Figures released by the Russian Federal Treasury have confirmed that Russia’s defence budget has been cut by 25.5% for 2017, falling from RUB3.8 trillion (USD65.4 billion) to RUB2.8 trillion.
The reduction represents the largest cut to military expenditure in the country since the early 1990s.
The reduction follows an extended period of large increases to Russian defence spending with growth having achieved an average rate of 19.8% a year since 2011 in nominal terms. Despite the cut, the 2017 budget will remain about 14.4% higher than the level of defence spending seen in 2014 in nominal terms.
The Russian government initially outlined plans to reduce defence expenditure in the draft of the three year budget for 2017 to 2019 released in October 2016.
The steep drop in spending will continue to derail Russia’s much-hyped defense buildup, which in 2014 promised to replace 70 percent of the Russian military’s arms with brand new items by 2020. The modernization effort was intended to procure 2,300 new tanks, 1,200 new helicopters and aircraft, 50 new surface ships and 28 new submarines. Russia’s plans to field a new generation of nuclear platforms, from new rail-mounted ICBMs to a new strategic bomber will likely be slowed or placed on hold.
Low oil prices have reduced Russia’s economy.
Russia also had high costs associated with the War on Ukraine.
Russia’s military spending will fall from fourth in the world to eighth.
Russia’s GDP was $2.053 trillion (in U.S. dollars) in 2014, according to the World Bank, dropping to $1.331 trillion in 2015 — a drop of about 35 percent. There was a large drop in the value of the Ruble and Russia has had a recession because of the lower oil prices.
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