Russia's historic military spending soars amid Ukraine conflict
The war with Ukraine is increasingly costly for Russia, with its military budget nearing levels reminiscent of the Soviet era. What is the Kremlin channeling most of its resources into?
Next year, the Kremlin plans to allocate a staggering 41% of its budget to defense and security. This surpasses the combined spending on education, healthcare, social policy, and economic development. Notably, almost 30% of these funds will indirectly support war activities. The escalating conflict in Ukraine continues to inflate costs, gradually consuming profits accumulated over recent years.
Russian authorities recognize that budget revenues are consistently declining. By 2025, revenues from oil sales alone are anticipated to drop by 14% compared to the current year, and by 20% from two years prior. To complicate matters further, inflation at 21% diminishes the real value of government funds.
In 2023, 6.4 trillion rubles ($66 billion) were dedicated to defense. The following year, this figure rose to 11 trillion rubles ($114 billion), and the Kremlin plans to allocate 13.5 trillion rubles in the upcoming year, approximately $133.5 billion at the current exchange rate. In contrast, social policy, encompassing pensions, demographic initiatives, and housing, receives 6.4 trillion rubles.
This marks the largest military expenditure in Russia's history. Never before has the state earmarked such vast resources for military purposes. Interestingly, just a year ago, an entirely different forecast was predicted. According to the budget approved last fall, defense spending in 2025 was expected to decrease to 8.5 trillion rubles ($89 billion). However, the intensifying conflict in Ukraine is driving up costs. Where exactly is the Kremlin directing these colossal sums?
Ammo and repairs
The Kremlin does not officially disclose detailed information about war expenses, shrouding them in the secret part of the budget. However, based on known costs for the production of ammunition, tanks, armored vehicles, as well as fuel and supplies, some estimates are possible.
A significant portion of spending goes toward supporting military operations, especially the production of ammunition, including costly ballistic and cruise missiles, and the repair and maintenance of armored vehicles. According to U.S. intelligence, in the first two years of the war, these expenditures may have reached as much as $51.4 billion, approximately 5 trillion rubles at the current exchange rate. Almost half of this amount was spent on the production of rockets, with artillery shells alone reportedly costing $9 billion. The third-largest expenditure category was equipment maintenance.
These costs are dispersed across different ministries, complicating accurate tracking. For example, salaries for defense sector workers are paid by the Ministry of Industry and Trade, and development research is co-financed by the Ministry of Defense and the Ministry of Economic Development, effectively masking the war's true costs. Meanwhile, expenses related to military personnel are shared with the Ministry of Labor and Social Protection.
Food and funerals
The expense of maintaining the Russian army is substantial. The monthly cost of one soldier on the front is about 360,000 rubles, roughly $3,700. Russia places about 470,000 ground troops on the frontline, with an additional 30,000 members from the Rosgvardiya. In total, this amounts to 180 billion rubles monthly, or 2.2 trillion rubles annually, nearly $22 billion. This estimate only considers land forces. Additional costs arise from maintaining the Black Sea Fleet, which consists of 25,000 sailors, and the Aerospace Forces, which have also deployed several thousand more troops to the front.
Another significant financial burden is compensating the families of soldiers who are killed or injured. The Kremlin pays 7.4 million rubles ($76,000) for each deceased soldier and 3 million ($30,600) for injuries. In the first year of the war, Russia dedicated 913.7 billion rubles ($9.5 billion) to these compensations, but this year that figure rose to 2.4 trillion rubles ($25 billion). Compensation for the injured noted a similar increase—from 748.5 billion ($7.6 billion) to 2.5 trillion rubles ($25 billion).
Notably, not all compensation payments are directly funded by the Ministry of Defense's budget. Payments for wounded soldiers are drawn from resources earmarked for social policy, further straining the budget in this sector.
Where does the money come from?
Journalists at Forbes calculated that this year, the Kremlin spent the equivalent of a quarter of Russia's average annual exports from the past decade. Despite sanctions, Russian exports remain robust, with natural resources sold through intermediaries in China, India, and African countries.
Despite falling revenues, Russia still earns four times more annually than the war's cost. Cuts in social spending, investments, and social policies do not present significant challenges for the Kremlin. The society, accustomed to poverty, does not resist.
One-third of Russians—over 50 million people—live below the subsistence level. Approximately 17.2 million citizens are considered poor, making up 11.8% of the population. Only 32% of residents can afford purchases beyond the bare minimum. In such a society, resistance against the authorities is unlikely. Putin's promise of a great Russia holds more weight for many than a full bowl of food.
