By Craig Caffrey,  IHS

Faced with mounting fiscal pressures, largely as a result of lower revenues from the crucial energy sector, Russia has reduced its defense budget for 2015 by 5.3% to RUB 3,110.2 billion (US$57 billion) according to figures released by the Russian Federal Treasury.

Despite the downward revision, defense expenditure remains 25.6% higher than in 2014.

The new measure is likely to delay modernization of Russia’s armed forces

At the release of the Russian budget in December 2014, the defense budget had been approved at a level of RUB 3,274 billion, a 32.2% increase over 2014.

Going by the December 2014 projections, defense expenditure may fall in real terms by around 6% in the next two years.

The new measure is likely to delay the modernization of the armed forces although Russian officials, including President Vladimir Putin, have repeatedly stated that the State Armament Program will not be affected by any cuts to defense spending.

As a result of the rapid growth in the Russian defense budget since 2010, resourcing for the State Armament Program to date has broadly been in line with expectations. However, to meet the targeted level of spending by 2020, further growth of over 10% a year in the level of funding for the annual State Defense Order (SDO) will be required from 2016.

Assuming the modernization of the military continues to be prioritized by the government, the Ministry of Defense may have to divert funding from other areas of defense expenditure. With military personnel numbers unlikely to be cut significantly, operating costs appear to be the most likely source of potential savings.

On the list of world’s top defense spenders, Russia ($57 billion) stands fourth above France ($52.69 billion). United States tops the list ($566.69 billion) followed by China ($190.91 billion) and the United Kingdom ($60.90 billion).

Asia Times Financial is now live. Linking accurate news, insightful analysis and local knowledge with the ATF China Bond 50 Index, the world's first benchmark cross sector Chinese Bond Indices. Read ATF now. 

Leave a comment

Your email address will not be published. Required fields are marked *