The decline in world military expenditure slowed down in 2014

The Stockholm International Peace Research Institute (SIPRI) released on 13 April its annual SIPRI Yearbook of world military expenditure in 2014.

According to the Yearbook, the decline since 2012 in world military expenditure slowed down in the past year to 0.4% from 1.9%. The world military expenditure were running at $1,776 trillion or 2.3% of global GDP (0.1 p.p. less than in 2013).

Regarding a share of world military expenditure, Russia's 3rd ranking since 2011 after the United States and China – a share of 4.8% in 2014, according to the SIPRI statistics – disagrees with Russia's position in the global economy (8th on nominal volume of GDP, with a share of 3.4% in 2013, no data on 2014 have been released yеt, however, there is regrettably nothing Russia can count on to improve its position). This is indicative of economic overheating, above-normal militarization of the country. There is nothing to explain such a high military expenditure in Russia given the existing economic situation in the country.

Furthermore, Russia's military expenditure reached 4.5% of GDP in the past year, according to SIPRI, while our own calculations show 4.8%, i.e. more than twice the previously reported worldwide average (2.3%). Regarding this index, Russia has joined the group of top-20 states whose military expenditure, according to SIPRI, are more than 4% of GDP. The group is comprised of nine Middle Eastern states (incl. Israel), seven African states, three East European states (Azerbaijan, Armenia and Russia), and Myanmar, the sole state representing Asia.

Military expenditure as a share of GDP is as much objective index as a share of world military expenditure, however, both indices show regrettably that Russia's federal budget has been overloaded considerably with military expenditure.

Despite that our calculations show that Russia's 2014 military expenditure in real terms increased "as little as" 6.1%, i.e. 2 p.p. below the value reported by SIPRI (8.1%), the militarization of the budget has pushed the country over the arms race threshold set 4–5% of GDP by Deputy Defense Minister Yury Borisov late in the past year. As a reminder, the 2015 budget of the Ministry of Defense was initially running at Rb 3,6 trillion, or 4.6% of GDP (up 0.9 p.p. compared with 2014), with Rb 3,3 trillion under the line item 'National Defense' (4.2% of GDP, up 0.7 p.p.).

The Russian leadership have already taken first measures to remedy the situation. It is no secret that the effective federal budget law provided for as early as the last December a cut of the military expenditure in real terms both in 2016 and 2017, while amendments to the 2015 federal budget adopted last Friday by the State Duma have cut the military expenditure this year too – the expenditure under the line item 'National Defense' have been cut Rb 157bn (4.8%) to Rb 3,117,000,000,000. And, Russia's government keeps looking for reserves to further cut the military expenditure, as was stated at an expanded collegium of the Ministry of Finance on 14 April.

Valily Zatsepin, Ph.D. in Military Science, the Head of Economics of the Military-Industrial Sector Department.