STOCKHOLM (REUTERS, AFP) - Russian military spending fell by a fifth last year, its first decline in nearly two decades, with tighter purse-strings likely to affect Moscow's military activity ahead, a report by defence think-tank SIPRI showed on Wednesday (May 2).
"Military modernisation remains a priority in Russia, but the military budget has been restricted by economic problems that the country has experienced since 2014," senior SIPRI researcher Siemon Wezeman said, referring to Western sanctions imposed against Moscow over its annexation of the Ukraine's Crimea peninsula.
While global military spending rose one per cent to US$1.739 trillion last year, Russia's fell 20 per cent in real terms to US$66.3 billion, the closely followed report from the Stockholm International Peace Research Institute (SIPRI) showed.
It was the first fall since 1998, a year of a major crisis when Russia's economy collapsed and it defaulted on domestic debt. The following year Vladimir Putin took power as prime minister and, on New Year's Eve, president.
Based on the government's spending plan until 2020, defence costs are expected to stay flat from 2017 or possibly even fall somewhat adjusted for inflation, said Wezeman.
"Very clearly that has a direct impact on procurement and on operations. Those are the quickest things to cut," he told Reuters.
Russia dropped to fourth place in the ranking of the world's biggest military spenders, overtaken by Saudi Arabia.
"Russia definitely has a very clear feeling it has to show that it is still a major power, and you show that by undertaking operations in for example Syria, by showing up on the Atlantic Ocean with your navy," Wezeman said. "But I am sure that there will be serious cost cuts to those."
Russia's finances are still fragile following a two-year economic downturn brought on by Western sanctions and a collapse in global oil prices. Higher crude prices helped the economy return to growth of 1.5 per cent last year, short of a government target of 2 per cent.
The export-dependent economy has now got accustomed to lower commodity prices than before 2014, and the budget is likely to post a small deficit or even a surplus in 2018.
President Putin has also called for higher living standards and higher spending on social infrastructure, such as healthcare and education. Some government officials have called for lower military spending to free up funds for such initiatives.
The Kremlin said in March Russia would cut its defence budget to less than 3 per cent of gross domestic product within the next five years.
The United States remains the world's biggest military spender by far, accounting for 35 per cent of global expenditures, more than the next seven highest-spending countries - China, Saudi Arabia, Russia, India, France, Britain and Japan - combined.
The United States' defence budget was unchanged in 2016 and 2017 but a significant rise is expected this year.
China's spending as a share of world military expenditure rose to 13 per cent last year from 5.8 per cent in 2008.
"Continuing high world military expenditure is a cause of serious concern," SIPRI chair Jan Eliasson said in a statement. "It undermines the search for peaceful solutions to conflicts around the world."