"The Russian Navy is on the verge of collapse"

[ikalugin]

Originally Posted by Jimbuna

The sanctions by the west may not be all that effective but medium to long term I should imagine they will have some bearing on matters, especially when added to the reduction in oil revenues.

The decrease in oil revenues do hurt the budget, but not critically so, mainly because we were trying to avoid budget deficit for a long time (and kept building up reserves).

[Jimbuna]

So will Putin slow down the modernisation of the armed forces or let other areas of the economy suffer as a result of spending money Russia doesn't have or could be better spent elsewhere such as on social improvements, healthcare etc?

[ikalugin]

Originally Posted by Jimbuna

So will Putin slow down the modernisation of the armed forces or let other areas of the economy suffer as a result of spending money Russia doesn't have or could be better spent elsewhere such as on social improvements, healthcare etc?

I think what would be done is keeping the defence sector at about the same level of funding (in rubles), while providing state reserves (in foreign currency) for any critical items that they would need.

All the while de regulating the rest of the economy and decreasing the state presence there. One way to do this would be partial privatisation of state owned corporations for example.

But to be honest I really don't think that Russia would cut defensive spending by a large margin. That said the actual programs would be shifted right, because the way those programs are funded is only partially in advance pay - the rest is funded by the companies themselves via loans (which are later repayed by the companies when they complete the contact), even though those loans come with government guarantees, the state of our financial system is less than perfect.