Is Russia Really Cutting Its Military Spending?

Military force remains a predominant instrument of choice for Russian policymakers; yet, state expenditures on the Armed Forces continue to decline. This paradoxical situation was recently highlighted by the Stockholm International Peace Research Institute’s (SIPRI) latest global military balance assessment, which the Russian media eagerly picked up (Kommersant, April 29). SIPRI methodology is long-established and respected by experts. And yet, its latest assessment demoting Russia to sixth position in the world behind France looks not only counterintuitive but, in fact, plain wrong. Of course, to some degree, the impression that Russia must still be spending a fortune on its military is partly shaped by the assertive political rhetoric coming out of Moscow, which is amplified by official propaganda and reinforced by exuberant public demonstrations—like the military parade scheduled to roll over Red Square, on Victory Day, celebrated in Russia every May 9 (Krasnaya Zvezda, April 29). Nevertheless, significant material evidence exists to raise doubts about the government’s declared 3.5 percent reduction in military spending in 2018.

To its credit, SIPRI does not take the official data uncritically, but even the best research efforts can only go so far in correcting the deliberate distortions produced by Russia’s main statistical agency, Rosstat (Kommersant, April 6). Every year, more and more parameters of the defense budget have become secret and denied even to the State Duma (lower chamber of parliament), in violation of basic legislation (Vedomosti, October 17, 2018). It is also clear that a direct conversion of expenditures from rubles to US dollars using the current exchange rate produces serious errors because the pricing mechanism in the Russian defense-industrial complex is obscure: the Armed Forces obtain new weapons for a price substantially different from what foreign customers pay (RBC, April 29). In macro-economic estimates, the indicator of “purchasing power parity” is increasingly used for international comparisons; and a rough (because of secrecy) application of this method to defense expenditures approximately triples Russia’s stated military budget (Defense News, May 3).

President Vladimir Putin excels at praising Russia’s military might and boasting about new technologically advanced weapon systems, such as the nuclear-propelled underwater vehicle Poseidon (Nezavisimoe Voennoe Obozrenie, April 26). He used the occasion of launching the nuclear submarine Belgorod (in construction since 1992), which is supposed to carry Poseidons onboard, to concurrently supervise the laying of keels of four other combat ships (Moskovsky Komsomolets, April 23). This ceremony could not quite camouflage the deep problems in Russian shipbuilding, however, which struggles with fulfilling orders for the new Yasen-class nuclear submarines as well as with repairs of Russia’s only aircraft carrier, the Admiral Kuznetsov, and other Soviet-era cruisers (see EDM, April 25).

The Russian navy received little attention in the 2027 State Armament Program, which was approved with delays only in early 2018 because the government insisted on cuts bitterly contested by various lobbies (Nezavisimoe Voennoe Obozrenie, April 12, 2019). Putin often claims that Russia will not repeat the Soviet blunder of channeling too many resources toward military needs and will pursue the arms race on the cheap (Forbes.ru, April 29). The economy is, indeed, stuck in a protracted recession; and discontent caused by the sustained decline in incomes and increase to the retirement age is deepening (Nezavisimaya Gazeta, April 25). Growing public demand for social benefits thus raises the political need for the authorities to hide the real costs of Russia’s militarization.

This “creative accounting” is particularly widespread in budgeting for ongoing “hybrid” applications of military force, which are often financed from special “money pools” filled by “voluntary” contributions from super-rich individuals (Rosbalt, April 30). Costs associated with the de facto occupation of parts of Donetsk and Luhansk regions of Ukraine are certainly not included in official defense expenditures, and Putin took pains to explain that his decree on granting Russian citizenship to the population of these territories would not be that heavy for Moscow’s budget (Moscow Echo, April 25). The Syrian intervention is also increasingly unpopular, and state media only reluctantly informs about continuing attacks on Russian troops and bases (Interfax, May 2). Meanwhile, the deployment of Russian “advisors” and mercenaries in support of Nicolás Maduro’s regime in Venezuela is bluntly denied, and the state-owned oil giant Rosneft will probably have to cook its books to hide the accumulating losses there (Novaya Gazeta, May 3).

One particularly difficult-to-calculate feature in the complicated picture of Russian military money flows is corruption, which reaches mind-boggling proportions even in minimalistic official investigations (RIA Novosti, April 9). Scandals about hundreds of “dead souls” on the payrolls of military research institutes or fake research projects are exposed every month (Kommersant, March 2; RBC, April 18). The main driving force behind these revelations is the shrinking pool of officially declared state funding. Even in the all-powerful Federal Security Service (FSB), the head of the department supervising the financial sector was recently detained for bribery (RBC, April 25).

Financing of these structures is not included in the military expenditures, even if the Border Guard (subordinated to the FSB) is capable enough to capture three Ukrainian naval vessels in international waters near the Kerch Strait last November (see EDM, November 29, 2018). The main task of these forces is to ensure domestic security; and the brutal detention of liberal activists during the May 1 demonstration in St. Petersburg was supposed to demonstrate their readiness to protect the regime (Novaya Gazeta, May 1). Corruption goes hand in hand with this readiness, and the command of the heavily armed Russian National Guard (Rosgvardia) wants to make acquisitions secret so that embezzlement can be better covered up (Fontanka, April 27).

The sum total of money spent on strengthening, modernizing and corrupting various elements of Russia’s superstructure of militarism is probably not known even to Putin, who quite possibly does not care to inquire. Some lobbies may suffer cuts, but the whole system appears perfectly sustainable, so that top generals keep building mansions in the Rublevka suburb outside Moscow, next to the dachas of “liberal” ministers (Navalny.com, April 24). This waste of resources condemns Russia to degradation and lost ground in the global competition for redefining the world order; but apparently these consequences are entirely acceptable for Putin’s court. Russia is not facing bankruptcy, and each new “wonder-weapon” seems affordable; and yet, progressive militarization generates an interplay of external and domestic risks that the Kremlin is ill-equipped to control.