A new study shows Russia's defense budget has taken a big hit. In its annual report on global military spending, the Stockholm International Peace Research Institute highlighted a 20 percent drop in Russian defense spending between 2016 and 2017. The report suggests that Russia's economic troubles have put a dent in Moscow's aspirations to continue with elevated defense spending, but the 20 percent figure does require some context to be fully understood. Russian military modernization will move forward in the coming year, but the Kremlin will increasingly need to make tough choices about what it prioritizes.
After reducing its military spending during the 1990s following the collapse of the Soviet Union, Russia has sought to revitalize its military under President Vladimir Putin by steadily increasing its defense budget. Aided by a growing economy and rising energy prices, the pace of Russian military modernization further sped up after the 2008 Russo-Georgian War, which revealed the continued structural weaknesses in Russia's military capabilities. Five years later, significant investments into the Russian military paid off when the country utilized its increasingly sophisticated and capable military machine for operations in Ukraine and Syria.
But at the same time that Moscow was flexing its newly invigorated military muscles in Ukraine and Syria, Russia was hit by a double blow of lowered energy prices and painful sanctions from the United States and its allies in the West. The resulting Russian recession from 2014 to 2017 forced the Kremlin to make hard financial decisions. And as the recent study indicates, this included a considerable decrease in Russia's military spending.
While Russia's defense budget is certainly facing cuts, the 20 percent drop outlined in the report can be misleading if taken in isolation. First of all, it is important to remember that the difference in spending includes a one-time payment made by Russia's finance ministry in 2015 to clear some of the substantial debt it had accumulated with the country's defense industry. If this element is not included, the actual reduction has been calculated by analysts such as Michael Kofman of the Center for Naval Analyses to be closer to 7 percent than 20. Furthermore, deciphering the actual level of military spending by countries like Russia is hardly a precise exercise. A large amount of Russia's military spending, including spending on classified strategic weaponry, is often left undisclosed. And if energy prices rebound, that could once again allow Russia's defense budget to increase.
The explosive growth of Russia's defense budget that's taken place over the past decade and a half is largely over. And though Russian military modernization will continue in some form or another, Moscow will increasingly have to limit development to key areas rather than pursue an across-the-board approach. As prior Stratfor analysis has indicated, Russia will likely continue to prioritize its strategic nuclear arsenal, precision munitions and electronic warfare. The conventional navy, meanwhile, will likely be impacted most by spending cuts.