Russia is entering 2025 with a significant military budget. In early December 2024, President Vladimir Putin approved federal budget plans aiming to raise military spending to record levels in 2025. Defense allocations will reach approximately 13.5 trillion rubles (around $126 billion), a record-breaking 32.5% of the total federal budget and 6.2% of GDP.
This proposed increase in military spending for 2025 signifies a turning point in Russia’s modern geopolitical strategy. It highlights the Kremlin’s focus on national security amidst the protracted conflict in Ukraine and escalating tensions with NATO and Western powers.
Key Dimensions:
The new defense spending plan prioritizes protecting national sovereignty and security while meeting military needs across various fronts. The most notable aspects include:
Historic Levels of Military Spending:
The 2025 budget demonstrates a significant shift in Russia’s financial priorities. A large portion of state resources will be channeled towards defense and security. Out of a total federal budget of 41.5 trillion rubles, 13.5 trillion rubles will be allocated to defense, marking a 30% increase compared to 2024, which saw 10.4 trillion rubles allocated to this sector. This will push military spending to 6.2% of GDP, although it is expected to gradually decrease to 5.6% in 2026 and 5.1% in 2027, according to Bloomberg estimates based on the draft three-year budget.
This high percentage resembles defense policies during the Soviet era where extensive resources were dedicated to potential military preparations, often at the expense of economic diversification. During the Cold War, Soviet defense spending surpassed 10% of GDP in several years.
Secrecy of the Russian Federal Budget:
Despite the significant announced spending, this figure excludes other resources dedicated to the military campaign, such as those classified as “internal security” or highly confidential expenses, which could include funding for covert operations, intelligence activities, and experimental technologies. Spending on these secret and unspecified categories is projected to rise to 12.9 trillion rubles in 2025, compared to 11.1 trillion rubles initially planned for this year, representing roughly 30% of total budget spending. This wide range of secret spending reflects the scale of Russia’s military ambitions and raises questions about the actual details of the defense budget. Estimates suggest that combined spending on defense and security could account for around 40% of total government spending in 2025.
Escalating Western Provocations:
Russia’s escalating military spending plan is a direct response to rising tensions with the West. Ukrainian President Zelensky has repeatedly called for Ukraine’s accession to NATO as a means to end the “hot phase” of the war. US National Security Advisor Jake Sullivan has affirmed that the US will continue providing military support to empower Ukraine to achieve the best possible negotiating position. This has been reflected in the ongoing billions of dollars in aid from Western allies to Kyiv. He stated, “The Biden administration will give Ukraine the tools they need. We will also do what we can to put them in the best possible position on the battlefield, so that they are in the best possible position at the negotiating table. And then this war will ultimately end in diplomacy.”
Development of Russian Military and Security Capabilities:
The Russian Ministry of Finance stated that resources will be allocated for equipping the armed forces with necessary weapons and military equipment, paying military personnel salaries, and supporting defense industry institutions. Furthermore, there is a focus on developing drone programs, artificial intelligence in warfare, and cyber capabilities, reflecting the changing nature of modern conflict. Increased salaries and benefits for military personnel aim to bolster recruitment and morale. The Kremlin previously announced plans to expand the active military workforce to 1.5 million individuals by 2025.
Modernization of Russia’s Nuclear Arsenal:
The spending plan includes modernizing Russia’s nuclear arsenal, encompassing the development of hypersonic missiles and modern launch platforms. This aligns with President Putin’s ratification of amendments to Russia’s nuclear doctrine in November 2024, expanding the list of circumstances under which Russia could employ nuclear weapons. The updated Russian nuclear doctrine emphasizes that the state’s policy in the area of nuclear deterrence is defensive and that Russia is making every effort to minimize the nuclear threat. It views nuclear weapons as a means of deterrence, considering their use a last resort. Kremlin spokesperson Dmitry Peskov revealed that under the new nuclear doctrine, the use of non-nuclear Western missiles by Ukrainian armed forces against Russia could necessitate a nuclear response.
This Russian nuclear escalation comes amid Ukrainian pressure on its Western allies to provide long-range weapons that would enable strikes deeper into Russia. Putin’s signing of the decree followed US President Joe Biden’s authorization for Ukrainian forces to launch strikes using long-range “ATACMS” missiles deep inside Russian territory.
Potential for Multiple Military Theaters:
It is clear that this budget will see additional funding allocated to support military operations in Ukraine and other potential conflict theaters, encompassing intelligence missions and sabotage operations, particularly in Eastern European regions. This region has witnessed its largest contribution to European defense spending since the end of the Cold War. Poland is a prime example. It recorded the largest relative increase in defense spending in Europe between 2022 and 2023 and has already dedicated 3.8% of its GDP to defense in 2023. However, this figure remains below its declared target of 4%, representing a doubling of NATO’s 2% target, driven by concerns about Russia’s military expansion.
It is also notable that countries bordering or near Russia and Ukraine have witnessed sharp increases in their defense spending over the past decade. This is largely attributed to a heightened awareness of threats, particularly after the annexation of Crimea in 2014, the outbreak of the Ukrainian war in 2022, and its continuation at least until 2025.
Military Spending Surpassing Social Expenditures:
The new budget indicates a trend where military spending clearly surpasses social sector spending, including health, education, and social welfare. Combined allocations for these sectors total less than 25% of overall expenditures. These needs are projected to receive 6.5 trillion rubles in 2025, signifying a 16% decline in social spending from 7.7 trillion rubles this year (2024) to 6.5 trillion rubles next year (2025).
Response to Ukraine’s Declaration of a Significant Increase in Military Spending:
President Putin’s approval of the 2025 federal budget comes in parallel with the Ukrainian parliament’s approval on November 19, 2024, of the state budget for 2025. This budget also included a significant increase in funds allocated to the country’s defense efforts during the ongoing war with Russia, which has lasted for one thousand days. Ukraine plans to spend 2.2 trillion Ukrainian hryvnias (US $53.7 billion), or about 26% of its GDP, on defense and security next year. Ukrainian Prime Minister Denys Shmyhal indicated that the majority of this spending will be directed toward weapons production, procurement, and modernization of the country’s arms industry.
Potential Implications:
The world can expect certain potential implications in light of the significant increases in the world’s second-strongest military in 2025, including:
Accelerated Global Arms Race: Russia’s accelerated military spending could have profound implications for regional and international security. NATO member states are likely to respond by increasing their defense budgets, particularly enhancing the arms race in Eastern Europe, the first line of defense against potential Russian attacks. The deployment of advanced Russian weapons, such as hypersonic missiles, could force NATO to strengthen its missile defense systems, creating an unstable environment where military readiness is prioritized over diplomatic dialogue.
In this context, the 2024 Stockholm International Peace Research Institute (SIPRI) report revealed that military spending in Central and Western Europe is now higher than ever since the end of the Cold War, reaching approximately 552 billion euros in 2023. This suggests that the continued rise in Russian military spending levels could compel the European continent, alongside the United States, to engage in a new arms race against their Eastern adversaries, Russia and China.
Complication of the Conflict in Ukraine: The increase in Russia’s military budget reflects Moscow’s desire to enhance military capabilities and continue the military campaign in Ukraine. This occurs despite expectations that the war would conclude with the arrival of US President-elect Donald Trump in the White House at the beginning of next year. Furthermore, there are predictions of a slight decrease in Russian military spending in 2026 and 2027. However, these projections remain uncertain as the war continues. Additional resources could enable an escalation of attacks, particularly in disputed regions like Donetsk and Luhansk, ensuring that the largest conflict in Europe since World War II will remain ongoing, especially as Moscow achieves gains along the front lines and launches counteroffensives in areas like Kursk, which witnessed Kyiv’s sole military success this year.
Impact on the Stability of the Russian Economy: Diverting resources from civilian sectors to the defense sphere poses profound challenges to the Russian economy. Inflation is currently at 9.1%, weakening purchasing power for citizens, while social programs are being reduced in the new budget, threatening overall social stability. Amidst a growing labor shortage due to the war and partial mobilization efforts, key industries are facing severe bottlenecks. Furthermore, the focus on defense spending negatively impacts social services like education and healthcare, exacerbating economic disparities and straining social infrastructure.
This significant surge in Russian military spending occurs at a time when oil and gas revenues, historically the backbone of the Russian economy, are declining. This coincides with ongoing sanctions restricting access to global markets. Data indicates that the 2024 budget deficit will reach 1.7% of GDP, compared to previous estimates of 1.1%. Additionally, oil and gas revenue is expected to decline further to 10.9 trillion rubles by 2025, placing additional pressure on the ambitious federal budget.
Exacerbating the “Post-War” Dilemma for Russia: The anticipated recession in Russia following the war will be more severe than what the Russian economy has experienced in decades. With a contraction in the civilian economy, particularly small and medium-sized enterprises, due to the shift of labor towards defense and military industries, coupled with the central bank’s policy of raising interest rates (21%), it is natural that the civilian sector’s ability to withstand the post-war period will be hindered. It will face significant difficulties in regaining its strength and resilience.
During this phase, Russia will face complex economic and social dilemmas. If it reduces defense spending after the war, it may face a sharp economic recession that could jeopardize the stability of the regime. On the other hand, maintaining high defense spending could stifle the civilian economy and undermine its potential growth. There is another option, albeit one with significant risks, which involves the Russian military utilizing economic resources by continuing or threatening military expansion.
In conclusion, Russia’s proposed increase in military spending by 2025 represents a bold strategic move and a major dilemma simultaneously. While this move affirms the Kremlin’s commitment to military dominance, it also exposes critical weaknesses in its economic and social fabric. Economists have described this budget as “military Keynesianism,” characterized by significant military spending that fueled the war in Ukraine but also pushed inflation rates higher. Concerning global security, the consequences of this decision remain equally profound, with the potential for an intensified arms race and a prolonged conflict dynamic in Ukraine.
