Russian MPs voted on Thursday the budget for 2024 to 2026, with a 70% increase in military spending for next year, confirming the long-term nature of the conflict in Ukraine.
In Moscow, the Duma, the lower house of parliament, approved the state budget for the period 2024-2026 on Thursday October 26. Unsurprisingly, this is the budget of a country in a state of war. Credits allocated to Russian military spending will soar by more than 70% for next year. This sharp increase illustrates Moscow’s determination to continue its assault against Ukraine, launched more than a year and a half ago. For the first time in the history of post-Soviet Russia, military credits will even exceed social spending.
According to a document from the Russian Ministry of Finance published at the end of September, Defense spending will reach 10,800 billion rubles, that is to say 107 billion euros. The resources allocated to the army correspond to 6% of the The country’s gross domestic product (GDP) in 2024, up from 3.9% in 2023. But with 30% of state spending classified, it is difficult to assess how much the war in Ukraine is costing Russia, but certainly a considerable amount. At the end of September, Kremlin spokesperson Dmitri Peskov justified such an increase: “It is absolutely necessary, because we are in a state of hybrid warfare.”
Oil revenues as the main source of financing
The priorities of this budget are clear, according to the Ministry of Finance: “strengthening the country’s defense capacity” And “the integration of new regions” Ukrainians whose annexation Moscow demands. But also “social assistance to the most vulnerable categories of citizens”a few months before the presidential election scheduled for spring 2024.
The Kremlin is banking on a war that lasts, according to exiled Russian economist Igor Lipstits. “Clearly, Russia will be at war for the whole of 2024. But then expenses linked to security and maintaining order will increase, he analyzes. From what we understand, the government hopes to complete the active phase of fighting by 2025, after which a very strict police order will be established in the new territories and the police force will increase.”
“The Russian government apparently expects a reduction in military operations only in 2025.”
Igor Lipstits, Russian economist in exileat franceinfo
To finance its war, the Russian government is counting on a sharp increase in oil revenues, of +23% in 2024, a figure considered doubtful by many experts. Notably because international sanctions affect the sale of hydrocarbons, oil and gas, while this historically drove Russian growth. To finance this war budget, tax increases will also be considered. They could potentially weigh heavily on the real economy, just like the devaluation of the ruble. Two issues which are clearly not the Kremlin’s priority at the moment.