Putin braces for financial plight as war drains Russia’s budget

Putin 'will be faced with a collapse' says General Sir Shirreff

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Vladimir Putin is poised to face yet another obstacle on his imperial ambition to conquer Ukraine, as Russia’s war budget is plummeting. A report by the Institute for the Study of War (ISW) suggests that finances dedicated to supporting Putin’s “maximalist goals in Ukraine” could force Russia to “defund” other domestic and international programmes for the sake of the Kremlin’s war chest. Putin’s reluctance to make any short-term “sacrifice” and the drain on resources accelerated by the war could reportedly “undermine” his “geopolitical campaigns worldwide.”

News of Russia’s limited funds comes two days after the Russian leader signed a law allocating over nine trillion rubles (around £116 billion) for defence, security, and law enforcement for the 2023 budget, according to the British Ministry of Defence.

The total defence spending equals more than 30 percent of Russia’s overall budget for the 2023 fiscal year and around 8 percent of the country’s GDP in 2021. 

“Putin is thus continuing to drain his budget into his war in Ukraine and may need to defund other international or domestic campaigns in the process,” the ISW report said.

“Russian forces have been moving equipment and personnel from other conflict zones such as Syria and Nagorno-Karabakh and may deprioritize other combat and soft-power engagements in favor of sustaining a protracted war in Ukraine.”

The intelligence update added: “Putin is seemingly still unwilling to sacrifice his geopolitical initiatives in the short-term. [He] risks facing a financial predicament in which he will not be able to balance maximalist goals in Ukraine with his global power projection campaigns.”

Vladimir Putin’s re-allocation of fundings has reportedly “upset” some well-known pro-Russian military bloggers who claimed that his priorities were “failing to provide for Russian personnel on the battlefield.”

The Ministry of Defence’s intelligence update also came to the conclusion that Vladimir Putin’s 2023 budget would drain spending on other programmes away from the war. 

The update said: “The budget approved by Putin is likely over-optimistic in its expectation of revenue and spending in 2023. Therefore, other parts of Russia’s budget are likely to come under increasing pressure to support the costs of the war.”

Signs of financial tensions have been cropping up since early November when the Kremlin reportedly struggled to pay soldiers bonuses that were promised to those who joined the war effort. 

The Kremlin’s dwindling funds and broken promises led to “increasing social tensions within Russian society”, the ISW reported in November, forecasting the Russian government would “likely need to tap into the federal budget more heavily soon.”

Russia’s economy is taking a massive hit from the West’s economic sanctions, making it the only G20 country whose economy will drop in 2023. 

Russia’s GDP is expected to drop by at least 3.4 percent in the best-case scenario and by up to 5.5 percent in the worst-case scenario by the end of this year, according to independent analysis by the World Bank, the International Monetary Fund (IMF) and the Organisation for Economic Cooperation and Development (OECD).

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The same analysis predicts Russia’s economy will continue to shrink in 2023 by 2.3 percent year on year in the best-case scenario and by 4.5 percent in the worst-case scenario.

12 Russian officers, including Major General Robert Baranov, who Bellingcat identified as the commander in charge of directing the targeting and programming of Russian cruise missiles, were sanctioned by the UK Foreign Office as a result of their involvement in strikes on Ukrainian cities.

Citing British defence intelligence reports, the Foreign Office said: “Russian armed forces are struggling to replenish their missile reserves, while they are increasingly forced to rely on second rate drones supplied by Iran to keep up their inhumane bombardments of the Ukrainian people.”

In a bid to avert a nation-wide blackout in Ukraine, the United States shipped the first part of its power equipment aid worth about $13million (£10.5million) amid heavy fighting in the eastern regions of Donetsk and Luhansk.

President Volodymyr Zelensky said his country needed an additional €800million (£687million) to survive the winter and €1.5billion (£1.3billion) to restore the long-term damage to the energy grid.

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