Move comes as Russia’s wartime economic momentum grinds to a halt

Antonia Langford

27 June 2025

Vladimir Putin has announced plans to scale back military spending after Kremlin officials warned that Russia is “on the brink of recession”.

The Russian leader said he would reduce defence spending “next year and the year after, over the next three-year period” at an economic summit of five post-Soviet states in Minsk on Friday.

Responding to Nato’s plans to raise defence spending to 5 per cent of GDP, Putin said the alliance’s members would spend on “purchases from the USA and on supporting their military-industrial complex”.

“So who is preparing for some kind of aggressive actions? Us or them?” he added.

The comments came after Maxim Reshetnikov, the Russian minister of economic development, last week announced that the country is “on the brink of going into a recession”.

Elvira Nabiullina, the Russian Central Bank governor, also warned that the country’s wartime economic momentum – driven by massive state defence sector spending – was grinding to a halt.

“We grew for two years at a fairly high pace because free resources were activated,” she said. “We need to understand that many of those resources have truly been exhausted.”

Russia’s economy grew by 4.3 per cent in 2024, however, in an effort to kerb rampant inflation, interest rates were held at a staggering 21 per cent since October, before being cut marginally to 20 per cent this month as pressure eased slightly.

Inflation has largely been driven by sanctions creating higher import costs. Wage growth has also soared to a 16-year high due to labour shortages caused by syphoning off workers into the defence sectors and the military.

Moscow’s Higher School of Economics estimated that there was a deficit of 2.6 million employees at the end of 2024.

The Kremlin has also offered high wages and generous signing-on bonuses to soldiers in an effort to fill the ranks on the front line.

Although the military-industrial complex has benefitted from increased state spending, private-sector industries have been impacted by lower demand, rising costs and large debt exposure due to sky-high interest rates.

Russian banking officials have privately warned of a risk of a crisis over the coming year due to a growing number of businesses unable to make loan payments, Bloomberg News reported.

Future costs could include that of reintegrating veterans of the war in Ukraine. Of the almost 140,000 Russian soldiers who have returned to civilian life, half reportedly remain unemployed.

Putin, however, brushed off claims that the Russian economy was faltering at the St Petersburg International Economic Forum last week.

He said: “As far as the ‘murder’ of the Russian economy is concerned, as a famous writer once said – ‘rumours of my death are greatly exaggerated’.”

…………..

Also in the DT:

• Rebekah Koffler
• 27 June

Trump has Putin trapped, and the Kremlin knows it

The Kremlin’s lack of support for the Iranian regime indicates its fear of US retaliation via arms shipments to Ukraine

It has now been almost a week since US forces struck Iranian nuclear facilities and Russia is still sitting on the sidelines. Beyond the strongly worded condemnations of the US attacks and promises of unspecified help to the Iranian people, Vladimir Putin has not announced deliveries of any specific military hardware to Tehran. That, despite the fact that, in January, Moscow and Tehran signed a 20-year comprehensive strategic partnership treaty, which includes military-technical cooperation.

What gives? For now, the heat appears to have gone out of the conflict, but Putin still faces a conundrum. The Iranian regime remains in a precarious position, and it is uncertain that the current ceasefire will hold. Failing to deliver tangible support to Iran could result in Russia losing an ostensibly valuable ally, friendship with whom Moscow likes to brandish as a bogeyman whenever it wants to threaten the West. But if Putin were to decide to help Tehran re-arm, perhaps providing new air defence systems to replace the ones destroyed over the past few months, it would likely anger Donald Trump, who may decide to beef up supplies of lethal aid to Ukraine in its fight against Russia.

In an interview with the Russian publication The Gazette, Fyodor Lukyanov, prominent Russian political scientist, revealed the thinking behind Putin’s decision to do nothing. “Russia has a strategic partnership with Iran, and very fragile and significant relations with the American administration have begun to develop.” In addition, however, Putin has working relations with the Israeli leadership. Making a choice was “clearly not part of the Kremlin’s plans,” he said.

Indeed, a realpolitik-minded Putin maintained cordial relations with Israel’s Benjamin Netanyahu, a fellow pragmatist, until former US president Biden caused a rift between Moscow and Tel Aviv by pressuring Israel to provide lethal weapons to Ukraine. Putin has long maintained a careful balance between Iran and Israel, by keeping an open partnership with the ayatollahs and an undeclared alliance with Israel. He views both as strategically valuable to Russia’s geopolitical influence in the Middle East. Putin’s decision calculus is also shaped by the fact that Israel has one of the largest Russian-speaking populations outside of Russia.

The transactionally-minded Russian strongman is carefully threading the needle by paying lip service to Tehran via a diplomatic song and dance. Before the strikes, Putin offered to Trump to mediate an end to the hostilities between Israel and Iran, an offer that the US leader promptly rebuffed. A day after the strikes, having met with Abbas Araghchi, the Iranian Foreign Minister, in the Kremlin, Putin promised to make “efforts from our side to provide support to the Iranian people,” without authorising the provision of specific war-fighting capabilities.

Dmitry Peskov, Putin’s spokesperson, responding to questions from journalists about the kind of assistance Russia was willing to provide to Iran, was equally cryptic and non-committal: “Everything will depend on what Iran will need.” When pressed on whether Russia is ready to supply weapons to Iran, including the S-300 and S-400 air defence systems, Peskov repeated “everything depends on what the Iranian side, what our Iranian friends say”.

On Monday, during the annual St Petersburg international economic forum, Putin tried to justify Russia’s neutral stance on the conflict by saying “almost two million people from the former Soviet Union and the Russian Federation reside in Israel,” calling it an almost Russian-speaking country”. He accused those who call Russia an unreliable ally of being “provocateurs”.

Some Russian media outlets have sought to portray Putin’s decision-making as having nothing to do with Washington. But others have revealed concerns about Trump’s potential retaliation. One publication expressed fears that, if the Israel-Iran ceasefire holds, Trump will have leverage to pressure Putin on a Russia-Ukraine settlement.

Putin’s decision not to directly aid Iran – at least for now – is especially significant in light of the fact that Iran sent substantial deliveries of weapons to Russia for its war against Ukraine. They include short-range or close-range ballistic missile systems, the Fath 360 missile system, and “kamikaze” drones, Shahed-136 and Shahed-131. Iran’s assistance enabled Russia to reserve more advanced missiles with longer ranges for other purposes, allowing Moscow to better use its arsenal throughout the battlefield in Ukraine.

Lack of reciprocity by Moscow suggests that Putin is gravely concerned about the possibility of US ratcheting up support to Ukraine. It also indicates that Trump is quietly building a deck of cards to play against Putin when the time is right. Perhaps they will help him to finally fulfil his promise of ending the Russia-Ukraine war.

---

Rebekah Koffler is a strategic military intelligence analyst, formerly with the US Defense Intelligence Agency. She is the author of ‘Putin’s Playbook’, Regnery 2021. Her upcoming book ‘Trump’s Playbook’ will be published later this year. Rebekah’s podcast Trump’s Playbook is running on her channel Censored But Not Silenced and is available on most social media platforms @Rebekah0132.