There are clear signs that Russia’s 2024 military budget exceeded the planned 10.4 trillion rubles ($101 billion) and was actually closer to 13.2 trillion rubles ($129 billion.) This number comes from Minister of Defense Andrei Belousov, who said in December that defense spending was 32.5% of the total federal budget of 40.6 trillion rubles at the year’s end.
The minister’s uncharacteristic honesty suggests the 13.1 trillion ruble national defense budget for 2025 won’t even cover the officially planned 4.5% increase for inflation. It had risen to 13.5 trillion rubles when it was introduced in the Duma in September 2024 but actual spending will be higher still if the war remains as intense. The budget-busting expenditure follows a pattern of military costs exceeding Treasury plans since the full-scale invasion in 2022.
It is clear Russia’s leadership is going to spend much more on the armed forces in the coming years than even in 2022–2023. And it will have to do this regardless of the situation on the battlefield and the twin headwinds of inflation and the crash in the value of the ruble.
It will be hard for Moscow to maintain military spending at such a high level without either increasing imbalances in the economy — with the resultant domestic turbulence — or further steps toward restoring a command economic model to maintain political and social control.
The armed forces and the military-industrial complex as institutional actors and consolidated societal groups have become main beneficiaries of the war. They would also be the losers from any significant decrease of the military budget, which would inevitably cause personnel outflows and barely manageable financial problems for the state-owned corporations deprived of government investments, subsidies and loan guarantees.
The situation would be compounded by an enfeebled private sector that would be in no condition to take up the slack. The (probably inevitable) future crisis of the economy’s military sector will lead to an erosion of legitimacy for the authoritarian regime. Consequently, the Russian political leadership finds it has painted itself into a corner with a high and rising military budget that pushes it to continue an aggressive foreign policy. It cannot simply cut the military budget.
That’s why Moscow prefers to increase taxes, fees, fines and tariffs to maintain war spending and procurement. And this of course causes permanently rising costs for businesses and citizens already suffering from inflation and ruble devaluation.
For example, the monetary aggregate M2 — a broad measure of money in the economy — almost doubled during 2022–2024, from 66.3 trillion rubles on January 1, 2022 to 111 trillion rubles on December 1, 2024. This alone promises further high inflation rates. As a result, Russian society faces a lack of economic predictability, a growing cost for private economic activity and growing economic pessimism. These factors cause cumulative political dissatisfaction and an erosion of the regime’s legitimacy.
At the same time, any attempt at peaceful and moderate reform of the Russian authoritarian system seems impossible without a major (and probably violent) power transition and consequent existential risk for its elites.
The Kremlin’s alternative? The Russian political economy in its current state can only be balanced through further steps toward a government-directed command economy with only elements of a market economy. This will be reinforced by the further development of brutal political practices against any potential opposition within the elite, or society more widely.
Dr. Pavel Luzin is a non-resident senior fellow with the Democratic Resilience Program at the Center for European Policy Analysis (CEPA), a senior fellow at the Jamestown Foundation, and a visiting scholar at the Fletcher School of Law and Diplomacy (Tufts University.) In 2017–2018, he was a consultant on the issues of the armed forces, law enforcement agencies, and the defense industry for Alexey Navalny’s presidential campaign in Russia.
Europe’s Edge is CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America. All opinions expressed on Europe’s Edge are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.
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