The Soviet Union’s desperate commitment to the arms race made it spend itself into bankruptcy. Some things never change. The current projections for the 2017 budget suggests once again, as in Soviet times, Russia’s future is being mortgaged in the name of its military aspirations.

The headline figure is that national defence will account for RUB2.84tn ($44bn), or 17.5% of the total budget. Moreover, national security and law enforcement will be receiving another 11.9%, or RUB1.94tn ($30bn). Just in and of itself, this means 29.4% will be allocated to the security sector as a whole. However, even this does not tell the full story, as some of the funds earmarked for education, economic development and ‘cross-government issues’ are actually funding defence-related programmes, from the revived GTO (“Ready for Health and Defence”) pre-draft classes in schools to scientific research with an explicit military aim. Overall, more than 30% will be devoted to defence and security.

This represents a decline in dollar terms, from around $50bn, although that is not an especially useful indicator, as the defense budget generally is spent within the ruble sector.

It is also the case that the US typically spends just over half its federal budget discretionary spend on the military: in 2016 this was a titanic $585bn. However, this is based on a far larger and healthier economy and, more to the point, much of US spending on other purposes happens at the state and local level.

For Russia, where federal spending on health will be just RUB378bn (2.3%) and education RUB569bn (3.5%), the central government budget is both much more restricted and also important in driving national progress. Or the lack thereof.

The implications for the country’s already over-stretched public services are obvious, and will do nothing to address the fragmented and small-scale but serious problem of rising social and labour unrest. However, even for the military, the omens are not so encouraging.

First of all, one has to ask how much of these generous allocations will actually be spent as intended. According to the Main Military Procuracy (and once, memorably, even Dmitry Medvedev), the Gosoboronzakaz military procurement system is notoriously corrupt. More than two-thirds of the defense budget is spent through Gosoboronzakaz, including everything from building and maintaining barracks to buying new weapons. 

Anti-corruption campaigner Alexei Navalny has recently claimed that “nearly half” of all Gosoboronzakaz spending is “being stolen”. While this may sound like political hyperbole, back in 2011 Main Military Prosecutor Sergei Fridinsky said that 40% of the budget was being “wasted” – a fairly transparent euphemism for theft. Although partial data suggests some improvement in the situation in 2012-14, more recent economic pressures, as well as the massive opportunities for embezzlement provided by the war in Ukraine’s Donbas region, appear to have revived this dishonourable tradition.

There is also the question of on quite what the defence budget is spent. Although the total spend is down from 2015’s, reflecting the continuing pressure on the federal budget, Finance Minister Anton Siluanov has made it clear that procurement will be a priority: “despite the difficulties, the volume of purchased arms and military equipment will not be reduced”. 

Good news for what Soviet leader Nikita Khrushchev called the ‘metal-eaters’ of the military-industrial complex. Their interests seem to be considered more important than the soldiers. After all, much spending already goes on systems – such as the ruinously expensive T-14 Armata tank – that reflect not so much the generals’ priorities, but the need to protect major defence industrial corporations whose support Putin enjoys. As one tank officer told me, the Armata was “the tank UralVagonZavod wanted to make” rather than the tank that the soldiers actually wanted.

Furthermore, given that defence spending is flat or declining in absolute terms, the growing bite taken by embezzlement and procurement have to come from somewhere. The prospects for improved salaries and benefits in order to attract more volunteers to the military look poor, so the hope of further decreasing dependence on the draft and its under-trained and often reluctant conscripts will likely be dashed.

Reminded of Tsarist general Suvorov’s maxim, “hard in training, easy in battle,” under Defence Minister Shoigu, Russia has staged larger, more intensive and frequent military operations, a training regime which has indeed generated much greater operational effectiveness. It remains to be seen whether this programme will be crushed between the shrinking budget and the hunger of the ‘metal-eaters.’

No security for security

Likewise, the situation for the security and law-enforcement agencies is not as unrelievedly positive as might appear. 

The security agencies appear to be doing fine, although their budgets are within the ‘black’ sections – approved but not itemized – and at this stage hard to apportion.

The Ministry of Internal Affairs (MVD), though is suffering. When the National Guard was established earlier this year, it absorbed not only the MVD’s public order forces but also the FGUP Okhrana private security corporation, a profit centre whose revenues bolstered federal and local budgets. The MVD has already warned that policing faces a RUB500bn shortfall over the next three years, and the 2017 budget offers little relief. Expect crime rates to continue to rise.

As well as the spooks, the metal-eaters seem to be winning out again. Not only are the National Guard and the intelligence agencies’ budgets secure, but the MVD’s preliminary line-item expenditures suggest continued spending on new vehicles and weapons, at the expense of salaries and building upkeep. The cops may see their real incomes fall (which historically has grown corruption), and their premises get shabbier, but at least they will get new GAZ buses and armoured cars, and Ural trucks.

The 2016 budget ended up being shaved by 5% at the 11th hour, and it remains to be seen what will happen in 2017. As is, it will leave Russia with a deficit of 3.2% of GDP, which will consume RUB1.15tn of the rapidly-dwindling Reserve Fund and the National Wealth Fund. The former is likely to be empty by the end of next year, with serious implications for the country. 

In other words, not only is Putin continuing to burn through the financial reserves built up over years of plenty in the name of his security forces, he seems to be doing so inefficiently. His continued failure or refusal to reform the Gosboronzakaz system – perhaps because many of the greatest beneficiaries are also his greatest friends – ensures much is stolen. And even that which is spent is going to be spent inefficiently. Modern weapons in the hands of undertrained conscripts do not a superpower make.

In short, as his policies also alienate him from the West, bring sanctions on Russia, and force Moscow to continue bankrolling the Donbas with money that could be spent at home, is the greatest threat to Russian security Vladimir Putin himself?

Mark Galeotti is a senior research fellow at the Institute of International Relations Prague, a visiting fellow with the European Council on Foreign Relations, and the director of Mayak Intelligence. He blogs at In Moscow’s Shadowsand tweets as @MarkGaleotti.