Oil and gas are no longer enough to guarantee the revenue with which finance the war in Ukraine. According to Bloomberg, Putin is planning to take more money by some commodity producers and state-owned companies and to cut spending in sectors other than defense as the costs of warfare are rising. But how? Proposals include a increase in dividends of state-owned companies and a “one-time paymentby fertilizer and coal producers, according to instructions given to officials by Prime Minister Mikhail Mishustin, seen by the US agency in mid-December.
Russia's budget is shrinking as the Russian president's invasion heads into its second year and the economy contracts under heavy US and European sanctions. Dividends and an unexpected tax paid by Gazprom they have already helped to inflate a fiscal surplus late last year, but they no longer appear to be sufficient.
Putin needs money to finance the war
The document examined underlines that this fiscal effort is part of the "revenue mobilization" plan that Russia is organizing to finance the war. A decision has not yet been made on the size of the dividends or the one-off levy, as the amount will depend on the performance of the balance sheet in the full year 2022. But according to the newspaper, the authorities will try to fix the dividends above 50% of the net income of state-owned companies whenever possible.
But how much money does Putin need to continue the war? We talk about 175 billion rubles ($2,4 billion) of extra spending to resettle 100.000 people from Kherson to Russia, an apparent admission that Moscow has little hope of retaking the parts of the Ukrainian region its forces abandoned in the fall just weeks after illegally annexing it .
Spokesmen for the Russian government and the Ministry of Finance have not yet commented on the unsubscriptions.
Moscow cuts public spending
Meanwhile, the Russian leader has promised "no restrictions" on military spending for war, while social programs remain the largest budget item. In contrast to ever-thinner spending on education and medicine.
It is a balancing act developed by Mishustin, who calls for an "optimization" of budget spending outside defense and security and which should generate at least 150 billion rubles of savings.
Financing needs
With international debt markets virtually closed to Russia, the urgency grows to ensure the government's access to finance as its energy revenues are under pressure.
The Ministry of Finance, which last year provided for a budget deficit by 0,9% of gross domestic product, it now projects deficits of 2% in both 2022 and 2023. In total, last year's spending probably reached 30.000 trillion rubles, the finance minister said Anton Siluanov at the end of December, or about 27% more than initially expected.
Siluanov said the government does not plan to change taxes this year, even if budget expenditures will increase.
Furthermore, in the months leading up to the invasion in late 2021, le Russian mining companies, including coal and fertilizer producers, have been hit by an increase in the tax rate on mineral extraction. The government has since refused to ease the burden, though sanctions have halted sales and forced production cuts.
