Russia Could Be Spending Less on Defense Than Six Other Nations in 2017

There are probably few people happier that Donald Trump will be the next US president than Russia’s finance minister Anton Siluanov.

Responding to a third lean year in a row for Russia Siluanov’s ministry has come up with a budget proposal for 2017 that cuts across the board including a massive $15.5 billion cut in defense spending. That’s fully 27 percent of military spending for 2016!

Naturally the defense ministry was going to fight the cut tooth and nail but with Hillary Clinton out of the picture they will have a harder time.

If Siluanov prevails military expenditure in nominal dollar terms will go down from $60.5 billion in 2016 to $44.7 billion.

This would make Russia only the 7th nation in the world by defense spending. US, China, Saudi Arabia, Great Britain, India and France would all be spending more dollars than Russia.

Russia would be spending only $5 billion more than Japan and only $8 billion more than South Korea!

Obviously nominal dollar spending doesn’t tell the entire story. A billion dollars in many ways goes a lot farther in Russia than in a wealthier country, but nonetheless, a 750,000 man force on $45 billion — that’s got to hurt.

If the proposal goes through I think it means there is will in Moscow to make difficult but necessary decisions. Given that Russia’s GDP has contracted for three years straight large military budgets are a luxury now despite the New Cold War.

This is going to temporarily set back Russia’s military modernization program but the long-term economic health of the country is far more important. A recovery however requires an economy as unburdened by taxes, money creation and loans (future taxation) as possible. The finance ministry has the right idea here:

Overall, budget expenditure is planned to be cut from 19.8 percent of GDP in 2016 to 16.2 percent in 2019.

 

Under its long-term plan, the Russian Finance Ministry plans to reduce public spending to 13.1 percent of GDP by 2034.