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Russian Military Budget

In 1988 military spending was a single line item in the Soviet state budget, totaling 21 billion rubles, or about US$33 billion. Given the size of the military establishment, however, the actual figure was at least ten times higher. Western experts concluded that the 21 billion ruble figure reflected only operations and maintenance costs. The amount spent on Soviet weapons research and development was an especially well-guarded state secret, and other military spending, including training, military construction, and arms production, was concealed within the budgets of all-union ministries and state committees. Apart from considerations of state secrecy, this allocation of military spending to ministries other than the Ministry of Defense reflected the Soviet approach to managing resource allocation. Weapons produced by agencies such as the Ministry of General Machinebuilding [missiles] or the Ministry of Shipbuilding Industry [ships] were essentially provided as "free goods" to the Ministry of Defense.

By the mid-1980s, the Soviet Union devoted between 15 and 17 percent of its annual gross national product to military spending, according to United States government sources. Until the early 1980s, Soviet defense expenditures rose between 4 and 7 percent per year. Subsequently, they slowed as the yearly growth in Soviet GNP slipped to about 3 percent. In 1987 Gorbachev and other party officials discussed the extension of glasnost' to military affairs through the publication of a detailed Soviet defense budget. In early 1989, Gorbachev announced a military budget of 77.3 billion rubles, but Western authorities estimated the budget to be about twice that.

With the end of the Cold War, the combined military expenditure of Russia and other successor states of the USSR fell dramatically. In 1997 it was around one-tenth of that of the USSR in 1988. Between 1988 and 1993 weapons production in Russia fell by at least 50% for virtually every major weapons system. Weapons spending in 1992 was approximately 75% less than in 1988. Almost all of Russia's arms production is for sales to foreign governments, and procurement of major end items by the Russian military had all but stopped. By 1999 Russia had dramatically downsized its military and was no longer channeling one fifth of its national resources into maintaining it. In 1997 Russian military spending was only 1/7 of its Soviet era peak in 1988 and 2/5 of its level in 1992.

In 1989, the Soviet military was one of the most feared on earht. By 1994, the Russian armed forces suffered a major setback when they took on rebel fighters in Chechnya and by 1998, tanks were parked from lack of fuel and officers were working second jobs during duty hours to make ends meet. Aircraft could not fly due to lack of spare parts and ships sat rusting at their piers. In 2000, the submarine Kursk sank, in a preventable accident, with the loss of 118 lives. While the budget for the year 2000 indicates that spending on national defense will rise by 50 percent to $5.3 billion, past practice suggested that the military will be lucky to receive a fraction of what is promised.

However, under President Putin, the Russian leadership increasingly acted as though an improving military supported its foreign policies and conveyed the image of an active global power capable of asserting it national interests. It also supported the leaders’ domestic political position. In 2002 Dmitry Rogozin, the chairman of the foreign affairs committee a member of a pro-Putin faction in the Duma, stated that Russia had only two reliable allies—the Russian army and the Russian navy. Many others in the Duma have called for renewed increases in Russian military spending as the only way to guarantee respect for Russia in international affairs.

After nearly a decade of declining activity, the Russian military began to exercise its forces in mission areas it believes were essential for deterrence, global reach and rapid reaction. Open source reporting confirmed that ground force exercise activity in 2003 doubled that of 2002; training for use of non-strategic nuclear forces continued; and Russia desired to have the ability for its Navy and Air Force to operate globally, as evidenced in their joint exercises in the Indian and Pacific Oceans in 2003.

By 2006 Russia spent about 2.7 percent of its GDP on defense, about that of advanced European countries. Military leaderss protested that this was far too little to achieve foreign policy professed goals, while civilian leaders resisted militarizing the federal budget or economy as in Soviet times.

In the new millenium, the Russian economy remained very dependent on energy and other extractive sectors, such as timber, precious metals, non-ferrous metals and steel. In 2005 the Russian economy continued its sustained steady growth. GDP grew by an estimated 6.4% to $765.5 billion. However, this represented a decline from 7.1% growth in 2004. As in 2004, high world prices for oil and natural gas continue to be the engine behind much of this impressive growth. Russia ended 2006 with its eighth straight year of growth, averaging 6.7% annually since the financial crisis of 1998, while inflation was below 10% for the first time in the past 10 years. Although high oil prices and a relatively cheap ruble initially drove this growth, since 2003 consumer demand and, more recently, investment have played a significant role. The federal budget had run surpluses since 2001 and ended 2006 with a surplus of 9% of GDP. According to 2006 estimates, Russia's official GDP was $1.746 trillion (purchasing power parity) and $733.6 billion (official exchange rate), compared to the US GDP of $13 trillion.

By 2007 the Russian defense budget had almost quadrupled to $31 billion over the previous six years. In 2005 Russian defense spending rose 22 percent, 27 percent in 2006 and analysts estimate that in 2007 it could increase by an additional 30 percent. In 2007 the Russian Government approved a re-armament program through the year 2015 with a $240 billion budget.