Russia scrambles to cover ballooning cost of Ukraine war | Financial Times

LTC Eugene Chu
"Vladimir Putin’s cabinet is turning to increasingly irregular revenue-raising measures to fund a rapid rise in defence spending, which has tripled since Russia’s full-scale invasion of Ukraine.

The Russian government has said it aims to spend a staggering Rbs10.8tn ($108bn) on defence next year, three times the amount allocated in 2021, the last year before the invasion, and 70 per cent more than was planned for this year.

To cobble together that sum, the cabinet is relying to a greater extent on irregular revenues stemming from one-off taxes and levies, including “voluntary donations” western businesses have to pay when leaving Russia.

The defence budget “will allow us to completely support the tasks of the special military operation”, finance minister Anton Siluanov said on Tuesday, using the Kremlin’s euphemism for the war in Ukraine. The military spending increase, he said, was “essential to achieve our main goal: making sure we win”.

Russia’s record Rbs36.6tn budget for next year will take defence spending to 6 per cent of gross domestic product, exceeding social welfare for the first time, and require the Kremlin to tap considerably more sources of revenue than previously.

“Putin has two priorities: war and power,” said Konstantin Sonin, an economist and professor at the University of Chicago. “That’s why the budget process now works in such a way that policymakers first make sure the junta gets what it needs for the war and then address the rest of the budget . . . And to do all that, they constantly look for new sources to scrape money together.”...

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