Russia lacks money for war: military budget cuts begin

In 2026, Russia plans to reduce defense spending for the first time since the start of the full-scale invasion of Ukraine. This may indicate that it has reached financial limits beyond which it becomes difficult to maintain a high intensity of war.

The New York Times writes about this.

According to the draft budget of the Russian Federation for 2026:

Defense spending is being cut from over $163 billion to about $156 billion.

If we take into account the projected inflation rate of 7%, the real decline looks even more significant.

Despite the cuts, the Russian military budget is still almost four times larger than in pre-war 2021, and three times higher than Ukraine’s defense spending.

However, such a burden is already deepening the budget deficit, because Moscow is relying not on mobilization, but on expensive contract workers.

To partially compensate for the lack of funds, the Russian government plans to increase VAT from 20% to 22%.

Analysts believe that if the Kremlin wants to increase military funding again, it will either have to raise taxes again or increase domestic debt.

In any case, this will increase pressure on the economy and could challenge public support for the war, which is already based more on repression than enthusiasm.

Recall that Russian residents will face a significant increase in utility tariffs – over the next three years, payments may increase by almost 30% . The main reason is the deterioration of the infrastructure, which the state will modernize at the expense of the population, as budget funds have been reoriented to finance the war.

As reported, the Russian Ministry of Finance has proposed increasing the value-added tax rate from the current 20% to 22% . The changes are to come into effect on January 1, 2026.

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