Russian President Vladimir Putin’s move to reduce the country’s defense budget is a direct consequence of a three-year international sanctions regime against Russia, which among other spheres targeted the Kremlin’s military-industrial complex. Moreover, given that over the recent period global prices for energy resources, which remain Russia’s main source of income, have fallen significantly, Moscow has no alternative but to reduce its defense budget to support the financing of social programs.

Over these three years, Russia has completely exhausted one of its two reserve funds, and now it is already using the money from the second one, the "National Welfare Fund." This suggests that the financial situation in Russia is becoming ever more complex, including the rising budgetary problems. It is because of these problems that Russians are forced to cut their military expenditures in order to support the financing of other spheres.

Almost half of Russia’s defense expenditures are classified

However, it should be noted that almost half of Russia’s defense expenditures are classified, so finding out the real volume of defense financing is quite difficult. However, it is now reported that the reduction will be at 2.7%-2.8% of GDP. In this case, it is about the open part of the financing of troops. Meanwhile, the classified part remains secret. Therefore, it is difficult to draw a conclusion on how the reduction will affect the defense capability of the Russian Federation in general.

Given the “skills” of Russian propaganda, in Russia, any fact can be presented as a positive decision, while the Kremlin leadership is portrayed as the wisest. So the decision of the Russian authorities will be presented by Russian propaganda as Moscow’s willingness to peacefully settle any conflict and a step toward the rapprochement with the West in response to the fact that the West is increasing its defenses both within NATO and in regards to the defense budgets of individual countries. The Russian media will spin the information in a way to show that Russia, unlike the hated Westerners, reduces army expenditures and cares more about the citizens of the Russian Federation.

It is difficult to predict whether the trend toward the reduction of Russia’s defense budget will prevail. After all, it’s not clear yet, what will be Russia’s position on conflicts and wars in which Moscow is involved: whether it is going to move toward escalation or gradually curtail its aggression in Ukraine and Syria. It is these plans and intentions that will affect the dynamics of financing of the Russian army.

Andriy Novak is a Chairman of the Committee of Economists of Ukraine