Wednesday, December 16, 2020

Moscow Plans to Borrow from Banks Rather than Cut Spending on Military Production, ‘Vedomosti’ Reports

Paul Goble

            Staunton, December 14 – Because of deficits, the Russian finance ministry announced recently that the size of the Russian military would have to be cut by 100,000 men and Russian defense production would have to be significantly reduced over the next several years, Aleksey Nikolsky of Vedomosti says.

            But the journalist reports that his newspaper’s sources say that the Russian government has found a way not to make that cuts. Instead of doing so, the government will borrow money from banks, the Promsvyaz Bank in the first instance, to ensure that defense production will not be reduced (

            The amount to be borrowed is not trivial – “no less than 360 billion rubles” (five billion US dollars) – Nikolsky says. But it does mean that while other portions of the budget will be cut in major ways, the defense industry will not, yet another indication of Vladimir Putin’s priorities for the future.

            While few banks were enthusiastic about restructuring debt for defense contractors, leaders of that sector and in the defense ministry itself say that the consequences and costs of cutting back now would be large and “no one needs a return to the 1990s” when Russian defense industry spending was in free fall.

            Vedomosti does not speculate on the political implications of this plan, but it would seem likely that the banks holding such loans will now become a more important player in discussions about defense programs and even foreign policy, developments that could have an impact on Moscow’s use of force in the future. 

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