Will the Russian military budget for 2025-2027 be torpedoed by Saudi Arabia?
After almost doubling from 2022 to 2024, reaching 10.400 trillion rubles this year, or $112 billion, the Russian military budget is set to grow again very significantly in 2025, according to the federal budget presented this week by Moscow.
For the Kremlin and the Ministry of Defense, this is about continuing the ongoing transformation of the Russian armies, as well as their change of format, and financing the continuation of the special military operation in Ukraine, which is becoming more and more costly.
Surprisingly, despite a defense effort representing 6,3% of GDP planned for 2025, and 32,5% of the federal budget, the latter should remain under control, with a public deficit of the order of only 0,5%, according to the official information transmitted.
However, external factors could very soon derail this budgetary planning, to the point of jeopardizing Vladimir Putin's military ambitions, including in Ukraine. This is particularly the case with the changes currently taking place in Saudi Arabia concerning crude oil production.
In this section:
Russian defense spending to increase by 25% in 2025.
In fact, the Russian Ministry of Armed Forces will therefore receive, in 2025, a budget of 13.500 trillion rubles, or $145 billion, which represents an increase of more than 25% compared to the 2024 budget.
By then, the military will have seen its budget increased 2,5 times since the start of the conflict in February 2022. However, this increase is supposed to be the last, according to Russian budget planning.
Indeed, within the framework of the 2025-2027 budget planning, presented jointly, the 2026 budget should record a slight decrease, to 12.800 billion rubles (137 billion dollars at the current exchange rate), to rise again to 13.000 billion rubles (139 billion dollars in 2024) in 2027.
Some indications have been given regarding some programs funded over this time period. Thus, 6.100 billion rubles ($65 billion) will be used to achieve a technological leadership position, 234 billion rubles ($2,5 billion) to purchase new machine tools, 175 billion rubles ($1,8 billion) to purchase electronic components and semiconductors, and 112 billion rubles ($1,2 billion) in the field of drones and autonomous systems. Finally, 46,9 billion rubles ($520 million) will be used to develop new nuclear technologies.
Beyond these technological aspects, there are also 40 billion rubles dedicated to the new fund of defenders of the motherland, which supports veterans and their families, and 14 billion rubles ($150 million) for the extension of the mobilizable reserve.
There are 75% of this article left to read, Subscribe to access it!
The Classic subscriptions provide access to
articles in their full version, and without advertising,
from €1,99. Subscriptions Premium also allow access to archives (articles over two years old)
Christmas promotion : 15% discount on Premium and Classic subscriptions annual with the code MetaXmas2024, from 11/12 to 27/12 only.
Copyright : Reproduction, even partial, of this article is prohibited, apart from the title and the parts of the article written in italics, except within the framework of copyright protection agreements entrusted to the CFC, and unless expressly agreed by Meta-defense.fr. Meta-defense.fr reserves the right to use all options at its disposal to assert its rights.
I would like to point out that since the beginning of the war Russia has been selling its oil well below the official market prices in order to circumvent international sanctions. All experts report a price of around 40 dollars per barrel of Russian oil. A drop in current prices to around 70 dollars per barrel therefore has no consequences for Russia.
If Moscow is selling its oil (and gas) at this price today, it is because it has no choice. In fact, a drop in prices will homothetically lead to a drop in Russian sales prices. However, these are already dangerously close to operating costs. If they were to have to drop, there would simply be no margin left for the Russian state.
At $40 a barrel I don't see how another drop would be automatic. It's already the best possible deal for the buyer.
You assume that this price is a "flower" made by the Russians to their buyers. However, if it is at this price, it is because Moscow has no choice. This is the price charged by Moscow, to which are added many additional costs, to allow these hydrocarbons to be transported outside the traditional routes, with risks of Western sanctions, what is more. If the market price falls, the appetite for this offer will necessarily be much less, because Russia's customers will have to continue to pay these additional costs, and take these risks, for oil that will have a final price quite close to that of the Saudis, therefore of the world market.
So Moscow will have two choices: either lose significant market share, or try to lower its prices further, which will be very difficult, because of the higher operating costs in Siberia than in the Middle Eastern desert. In either case, it will result in a significant drop in revenues for the Russian state, and the federal budget.
If Moscow has made so much effort to maintain oil prices at this high level, it is certainly not to please the Saudis, so that they sell their production more expensively...
I never implied it was a "flower"! Where did you get that from?
Then your explanations may seem learned but they are wrong and show that you do not understand how the oil market works. Russia benefits from a "gray fleet", almost 600 oil tankers chartered by unscrupulous companies and mostly Western sailing, AIS disconnected, under flags of convenience and saving the amount of insurance. Contrary to what you say, the transport costs are not higher than for legal competition, quite the contrary. It is so true that Turkey, India and Azerbaijan buy Russian oil and resell it to us in the form of diesel with huge margins never seen before in the sector. So it is not about to stop whatever the speculations in your article. In addition, a good part of Russian oil is exported to Asia or through the Caspian by gas pipelines towards India, which therefore has very little influence on the final price. Since the start of the war and Western sanctions, Russia's oil and gas revenues have increased by $83 billion annually. You forget to mention that Saudi Arabia urgently needs to bring in foreign currency to finance its major infrastructure projects, so much so that its flagship project "the Line" has been reduced by 80%. It will therefore not let prices fall below $70 for long. As for the United States, its LNG has been exported massively to Europe, since it replaced that coming from Russia, at a cost price so high that it artificially maintains the average world price of gas well above the break-even point for Russian gas.
There you have it, these are facts, not assumptions, and sometimes it's not shameful to admit that you're not always right.
The problem is that today there is a cognitive bias everywhere that would like Russia to be the devil and therefore unconsciously we must always wish the worst for it. I am not sure that this is a guarantee of objectivity.
In that case, why do they sell it at $40, and not at $60 or $80, which would already represent a huge added value for their customers? I am not an expert on oil prices, I agree, but I know the Russians well. And if they can sell at a higher price, they do. If they do not, it is because they cannot. And if they cannot, it is because of external factors, factors that are likely to be influenced by the fall in world prices.
There is no bias here. The issue of stopping the "three scenarios" is widely discussed in the Russian press itself. Is she fucked too?
Concerning Saudi Arabia, other specialists than you, on the contrary, believe that Riyadh will let prices fall, because it needs to protect its market shares, against the arrival of new players, not belonging to OPEC, and producing more and more, at lower prices, like the United States. Such an ambition would certainly not be satisfied with a few transitional adjustment measures, and requires an increase in production, to lead to a fall in prices, sustained over time, precisely because the Kingdom needs more revenue.
In any case, everything indicates that we will soon find out. If the Russian public deficit explodes in 2025, it will not be due to an increase in spending, but to a collapse in revenues. And if world prices fall to $70 or less, I am certain that this will be the case.
Admit that so far I have never been wrong in my statements about the development of the situation in this conflict, and in Russia. We will see if this time will be my first failure in this area ))
They sell to non-aligned states that take risks of American sanctions by "laundering" this production while making a margin on it due to this sale price of $40 per barrel.
If this margin is reduced, these intermediaries will no longer have any interest in jeopardizing their foreign policy to satisfy Putin.