MOSCOW — A draft copy of Russia's 2016 federal budget shows that its military spending will remain essentially flat next year, with a modest increase of 0.8 percent, while the majority of Russian government spending is set for cuts amid an economic downturn.
But Russia's economic crisis, spurred in part by Western economic sanctions following the annexation of Crimea last year, and the collapse of global oil prices — which, in turn, cut the ruble's value by nearly half — appears to have thrown a wrench in procurement plans.Russian military spending has been rising each year since an ambitious 20 trillion ruble (US $700 billion at the time) modernization and rearmament program was launched in 2011. The program kicked into high gear last year, when expenditures jumped 26 percent over 2014.
According to a draft 2016 military budget, "the 2016 budget allocation for national defense is planned at 3.145 trillion rubles [US $50 billion]," or around four percent of Russia's expected gross domestic product next year, the TASS news agency reported.
Going into 2015, the State Duma — Russia's lower house of Parliament — allocated about 3.3 trillion rubles (US $52 billion) for defense expenditures. Economic realities this year later forced a 5 percent reduction to just over 3.1 trillion rubles, which still represented a 26 percent increase.
If approved, next year's budget will see just 25.5 billion rubles ($400 million), or less than one percent, added over 2015.
With around two-thirds of Russian military spending typically allocated for procurements under the state rearmament program and the value of the ruble contributing to inflation at home, it is not clear that Russia will be able to continue its procurement programs as planned.
In 2015, nearly 2 trillion rubles of the budget (US $32 billion) was allocated to procurements. IHS analyst Craig Caffrey wrote in a note in June that Russia would need to begin hiking expenditures by 10 percent each year through 2020 to meet President Vladimir Putin's spending targets.
"Since 2010, the budget has increased by an average of 20 percent a year," Caffrey told Defense News in response to follow-up questions on Nov. 4., explaining that without continuing this level of growth, it will be difficult to fund modernization without significant cuts to operational spending.
While funding for the re-armament program may increase marginally over the next several years, the downturn in funding hikes may force investment and procurement targets to be pushed back into an upcoming procurement program covering the period from 2016 to 2025.
"So, what we may see when the new 2016-2025 [modernization program] is released is that some funding is deferred and back-loaded into the 2020-2025 period," Caffrey concluded.