Western analysts are often surprised that Russia can keep spending heavily on defence when its economy is weak. But this is to ignore how the Kremlin prioritizes a strong military over most other budget needs.
What is the myth?
A persistent and potentially dangerous myth is that Russia is unable to sustain its military expenditure. This belief rests on the idea that in unfavourable economic conditions, Russia’s leaders will at some point soon be forced to reduce defence spending so that they can focus on more pressing concerns, such as maintaining living standards or diversifying the economy.
The problem with this myth is that it tempts many Western policymakers to underestimate the durability of the military challenge posed by Russia. Russia has historically allocated a larger share of national output to military expenditure than is typical for Western states, and has consistently prioritized this over other needs that democracies consider important. Both historical precedent and current practice argue that Russia will continue high levels of defence spending regardless of economic conditions. In addition, applying misleading conversion factors means that what can be bought with this expenditure is commonly underestimated in the West.
Who advocates or subscribes to it?
The prediction that Russia will be forced to cut defence spending is highly persistent despite never having come true. The view usually becomes particularly popular whenever Russia experiences an economic slowdown, as it did in 2015 following the collapse of oil prices at the end of 2014, or again in 2020 when global economic output plunged as a result of the COVID-19 pandemic.
Why is it wrong?
In practice, the share of output that the Kremlin allocates to defence expenditure – between 4 and 5 per cent of GDP – has been, on average, significantly higher than in most other countries for the last three decades. Even when economic times are tough, defence spending is rarely cut, reflecting the high political importance Moscow assigns to maintaining a strong military.
The size of any country’s military spending – the defence ‘effort’ – is a function of the size of its economy (i.e., the total available productive resources) and the share of total resources that the political leadership assigns to military spending – the ‘defence burden’.
The defence burden is most often expressed as a share of national output (GDP). It might also be expressed as a share of government spending, although this is not as common.
The magnitude of the defence burden is essentially a political choice and is shaped by whether the country’s government and population are prepared to accept the allocation of scarce resources towards defence spending instead of other spheres of public spending, such as infrastructure, health or education.
While the size of the defence effort is also subject to misunderstanding, this is principally caused by the choice of exchange rate used to measure economic activity in Russia. Put simply, many widely used measures of Russian military spending understate its true value by converting rouble expenditure into US dollars at market exchange rates. A more accurate measure is based on the use of purchasing power parity (PPP) exchange rates.
But the question of sustainability rather than size of spending has less to do with exchange rates and more to do with the political question of what share of national output Russia’s rulers are prepared to spend on defence. The answer is ‘a lot’.
Measuring Russia’s defence burden as a share of GDP is not easy. Military expenditure is distributed across different sections of the federal budget, presenting challenges when estimating how much Russia really spends on defence. For the purposes of simplicity, however, it is possible to apply one of the two most used methods.
The first and simplest definition includes only spending in the ‘national defence’ chapter of the federal budget. This includes expenditure on procurement, wages, housing, training and exercises, operational costs, personnel, construction, and the development and production of nuclear weapons by Rosatom. Most spending under this chapter is carried out by the Ministry of Defence (MOD). Spending under the ‘national defence’ chapter represents a lower-bound estimate of Russia’s defence burden.
NATO and the Stockholm International Peace Research Institute (SIPRI) use another measure. Their estimate includes spending by the MOD under other chapters of the budget, such as military pensions, as well as spending under the education, health, culture and mass media chapters. It also includes spending on other forces, such as paramilitary forces that are judged to be trained and equipped for military operations (such as Rosgvardiya) and the Border Service attached to the Federal Security Service (FSB). Collectively, these areas of spending, along with spending under the ‘national defence’ chapter, represent a wider definition of military expenditure.
In practice, Russian defence spending is even higher. Other parts of the budget are used to finance defence and defence-related projects. There is also evidence that the figures contained in the budget conceal a significant share of hidden defence spending.
If we take the SIPRI measure of defence spending, it is clear that Russia has been prepared to tolerate a much higher defence burden than nearly all NATO members. This was true even in the 1990s when Russia was in the throes of a deep economic crisis. At a time when living standards plummeted and the state itself experienced several severe financial crises, defence spending did not drop below 2.7 per cent of GDP (see Figure 1).
Once Russia recovered from the economic turmoil of the 1990s, aided by better economic management and rising oil prices, the defence burden began to rise. This was especially evident after 2010 when Russia embarked on an ambitious military modernization programme. As procurement spending was ramped up, the defence burden peaked at a post-Soviet high in 2016. It has since declined moderately in real terms but remains higher than in most large countries. And all this at a time when Russia has been under Western sanctions and when oil prices have been volatile. Come boom or bust, the commitment to military expenditure has been unwavering.