War and economic militarization in Russia have created a circle of interested parties that hinders reduction of military spending - Constitutional Protection Bureau

RIGA - War and economic militarization in Russia have created a circle of politically and economically interested individuals who benefit from military action, and this will make it difficult to reduce military spending and militarization in the future, according to the 2025 activity report published on Monday by the Constitution Protection Bureau (SAB).

The full-scale invasion of Ukraine has significantly contributed to the militarization of the Russian economy and its focus on meeting the needs of the army. Over the next three years, Moscow plans to allocate 38-41 percent of budget expenditure, or more than 6 percent of gross domestic product, to military needs, according to the SAB.

The Russian economy's growth to date has been largely driven by large investments in the military-industrial complex. In the SAB's assessment, the militarization of the Russian economy will continue even after the potential end or freezing of the war in Ukraine, thereby developing military capabilities and posing a significant threat to European countries and NATO. If, as a result of the potential end of the war, Western countries lift or soften the sanctions imposed on Russia, the Kremlin's ability to maintain a high level of economic militarization without risking economic turmoil will increase significantly, the SAB has indicated.

Since the invasion of Ukraine, Russia has demonstrated a consistent ability to adapt to the restrictions imposed on it, according to the SAB. Russia continues to maintain the focus of its economy on militarization, achieving current economic stability and resilience to Western sanctions at the expense of long-term prosperity. This trend involves not only the significant diversion of resources to arms production, but also efforts to improve and further develop self-sufficiency in military production, which will maintain Russia's military threat to its neighbors in the future.

Contrary to the efforts of Russian officials to minimize the impact of the war on the daily lives of the country's population, the changes in Russia's economy and society since the start of the war have been significant and palpable. Heavy spending and an influx of resources into the military-industrial complex are currently propping up the Russian economy. In contrast, the civilian sector is facing declining activity and a lack of development prospects due to sanctions, an increasing tax burden, and limited and more expensive access to capital, concludes the SAB.

Russia's rapid redistribution of resources and unequal support for economic sectors is creating structural imbalances, the negative consequences of which are likely to manifest themselves in the future. If conditions remain unchanged, there is a low probability of a collapse of the Russian economy in the short term, but in the long term, the country's technological development and international competitiveness will decline, according to the SAB.

Russia's military-industrial complex is operating at full capacity, the SAB acknowledges. Combined with the use of its historical legacy base, this has allowed Russia to expand its arms production in 2025 in accordance with the principle of "quantity over quality."

At the same time, Russia has encountered certain shortcomings in the production of its military-industrial complex, such as dependence on imports and limitations in the available workforce and production capacity. These shortcomings are partially addressed by funding. Federal budget plans for the coming years indicate an almost unchanged commitment to continuing arms production and expanding the capabilities of the military-industrial complex.

The war and the militarization of the Russian economy have created a circle of politically and economically interested individuals who benefit from the war, further hindering the reduction of military spending and militarization in the future. Demand for arms production remains consistently high, and the sector, with more than 6,000 companies directly or indirectly involved, contributes to Russia's continued economic dependence on high military spending, the SAB has concluded.

Given the need to replenish war-depleted arms reserves and the importance of military production to the economy, Russia's militarized economy will remain in place even after the war in Ukraine ends, the SAB believes.

It is very likely that Moscow will implement a gradual reduction in military spending to mitigate the risks of economic instability, while at the same time restoring its military capabilities. Although Russia's expanded military production capabilities are considered technologically simpler, the maintenance of the country's economic militarization will continue to pose a threat even after the end of the war in Ukraine.

The SAB is one of three Latvian state security agencies that conduct intelligence and counterintelligence, protect classified information, monitor critical information and communication technology infrastructure, and conduct and control the exchange of classified information with international organizations.