Editor's Note: Russia's worsening economic crisis has forced the Kremlin to make severe budget cuts. Going into 2016, the federal budget was tightened in all ministries except defense, in which spending was kept largely flat. After all, Russia is in the middle of conflicts in Syria and Ukraine and knows how dangerous it can be when its military capabilities languish. But in January the Russian Finance Ministry ordered another 10 percent spending cut for all ministries — including defense. And on March 6 Russia's deputy defense minister said the Defense Ministry would cut spending by an additional 5 percent this year. While the next reduction still needs to be approved, that it was proposed at all suggests Russia is willing to make cuts to anything, including all-important military expenses. Russian government sources from Vedomosti and Kommersant say the cuts will come from the military's ambitious rearmament program, though the Defense Ministry denies this. The following is a selection of analyses on how Russia has handled tightening finances by reducing military spending, well before the latest 5 percent defense cut.
March 3, 2016: Ever since its unexpected loss of influence in Ukraine and subsequent standoff with the West over the country, Russia has been re-evaluating its military and security positions across the former Soviet periphery. With the war in eastern Ukraine developing into a long-term frozen conflict, Russia has worked to shore up its presence and assets wherever possible in the Eurasian borderlands. It has reinforced brigades in western Russia and engaged in talks to open an air base in Belarus and expand weapons sales to Armenia, both of which occupy strategic areas near conflict zones and are loyal Russian allies when it comes to security.
Though it is farther from the conflict in Ukraine than other parts of the former Soviet periphery, Central Asia is nevertheless important to Russia's strategic interests. The region's proximity to Afghanistan — a country significant not only for the security risks it poses to Central Asia, and thus Russian interests in Central Asia, but also for the Western activity there — only adds to its importance.
Feb. 23, 2016: Now the Kremlin is looking at another opportunity for belt-tightening: foreign loans. Over the past decade, it has used foreign loans from government coffers to press its agenda with and in other countries. These are loans directly from the government's VTB bank, though there are many loans from Russian companies (such as Rosoboronexport, Gazprom and Rosneft) along the same lines. In recent years, these loans were many times not investments at all but incentives to induce the countries to make foreign policy decisions in line with Russia's needs. In addition, the Kremlin often either wrote off the loans, or the terms of the agreement were skewed to become more like a bailout than a loan.
Feb. 16, 2016: The Russian economy is staggering amid low oil prices. Kremlin power struggles are intensifying. And social unrest is increasing nationwide. The United States is reinforcing European allies all along Russia's western flank. This scene does not suggest a perfect record for the Russian leader, but Putin is also a skilled practitioner of realpolitik. Moscow has a sober ruthlessness and resourcefulness that it will employ to try to make up for its most obvious weaknesses.
Feb. 10, 2016: The Ukrainian conflict has already had its fair share of fruitless negotiations and cease-fire breakdowns. Simply continuing the status quo would understandably be more likely. But the drop in global oil prices and the subsequent weakening of the Russian economy, as well as Russia's extensive involvement in Syria, could be giving new life to negotiations among Kiev, Moscow and the West. A grand bargain over Ukraine is far from near, but there may be room for compromise over what so far have been intractable issues.
Jan. 27, 2016: As a growing number of countries compete to sell their wares in India's robust arms market, the dominance of Russian defense manufacturers is quickly eroding. For Moscow, the decline comes at a particularly bad time: Russia's economy is struggling under the weight of foreign sanctions and the global drop in oil prices. Moscow has been forced to make sweeping budget cuts, and the previously anticipated spike in defense spending is now unlikely. In fact, the Russian arms industry would be lucky if Moscow's overall defense spending remains constant over next two years.
Jan. 20, 2016: Ships, shipbuilding and access to the sea define Russia and the influence it can exert. Since the 17th century, Russia’s shipyard industry has been in a perpetual state of flux as the country seeks access to water outlets through military conquest. The country's ability to secure and modernize warm water ports has been regularly disrupted by domestic and international conflict, often resulting in the destruction and degradation of the shipyard industry as a whole. The need to make war to protect its naval power has led Russia to prioritize its military shipyard industry above civil shipbuilding.
This was certainly the case in the Russian annexation of Crimea and in the support of the Donbas separatist movements to retain control of the port of Sevastopol, which forced Ukraine to cut off export of important components and shipyard services to Russia critical to its naval modernization program. To make matters worse, a slew of economic problems has hampered Russia's efforts to modernize its military and civil shipyards. Moscow will do its best to selectively fund and develop key ports along its strategic water bodies. But it will not be easy.
Jan. 13, 2016: All Russian government ministries have been ordered to slash their budgets for 2016 by 10 percent, a government source told Russian newspaper Vedomosti. If any ministry or agency fails to submit its budget reductions by Friday, the Finance Ministry will reportedly make the cuts itself. This forceful directive is not only a response to Russia's dire economic situation but the Kremlin's direct acknowledgement that it cannot delay financial reforms for political reasons any longer. It is also an indicator that Russia's financial elite is gaining power within the Kremlin.
Nov. 3, 2015: After months of battles over the details in the Russian Cabinet and among the Kremlin elite, the Russian State Duma is currently debating the 2016 federal budget. The draft submitted to the Duma shows the Kremlin's priorities for the next year, as well as the constraints on Russia both internally and externally. How Russia spends its limited resources this year will affect the country far beyond 2016.
The Russian government decided to draft a full budget only for the year 2016 rather than devise a traditional three-year budget because of what it deemed "unpredictable economic volatility" caused by low oil prices, a weak currency and Western economic sanctions. Russia is officially in a recession, with GDP growth projected to fall 3.9 percent in 2015. In January, the government was forced to slash its budget by 10 percent in all sectors and ministries except for defense. However, if current conditions hold, Russia's Economic Ministry forecasts that the country's GDP growth will rise 0.7 percent in 2016, and the Kremlin is hoping for an even brighter outlook as it lobbies Europe to lift its sanctions on Russia.
Aug. 27, 2012: Russia has been struggling to reform its military since the fall of the Soviet Union and the ensuing crisis in Russia. Some progress was made after Vladimir Putin came to power, though Russia had no viable and specific plan for its military until 2010, when Moscow drew up its first serious military doctrine in years. Reform has progressed since then, but the next few years will be a true test. Russia's goal is to create a military capable of facing the country's main challenges domestically, regionally and globally. Though the Kremlin has moved forward with its plans, major constraints could slow this progress if not stop it altogether.