From Bloomberg, June 1:
Senior government officials have warned Russian President Vladimir Putin that spending on the war in Ukraine is on an unaffordable path, the most serious sign of internal division in Moscow since the full-scale invasion began.
Officials in Russia’s Finance Ministry and central bank have advised the Kremlin that the current level of projected defense expenditure risks the government’s budget deficit widening dangerously, according to people familiar with the matter and documents reviewed by Bloomberg News.
The officials, who have grown increasingly concerned about the state of Russia’s economy and state budget in recent months, have proposed new cuts to defense spending, the people said. It will be difficult to mend the country’s stretched public finances without finding further efficiencies, they have advised.
However, a divide among policymakers has seen senior officials in the Defense Ministry and some in the Kremlin, who are determined to pursue Putin’s war aims, insist on protecting military expenditure. Reducing it would badly damage the economy because so many businesses are reliant on military-related contracts, they have argued.
Putin has asked Finance Ministry officials to find spending reductions in other budget areas before targeting defense, some of the people said. They were all granted anonymity discussing the concerns, the extent of which has not been made public.
Kremlin spokesman Dmitry Peskov didn’t immediately respond to a request for comment.
The Defense Ministry is not only resisting cuts but is demanding additional funding, according to two people close to the Russian government. Military expenditure will have to increase to address a shortfall as high as three trillion rubles ($36 billion) this year, they said.
The president has been aware of the budgetary pressures both last year and this year, so the challenges aren’t a surprise, the people said. The scale of any spending cuts will depend solely on Putin, as no major budget decisions are made without his approval and he acts as the ultimate arbiter, they said, describing that as an iron rule.
When the 2026 budget was drafted, officials understood that a funding gap of roughly 1.2 trillion to 1.5 trillion rubles could emerge in the second half of the year, money that might be needed for the defense sector.
At the time, there were hopes the war in Ukraine would end following the summit in Alaska last August between Putin and US President Donald Trump, which would have made a reduction in defense spending in the second half of 2026 a logical assumption, according to the people close to the Russian government....
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Russia's budget deficit is less than half that of the U.S, 2.5% vs. 5.9%
