Happy Days For Russia’s “Black Budget” Secret Defense Spending



Happy Days For Russia’s “Black Budget” Secret Defense Spending

The brakes were supposed to have been applied on defence spending in the draft 2017-19 budget.
By Nick Allen in Warsaw October 28, 2016

Russia’s military campaigns and interventions in Syria and Ukraine are clocking up billions in costs and there is still more hardware to develop, buy and deploy as the country increasingly squares up to the West, putting immense strain on the national budget and reserves.

Parallel to the quest to boost tax revenues, the finance ministry authors of new amendments to the 2016 budget figured out how to cover much of the current and coming military expense: by raking out RUB800bn ($12.7bn) from areas such as investments, education, health care and pensions and secretly shovelling it into defence to pay off the credits of Russian contractors.

According to the new plan, these will extend the Kremlin’s armaments drive, even though the brakes were supposed to have been applied on defence spending in the draft 2017-19 budget. Meanwhile, welfare spending will also grow, helping to keep the lid on public disatisfaction at shrinking services.

“We see an opportunity to repay loans taken by the companies, to relieve them of the debt burden and make it possible to reduce debt relative to revenue in order to give them an opportunity to raise loans again,” Finance Minister Anton Siluanov told Russia’s parliament this month as he presented the amendments to the budget, much of which will as usual be covered with funds released towards the end of the year.

Battle for the purse strings

As well as meeting the defence instructions of President Vladimir Putin, that would also allow enterprises to shift some capacity toward civilian production, Siluanov added in comments that observers say actually signal a defeat for his ministry. Having battled to balance the books this year amid low revenues from oil, Siluanov’s team has been overruled by the government, which now wants to increase the year’s overall spending by RUB304bn to RUB16.4 trillion ($4.8bn to $261bn). In other words, the men in black or wearing epaulettes won the fight for control of the state’s finances.

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