economists refer to as 'military Keynesianism,' characterized by a marked rise in military expenditures that has not only supported the war in Ukraine but also spurred a consumer spending surge and inflationary pressures within the nation.
Analysts speculate that this allocation indicates a full transition of the economy to a war footing, suggesting that even if the conflict in Ukraine were to reach an end, funding for military and defense sectors will remain a core governmental focus. The Bell, a leading Russian economic publication, highlighted that military and security expenditures will surpass combined funding for education, healthcare, social programs, and national economic initiatives.
With the draft budget proposing a approximately 15.58% decline in social spending — dropping from 77 trillion rubles this year to 65 trillion rubles next year — concerns mount over the implications for the civilian sector.
This dramatic escalated investment in military capabilities has raised alarm among European defense strategists, who have voiced concerns that NATO may have underestimated Russia's capacity to sustain a prolonged conflict. At the same time, Ukraine grapples with insecurity regarding future military support from its key allies. This evolving dynamic has seemingly emboldened Kremlin leaders, with Putin confidently proclaiming that all objectives set for Russia’s 'special military operation' will be achieved.
Over the past year, Putin's rhetoric has grown increasingly assertive, as Russian forces make incremental progress in eastern Ukraine. He has taken a rigid stance, demanding Ukraine’s unconditional capitulation while advocating for the country's 'denazification,' demilitarization, and neutral status.
Despite these proclamations of strength, experts warn of a bleak long-term economic horizon for Russia post-invasion. The Kremlin's shift toward reliance on Chinese and alternate markets, alongside sanctions evasion strategies, are believed insufficient to compensate for lost access to Western markets and technologies. Moreover, the surge in military spending has fueled domestic inflation, obliging the central bank to raise interest rates as Russia faces significant labor shortages due to its heavy financial and resource investments in military operations.
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