Russia Mulls Military Spending Cuts As Low Oil Prices Weigh On Economy

Struggling with a recession amid low oil prices and measures to curb the pandemic, Russia is mulling over cutting its military budget by 5 percent between 2021 and 2023, recommendations from the Russian finance ministry showed.

According to the finance ministry’s recommendations for budget expenditures in the next three years, as reported by Reuters, Russia is also considering cutting spending on the court system and on wages for civil servants by 10 percent.

Spending on military is considered a state secret in Russia, but defense expert and the Editor-in-Chief of the ‘Arsenal of the Fatherland’ magazine, Victor Murakhovsky, told Russian outlet RBC that the 5-percent cut for the years 2021, 2022, and 2023 likely means that the budget for the Russian Defense Ministry may be lower by around US$3.17 billion (225 billion Russian rubles) for the three years combined.

Last year, Russia was the fourth-largest spender on military in the world and increased its military expenditure by 4.5 percent to US$65.1 billion, according to estimates from the Stockholm International Peace Research Institute (SIPRI).

However, Russia is now considering cuts in its military spending as its economy is suffering the consequences of the oil price crash it helped create with the temporary rift with its OPEC+ partner Saudi Arabia in March. The Russian ruble crashed, and Russia’s oil income shrank as a result of the plunge in oil prices. Under the new OPEC+ deal from April, Russia is cutting its oil production by 2 million barrels per day (bpd) until the end of July, after which cuts are set to ease.

The oil price crash, along with the coronavirus-driven global recession, will result in Russia’s economy shrinking this year by 6 percent, or by the most in 11 years, the World Bank said in its latest economic report on Russia earlier this month.   

By Charles Kennedy for Oilprice.com

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