WASHINGTON – A budget being drafted by the cabinet of Russian Prime Minister Dmitri Medvedev to be submitted to Russian President Vladimir Putin reflects increased spending based on energy revenues which could dip almost any time, says a report from Joseph Farah’s G2 Bulletin.
However, Putin wants to continue increased spending for security in an effort to tamp down expected social unrest from cuts in the upcoming budget.
This has prompted the cabinet to compromise from more draconian cuts it initially had drafted. This draft compromise is to be presented shortly to the Duma and then on to Putin for approval.
In past years, Russia has seen increased profits from high energy prices in oil and natural – which make up some 50 percent of all government revenues.
According to regional sources, Russia has some $500 billion in currency reserves and $130 billion in a sovereign wealth fund.
Energy profits have permitted Russia to increase spending to meet such social needs as housing, education and health care as well as national security and law enforcement.
The proposed budget which is for three years has been predicated on $117 a barrel of oil, according to a report from the open-source group Stratfor.
Yet, Putin had announced during his campaign for president spending increases beginning in 2013 for social projects, pensions and defense. Some around Putin had warned him to base the budget on lower energy profits over the coming years. In doing that, however, Putin would not obtain the revenues he need for his promised military, economic and social reforms.
The budget draft to be submitted to Putin reflects cuts in the areas where he wanted increases.
In defense spending, Putin promised a major re-armament program to modernize the Russian armed forces. Over the next 10 years, Putin’s re-armament program is to cost some $770 billion. This would be almost a 25 percent increase in defense spending beginning next year.
However, there is to be a 30 percent increase in national security and law enforcement due to growing security concerns at home, primarily because of Islamist groups who have threatened to disrupt the 2014 winter Olympics in the Russian city of Sochi.
However, the budget increase in this sector may also be needed for expected social unrest due to cuts in housing and health care, each of which are to be cut by more than 25 percent.
Spending for the Russian pension system, however, still is being calculated. It constitutes the largest government expense.
“Overall, it seems the Kremlin has realized that it cannot spend as it did in the mid-2000s,” the Stratfor report said. “Moscow is attempting to maintain some stability in its defense spending, but social spending is taking the brunt of this new strategy, something that could further the unrest over the next few years.”
The question is whether the Russian parliament, or Duma, will further modify it before it reaches Putin’s desk, and if Putin will accept the budget with cuts which go contrary to his campaign promises.
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