Russia’s finance team signals war costs becoming unaffordable

Russia’s finance officials have warned President Vladimir Putin that the current level of military spending is becoming unsustainable, exposing rare divisions within the Russian leadership over the economic costs of the war in Ukraine, Bloomberg News reported.

Officials from Russia’s Finance Ministry and central bank have told the Kremlin that projected defence expenditure risks widening the budget deficit to dangerous levels and have proposed further cuts to military spending, according to people familiar with the discussions and documents reviewed by Bloomberg.

The warnings reflect growing concern among economic policymakers about mounting pressure on Russia’s finances as the war enters its fifth year. Officials argue that restoring fiscal stability will be difficult without reducing spending or improving efficiency.

The proposal has met resistance from the Defence Ministry and some Kremlin officials, who maintain that military expenditure should be protected to sustain Russia’s war objectives. They also contend that reducing defence spending could harm sectors of the economy that depend heavily on military contracts.

According to people familiar with the matter, Putin has instructed officials to seek savings in other areas of the budget before targeting defence expenditure. The Defence Ministry, meanwhile, is reportedly seeking additional funding, with estimates suggesting a financing shortfall of up to 3 trillion roubles ($36 billion) this year.

When Russia’s 2026 budget was drafted, officials anticipated a possible funding gap of between 1.2 trillion and 1.5 trillion roubles in the second half of the year. At the time, some policymakers expected the war could end following last year’s summit between Putin and U.S. President Donald Trump in Alaska, making lower defence spending a reasonable assumption.

The debate has intensified as Russia’s economic outlook deteriorates. The Economy Ministry recently cut its 2026 growth forecast to 0.4% from 1.3%, while official data showed the economy contracted in the first quarter for the first time in three years.

Russia’s budget deficit reached 5.9 trillion roubles, or 2.5% of GDP, during the first four months of 2026, already exceeding half of the government’s full-year target.

Finance Minister Anton Siluanov acknowledged the pressure in a May interview with Kommersant, saying “a certain restraint” was needed in public expenditure. “Reserves are not endless. Weakness in finances cannot be tolerated in the context of such large-scale transformations in the world,” he said, adding: “We need to improve the efficiency of budget expenditures.”

By Aghakazim Guliyev