Russia's Military Budget Reaches Historic High

More than two years into its full-scale war in Ukraine, Russia has not weakened its state finances — it has restructured them entirely around the war. New analysis shows Moscow is spending more on its military, in real terms, than at any point in modern Russian history.

The Stockholm International Peace Research Institute published an assessment on 14 April 2026 confirming that Russia's 2026 federal budget allocates 40% of all government expenditure to defence and security — an unprecedented peacetime level since the Soviet era ended in 1991. SIPRI places Russia's estimated 2026 military spending at approximately $145 billion in purchasing-power-parity terms, making it the world's third-largest military spender behind only the United States and China.

Context makes the number more striking, not less. Russia's nominal GDP was $2.24 trillion in 2025, according to the World Bank — significantly smaller than the U.S. ($29 trillion) or China ($19 trillion). Military spending at 40% of the federal budget represents roughly 10% of GDP, five times the NATO recommended floor of 2%. The Kremlin is financing this through a combination of petrodollar revenues, a wartime tax on private corporations, and drawdowns on the National Wealth Fund — Russia's sovereign reserve. The NWF has declined from $182 billion in February 2022 to approximately $70 billion today, according to Russia's Finance Ministry disclosures.

“Context makes the number more striking, not less.”

The Iran war has become an unexpected fiscal lifeline. Brent crude surged to $103 per barrel on 14 April following the U.S. declaration of a naval blockade of Iranian ports. Russia's Finance Ministry has used a formula in which every $10 increase in Brent adds roughly $15 billion annually to federal revenues at current export volumes. Oil above $90 per barrel was already described as a "best-case scenario" in the Kremlin's 2026 budget assumptions. At $103, Moscow is running a significant surplus on the oil-and-gas line — the precise windfall that Washington's hawks warning of the Iran war's unintended beneficiaries had in mind.

For ordinary Russians, the wartime economy presents two faces. Unemployment stands at a recorded low of 2.3% — partly because approximately 700,000 military-age men have been mobilised, removing them from civilian labour statistics. Wages in defence-sector manufacturing have risen 30–40% since 2022, according to Russia's national statistics agency Rosstat. Consumer goods inflation ran at 7.9% in March 2026, however, also per Rosstat, and the Central Bank of Russia has kept its key interest rate at 21% — a level that effectively shuts down mortgage lending and private investment credit.

The complication in SIPRI's analysis is methodological. Russia's official defence budget undercounts actual military spending by design — classified items, intelligence service expenditures, and the costs of proxy and paramilitary forces operating in Ukraine are excluded from the official line item. SIPRI estimates total military-related spending, including those categories, could be 15–20% higher than the published figure. Independent Russian economist Alexandra Prokopenko, currently based at the German Council on Foreign Relations in Berlin, wrote in a 14 April analysis: "Russia's published budget is the floor, not the ceiling, of military spending. The real number is structurally unknowable by design."

**What this means**

Russia's record military expenditure has direct consequences for European defence planning. RUSI published an April 2026 analysis warning of what it termed Putin's "2026 hybrid escalation posture" — expanded drone warfare against Ukrainian infrastructure, coordinated sabotage operations in European countries, and intensified information operations. The analysis argues that this posture reflects a military-industrial base that is now larger and more productive than at any point since 1991.

NATO members collectively spent $1.4 trillion on defence in 2025. Russia spent an estimated $145 billion. The asymmetry remains large, but NATO's efficiency advantage has been partially offset by the geography of attritional warfare and Russia's demonstrated willingness to absorb casualties at a scale no democratic government could sustain politically. The question for European defence planners is not whether NATO outspends Russia — it does, by a factor of nearly 10 — but whether it is converting that spending into deterrence at the speed the threat requires.

The most consequential threshold to watch is the National Wealth Fund balance. At current oil revenues above $90 per barrel and with the NWF still above $50 billion, Russia's fiscal war posture is sustainable through approximately 2027. A significant oil price decline — which any Hormuz settlement would accelerate — is the single external factor most likely to change Moscow's military calculus, faster than any battlefield outcome.