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29th May 2022

Russian army in oil-funded spending spree before Ukraine

  • Moscow military budget started going back up in line with oil and gas markets (Photo: Dmitriy Fomin)
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Robust oil and gas revenue enabled Russia to go on a military spending spree ahead of its Ukraine invasion, according to researchers in Sweden.

The Kremlin's military budget had dwindled between 2016 and 2019, but began going up again as oil and gas prices recovered, Stockholm-based think-tank Sipri said Monday (25 April).

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It jumped 2.9 percent in 2021 compared to 2020 to reach $65.9bn [€61bn].

But Russia's "national defence" budget line, which covers operational costs and weapons purchases, leapt up 14 percent compared to 2020, reaching $48.4bn, on the eve of the war.

"High oil and gas revenues helped Russia to boost its military spending in 2021. Russian military expenditure had been in decline between 2016 and 2019 as a result of low energy prices," Sipri researcher Lucie Béraud-Sudreau said.

Sipri's direct link between Russia's petro-income and war-machine comes amid EU talks on an oil and gas embargo on Russia, which are dragging out due to European energy dependence.

At the same time, Ukraine's military spending fell in 2021 to just $5.9bn, Sipri noted.

That was a blip compared to previous years — Kyiv's spending increased by 72 percent compared to 2014, when Russia first invaded its eastern and southern regions.

But even though Nato countries have been watching as Russia became ever more aggressive toward its neighbours, they have been doing little to prepare for the worst, Sipri's findings indicated.

Just eight out of the 30 Nato allies spent at least two-percent of their GDP on the military last year (Nato's target) — and that figure was one fewer than in 2020.

Germany, Nato's richest EU member, spent just 1.3 percent of its GDP — a decline of 1.4 percent compared to 2020 due to inflation.

The US and some EU states have been pouring in anti-tank and anti-aircraft weapons into Ukraine in the past three months of Russian warfare. Heavier equipment, such as howitzers and tanks, have also been transferred.

But if the start of the war in February is likely to herald a golden age for arms manufacturers in the coming years, the sector was already doing better than many other parts of the economy in the wake of the pandemic.

Global military spending topped $2 trillion for the first time in history last year, Sipri reported.

The US reduced funding slightly overall to $801bn, but China ($293bn), India ($76.6bn), and the UK ($68.4bn) all spent more than ever.

Iran also increased its military budget for the first time in four years (to $24.6bn) and Nigeria spent a whopping 56 percent more in 2021 ($4.5bn) than the year before.

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