Russia plans to reduce military spending, but war outcome matters

Russian President Vladimir Putin announced plans to lower military spending starting next year, citing pressure on the country’s budget. Speaking in Minsk, Belarus, he noted that Russia is currently spending 6.3% of its GDP on defense, which he called a significant amount. However, any cuts depend on the progress of the ongoing war in Ukraine, as Putin emphasized the need to achieve the conflict’s goals.

The Russian economy is showing signs of strain. The finance ministry recently increased its 2025 budget deficit forecast to 1.7% of GDP, up from 0.5%, due to lower energy revenue expectations. To manage this, Russia plans to use its financial reserves. Defense spending, which makes up 32% of the 2025 federal budget, is at its highest level since the Cold War, fueling inflation and economic challenges.

Putin contrasted Russia’s approach with NATO’s plans to increase defense budgets over the next decade. He suggested that Western spending might not guarantee safety and could harm their economies. Meanwhile, Russia’s central bank head, Elvira Nabiullina, warned that the economy’s wartime growth is slowing, as resources are running low.

High interest rates, now at 20%, are being used to combat inflation. Despite these economic pressures, Putin remains focused on the war’s outcome before committing to significant budget changes. The decision to scale back military spending will hinge on Russia’s success in Ukraine, balancing financial needs with strategic priorities.