The war in Ukraine is costing the Kremlin dearly: Russian officials warn Putin of a budget crisis

Senior Russian officials have warned President Vladimir Putin that the costs of the war in Ukraine are becoming too expensive and putting pressure on the country's budget.

Officials from Russia's Finance Ministry and central bank say defense spending risks pushing the budget deficit to unsafe levels, according to people familiar with the matter and documents reviewed by Bloomberg News.

They have called for cuts or efficiency savings in military spending as financial pressure mounts.

However, defense officials and others in the security establishment are objecting, arguing that cutting military spending would weaken the war effort and harm industries that depend on state military contracts.

According to people familiar with the talks, President Vladimir Putin has told the finance ministry to seek savings in other parts of the budget before cutting defense spending.

At the same time, Russia's war costs are already exceeding previous plans. According to a Financial Times report citing an internal government document, military spending is expected to be about 2 trillion rubles ($28 billion) higher than planned this year.

The document, based on a letter from Finance Minister Anton Siluanov, warns that the government may need to freeze spending in other areas to cover the gap. In a worst-case scenario, the shortfall could grow to 4 trillion rubles ($56 billion) in the coming years.

Russia has allocated 16.84 trillion rubles ($238 billion) for defense and security in its 2026 budget – nearly 40% of all government spending.

The budget gap is already widening. In the first four months of this year, Russia recorded a deficit of 5.9 trillion rubles ($82 billion), much higher than expected and the largest since the start of the full-scale invasion of Ukraine.

The government initially planned a deficit of 3.8 trillion rubles ($53 billion) for 2026, but officials now expect the gap to be much larger as spending increases and growth slows.

Finance Minister Siluanov is said to have suggested freezing up to 2.9 trillion rubles ($40 billion) in spending this year to help stabilize the budget.

Russia's economy is also slowing. Growth forecasts have been sharply lowered, and officials now expect almost no growth in 2026.

Even higher oil prices are unlikely to solve the problem. Government experts say oil will have to stay above $100 a barrel for a long time to make a real difference.

Siluanov has warned that “reserves are not infinite” and said the government must be careful with spending. But options are limited, with taxes already rising and new revenue ideas being discussed.

The GeoPost