On June 27, 2025, President Putin announced that Russia was looking to reduce its military expenditure in the next few years. This decision contrasts with NATO's plans to increase collective defense spending by 5% of GDP over the next decade. Putin noted that while NATO’s spending increases, Russia is considering defense cuts. Despite no final agreement between Russia’s defense, finance, and economy ministries, the Russian leadership is reportedly aligning towards this reduction.

NATO’s Growing Military Budget

In a stark contrast, NATO allies agreed to ramp up their defense spending in response to perceived long-term threats from Russia. NATO’s new spending goal comes amidst increasing concerns over Russia's actions in Ukraine. The alliance's move to increase spending contrasts with Russia’s planned military expenditure reduction.

Economic and Military Context

The announcement comes at a time when Russia is experiencing significant economic challenges. Falling energy revenues and inflation pressures are impacting the Russian budget. To accommodate rising military costs, Russia's government raised the defense budget by 25% in 2025, leading to a sharp increase in military-related inflation. Military plants have been operating at full capacity, with heavy investments in bonuses for soldiers and compensation for fallen soldiers' families.

Ukraine Conflict and Future Prospects

Putin’s announcement comes amidst the continued and intensifying conflict in Ukraine. Russia has significantly increased military spending since the conflict began but appears to be acknowledging the financial toll as the war shows no signs of abating. Putin also praised U.S. President Donald Trump’s efforts to negotiate peace, although the West remains skeptical of any real peace initiatives from Russia.