Russia overspends on Putin’s war in Ukraine by $28bn

{"text":[[{"start":11.75,"text":"Russia’s spending on Vladimir Putin’s war in Ukraine is on track to blow through its budget by Rbs2tn ($28bn) this year, forcing the Kremlin to contemplate deep spending cuts in the coming years, according to a letter seen by the FT."}],[{"start":26.8,"text":"Finance minister Anton Siluanov asked Russia’s cabinet in February to freeze planned spending elsewhere to cover the mounting cost of the war, the letter shows."}],[{"start":36.1,"text":"The request highlights Russia’s struggles to finance the war despite budgeting Rbs16.84tn ($238bn), or almost 40 per cent of this year’s budget, to defence and security."}],[{"start":49.45,"text":"The Kremlin planned a budget deficit of Rbs3.8tn for all of 2026. In the first four months of this year, however, Russia’s budget is already Rbs5.9tn — or 2.5 per cent of GDP — in the red, its largest deficit since Putin ordered the full-scale invasion of Ukraine in 2022. "}],[{"start":69.80000000000001,"text":"The finance ministry estimated in February that the Rbs2tn shortfall caused by additional military spending could rise to as much as Rbs4tn this year in a “negative scenario” that would continue into 2027 and 2028, according to the letter. It asked the cabinet to freeze Rbs2.9tn of planned spending for this year, a figure that could rise to Rbs7.1tn in 2028, the letter shows."}],[{"start":97.75000000000001,"text":"War spending could push Russia’s budget deeper into the red if cuts cannot be made elsewhere, the letter suggests."}],[{"start":104.70000000000002,"text":"Since Siluanov made his plea, Russia’s budget has received a boost from the Iran war, which sent oil prices above $100 a barrel for the first time since 2022. "}],[{"start":115.65000000000002,"text":"But the additional windfall from higher energy prices is unlikely to be sufficient to cover all of the Kremlin’s ballooning expenses on the war in Ukraine. "}],[{"start":125.50000000000001,"text":"In an interview with Russian newspaper Kommersant published on Wednesday, Siluanov said the finance ministry was revising the budget to account for “changes in macroeconomic conditions [and] the need to concentrate additional resources on important priority areas”."}],[{"start":142.4,"text":"He also indicated further cuts to the budget were possible. “Our reserves are not endless. We can’t allow any weak points in our finances while such major transformations are going on in the world,” Siluanov said. “The cabinet is working constantly to stabilise and balance state finances.”"}],[{"start":null,"text":"

"}],[{"start":159.55,"text":"Siluanov said this month that in April, Russia had received Rbs200bn ($2.8bn) in surplus revenue from energy exports. But he said expected energy revenues had fallen short by roughly the same amount in March."}],[{"start":174.95000000000002,"text":"The boost from higher oil and gas prices has been tempered by payments to Russian oil companies to limit domestic petrol price rises, as well as the strength of the rouble. The currency is trading around its highest levels against the dollar in more than three years."}],[{"start":190.3,"text":"The spiralling expenditure on the Ukraine war, now into its fifth year, is clouding an already gloomy economic climate in Russia. "}],[{"start":198.65,"text":"The economy ministry this month cut its growth forecast for 2026 by nearly a full percentage point to just 0.4 per cent. It now expects GDP to grow 1.4 per cent next year and 1.9 per cent in 2028, a sharp drop from predictions made just last September of 2.8 per cent and 2.5 per cent respectively."}],[{"start":221.70000000000002,"text":"“The economy is not in spectacular shape, but it is resilient. Still, the budget is the number one topic — in the media, in central bank statements, and in behind-the-scenes talks,” said Sofya Donets, chief economist at Moscow-based T-Investments."}],[{"start":238.9,"text":"“People are looking at the budget to understand: who is next? Will there be room for rate cuts, and which taxes will be raised next? When will they come for us?”"}],[{"start":248.15,"text":"Russia’s top economic officials have acknowledged mounting imbalances in the economy but present them as part of a standard boom-and-bust cycle."}],[{"start":256.15,"text":"Some officials have nonetheless begun to blame Russia’s wartime spending for the economic troubles."}],[{"start":262,"text":"Renat Suleimanov, a member of Russia’s parliament, told a Siberian news outlet last week that the war must end “as soon as possible” because of the economic fallout from high military spending."}],[{"start":273.45,"text":"“What development, investment, and capital allocation can you talk about [when] 40 per cent of the federal budget is defence and security? Tanks and shells don’t have any consumer value [ . . . ] they ensure employment and wages in the defence industry, but they also drive up inflation and cut other spending, like social services and investment,” Suleimanov said."}],[{"start":294,"text":"In January, the finance ministry had already made a separate request to government agencies to cut non-essential expenditure by 10 per cent to stop the budget deficit from widening, but excluded social and defence spending from the cuts. "}],[{"start":308.55,"text":"Alexandra Prokopenko, a former central bank official, said Siluanov’s letter showed Russia was prioritising spending on the war at the expense of everything else."}],[{"start":318.65000000000003,"text":"“The finance ministry needs money for the war, so whatever happens, it’s not defence and security that gets cut, but procurement, subsidies to corporates and financing public institutions,” said Prokopenko, now a fellow at the Carnegie Russia Eurasia Center, a think-tank in Berlin. "}],[{"start":335.00000000000006,"text":"Russia’s finance ministry did not respond to a request for comment. Dmitry Peskov, Putin’s spokesman, did not respond to a request for comment. "}],[{"start":353.6000000000001,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1780035151_3516.mp3"}