Russia's war costs soar to $323 million daily amid economic strain

An article by Bulgarian Military notes that the financial burden of Russia’s ongoing conflict in Ukraine has reached unprecedented levels, with the country’s military spending soaring to unsustainable heights. According to data reported by Janis Kluge of the German Institute for International and Security Affairs, Russia’s defence expenditure for the first half of 2024 has skyrocketed to 5.3 trillion rubles ($55.65 billion). 

According to the article, this figure represents a 36 per cent increase compared to the previous year, translating to a daily expenditure of approximately 29 billion rubles ($322.6 million), or around 1.2 billion rubles ($13.3 million) per hour.

The analysis mentions the scale of Russia's military spending, saying it is staggering when compared to other national budget allocations. The current military budget now exceeds almost one and a half times the annual allocation for Russia’s national economic support program. This is more than three times the budget for higher education and represents eighteen years' worth of funding for the National Health Project. The magnitude of this expenditure highlights a significant shift in resource allocation, prioritizing military needs over other crucial sectors.

According to the article, a notable aspect of this spending surge is the increase in covert military expenditures, which Kluge estimates at about 1 trillion rubles ($11 billion) per quarter. Public defence procurement has also seen substantial growth, up 54 per cent from the previous year and an astounding 126 per cent compared to 2022. This indicates not only a significant increase in visible defence spending but also a substantial amount of secret funding directed towards acquiring weapons for the front lines.

Furthermore, the article points out that the increase in military expenditure is also evident in recruitment and international military cooperation. Spending on recruitment, including the expansion of volunteer and contract soldier numbers, has surged by 25 per cent from last year and 175 per cent since 2021.

 Additionally, expenditure on international military-technical cooperation, likely including purchases from Iran and North Korea, reached nearly 120 billion rubles ($1.3 billion) in the first quarter, escalating to over 150 billion rubles ($1.7 billion) in the second quarter. This pivot towards isolated alliances suggests a significant realignment in Russia’s international relations and highlights the growing complexity of its geopolitical strategy.

Domestically, the Kremlin’s substantial military investments might enhance national pride and support among certain factions. However, there is a risk of growing public discontent if economic hardships emerge due to reduced funding in vital social sectors.

The 2024 budget allocates a record 10.8 trillion rubles ($120 billion) to the military, accounting for nearly 30 per cent of total spending. This level of expenditure is reminiscent of Soviet-era allocations and could rise to 13.3 trillion rubles ($148 billion) by year’s end, amounting to 7-8 per cent of GDP.

Despite current budget surpluses for most of the year, the declining oil prices pose a significant threat to Russia’s fiscal stability. With Urals crude oil prices falling below $60 per barrel in September, well below the budgeted $70 per barrel, the Kremlin faces increased challenges in maintaining its budgetary commitments.

The heavy reliance on oil revenues to fund military expenditures makes Russia vulnerable to fluctuations in global oil markets, potentially jeopardizing the sustainability of its current military spending trajectory.

In summary, the article notes that while Russia’s military budget expansion reflects a concerted effort to sustain its conflict in Ukraine and project power, it simultaneously strains the national budget and exposes vulnerabilities tied to oil revenue dependency. The long-term sustainability of this spending spree remains uncertain, particularly if oil prices continue to decline.