Russia increases its military spending, but the reasons are internal

In an essay for, former State Duma Representative Aleksei Mikhailov writes about sharply rising military spending foreseen by the Russian 2015 budget. According to the proposed budget for the next year, Russia’s defense spending should reach 4.2 percent of the GDP, a sharp increase from 3.4 percent of the GDP in 2014 and only 1.5 percent of the GDP in 2010. If the proposed budget passes, military spending will take up 21.2 percent of the total central government expenditures for 2015.

Consequently, Mikhailov writes, other budgetary expenditures will have to be cut. Budgets for education, healthcare and sport will be noticeably reduced, with healthcare suffering the most. According to Mikhailov, the World Bank ranked Russia as 9th on the list of countries with highest military spending in relation to GDP, higher than any other nuclear power, including the United States with defense spending of 3.9 percent of GDP. If it passes the 2015 budget as planned, Russia will enter the top 5 countries in the world in terms of defense spending as a percentage of the total central budget. The author notes that Russia’s increased military spending is unlikely to surpass the respective budgets of the two top defense spenders, the United States and China, in absolute terms. As a matter of fact, even if Russia decided to spend its entire central budget on defense, it would still fall short of the U.S. military spending. In order to match the Chinese military budget, Russia would have to spend as much as 8 percent of the GDP on defense. At the same time, Russia’s defense budget dwarfs that of its neighbors – it spends 36 times as much on defense as Ukraine does. Consequently, Mikhailov concludes, the sharp increase in Russia’s military spending is most probably motivated by internal factors.

Mikhailov claims that the recent herding of the Russian defense industry into state-owned monopolies damaged its competitiveness, which led the former Defense Minister Serdyukov to consider foreign suppliers. When Serdyukov was removed in 2012 under allegations of embezzlement, some speculated that it was a consequence of his unwillingness to continue equipping the Russian army with local production regardless of its quality. At the same time, the Russian Government sees the defense industry as one of the few remaining possible generators of economic growth and wants to ensure that the respective budget is spent locally. However, Mikhailov writes, such a strategy is likely to play into the hands of the chosen few, as the secretive military contracts in a competition-free environment represent an ideal opportunity for the suppliers to inflate prices. He concludes by noting that the USSR’s military budget in 1990 amounted to 19 percent of the country’s GDP, and it still didn’t help the economy from running into the ground.


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