Front money

Russia’s lower house of parliament, the State Duma, approved the first reading of the draft 2025 federal budget and planned spending for 2026–2027 on 24 October. Defence remains the largest item in terms of expenditure, accounting for almost a third — 32% — of all federal spending next year, at 13.5 trillion rubles (€128 billion).

A significant part of Russian military spending is now sourced from Russia’s regions, which this year collectively allocated 813.4 billion rubles (€7.8 billion) for the war effort: an increase of over 38% on the 588 billion rubles (€5.6 billion) spent in 2021. By comparison, regional spending on social benefits unrelated to the war has increased by just 16% over the same period.

Such huge increases in regional spending were never planned for, with regional budgets drawn up to provide a total of 445 billion rubles (€4.3 billion) for the war, a decrease on 2023 spending. However, by mid-October, planned spending on the war had surged by 83%. Simultaneously, the total spending by the Russian regions in 2024 increased by 12% over the same period, while for healthcare and social services, the figures were 14% and 8% respectively.

Before 2022, military spending by the Russian regions had consisted largely of costs for civilian defence, emergency situations, social security for veterans and military recruitment costs. Our calculations include some spending which is unrelated to the war, such as disaster response situations, which usually aren’t linked to conflict, but which cannot easily be separated from military spending as funds for both are often allocated together in the budget.

As the war in Ukraine had not until recently been fought in Russia itself, regional spending on civil defence and emergency response had remained relatively static at about 130 billion–140 billion rubles (€1.25 billion–€1.34 billion) a year. In 2024, however, that amount suddenly leapt to 225 billion rubles (€2.2 billion), a serious increase even without the 34 billion rubles (€326.5 million) earmarked for flood prevention in the Orenburg region.

Russia’s regions are also now responsible for paying signing bonuses to those enlisting to fight in Ukraine, as well as benefits and compensation for soldiers and their families, payouts for housing destroyed in Ukrainian attacks, and for training and arming defence units in frontline areas.

Therefore, regional spending on the war extends to far more than national defence contributions, which currently account for just 4.4% of regional spending, and also includes nominally civilian sectors such as housing and communal services, healthcare or education.

Military spending varies greatly from region to region, so while the occupied Luhansk, Donetsk and Kherson regions of Ukraine spend around a third of their budget on defence, most Russian regions spend far less, for instance both Chechnya and Tatarstan spend only about 0.5% of their total budgets on the war.

Since the Armed Forces of Ukraine (AFU) began an incursion into Russian territory in August, the now partially occupied Kursk region has increased its military spending to 28.7%, a comparable level to that seen in the Ukrainian regions occupied by Russia. This is more than it spends on education and almost four times more than it spends on healthcare. Meanwhile, its non-military spending has not increased this year, which means that its overall expenditure has decreased once inflation is factored in.

In short, Russia’s regions simply cannot afford to absorb these increases in military spending, and all 83 regions are expected to end the year in the red, though with federal subsidies exceeding revenue in 17 regions, funds from Moscow will have to be used in many places to cover budget deficits.

For example, the Kursk region is now scheduled to receive 45.6 billion rubles (€436 million) this year from the federal budget instead of 18.3 billion rubles (€175 million), a sum almost equal to its own revenue. By the end of the year, that should amount to 50.9 billion rubles (€478 million).

Some payouts and benefits to soldiers and their families are categorised as general expenditure in regional budgets. Legal and psychological assistance, school lunches, kindergarten fees, housing subsidies and other benefits paid out at the regional level are often categorised as payments for “specific categories of citizens”. Since these “specific categories” can also apply to large families, those with disabilities, and other groups, it was impossible to accurately determine the proportion of expenditure on soldiers in this case, and we did not include them as military expenses.

Although the regions are liable for a significant part of the cost of reconstructing the occupied territories, these costs pass through intermediaries. As a rule, money goes from regional budgets to reserve funds, then to nonprofits, and only then to their destination. As a result, it was not possible to determine how much money a particular region has allocated for reconstruction work in the “new territories” by using official data. Despite that work being financed by some 82 Russian regions, we were unable to identify directly related expenditure items in their budgets.

Another euphemism frequently employed in regional budgets is expenditure on “economic development”, which means the military-industrial complex rather than the civilian sector. “Many regions give various subsidies to companies producing military products. This often isn’t a local initiative but an order from above. It is customary to use flowery language in reporting and it can be difficult, if not impossible, to distinguish investment in the civilian economy from investment in the military-industrial complex,” Tatyana Mikhaylova, an economist at the University of Pennsylvania, told Novaya Europe.

Although all regions have introduced lump sum payments for those signing contracts with the Defence Ministry, less than half of regional budgets list that expenditure, with the funds being commonly “disguised” as social spending.

“It is impossible to make an accurate estimate of what amount of Russian military spending is met by regional budgets,” says Mikhaylova. “A large part of them cannot be seen in budget reporting. However, this spending has little to do with either what the regions want or what they can afford. They are forced to do as Moscow says, and any shortfall will be met by money from the federal budget.”