IN FOCUS
By Rishika Yadav

Russian military expenditure during the Ukraine War: Five Takeaways

On 30 June, the Stockholm International Peace Research Institute (SIPRI) published a report, "Russia's military expenditure during its war against Ukraine," that examines Russian military expenditure during the Ukraine war and its funding sources. 

The report on Russian military expenditure during its war against Ukraine and sheds light on the sources of funding for these military activities. It also highlights the continued focus of Russian President Vladimir Putin on pre-war policy goals, such as national welfare and technological sovereignty. The report provides valuable insights into the financial aspects of Russia's involvement in the conflict and its strategic priorities.

Following are the five key takeaways from the report:
Sustainable resource commitment by Russia
Despite economic sanctions, Russia has effectively managed its resources during the war in Ukraine. President Putin and his government have prioritized pre-war policy goals, minimized economic costs, and fought the conflict in a financially limited manner. Defence spending increased as the conflict progressed, reaching 17 per cent of total government expenditure. Russia has sustained its commitment to the war while maintaining business as usual.

Stable defence budgeting despite sanctions
The Russian government's approach to budgeting for 2023-2025 remained stable despite the ongoing war in Ukraine and the impact of severe sanctions. The budget forecast was initially pessimistic but became more optimistic over time, predicting a recovery in the economy. Defence spending was expected to increase in 2023 but decline in subsequent years, indicating a potential shift in military operations. Surprisingly, spending on social policy increased, while spending on the economy decreased. Limited details were provided on total military funding, but some changes were observed in funding lines related to housing, health, and mass media within the defence budget.

Russia's 2023 federal budget implementation encountered difficulties due to a larger-than-expected deficit of RUB 3424 billion from January to April. Declining oil and gas earnings, currency depreciation, and efforts to reduce reliance on unfavorable currencies contributed to the shortfall. However, the government displayed cautious budget management, minimizing the budget listings compared to the previous year. Despite the deficit, funding for the ongoing war is unlikely to be significantly affected, as the government can borrow or draw from the National Welfare Fund. A budget crisis in 2023 is improbable.

Complexity of war funding
The total military expenditure in the 2023 budget is estimated to be 6648 billion roubles, representing 23 per cent of the total government budget and 4.4 per cent of forecast GDP. It is important, however, to note that this total military expenditure does not solely reflect the cost of the war in Ukraine. Some military spending is unrelated to the conflict, while certain expenses related to the war are covered by budget chapters other than "national defence." The funding of military activities associated with the war from sources other than the federal budget, such as regional budgets and voluntary donations, further complicates the assessment of total military expenditure. Therefore, relying solely on the official budget sources may result in underestimating the overall funding for military operations.

Potential risks in the future
Russia's future federal budget preparations are outlined in the report, highlighting an optimistic outlook based on the economy's performance. President Putin and the government discussed positive GDP growth forecasts. However, caution is needed as some assumptions may have been overly optimistic. The Bank of Russia's report raised concerns about inflationary risks and a larger budget deficit. Adjustments to the budget planning process are expected based on evolving economic conditions.

Complicated analysis due to restricted information
Financial limitations suggest Russia has fought the war as a more limited operation. Limited access to budget information complicates analysis, but updates on budget spending in 2022 and early 2023 are provided, along with prospects for future spending. The Russian government has restricted information on budget spending and access to relevant documents. The budget law for 2023-2025 lacks detailed information on defence or the war.

Reference:
Julian Cooper, “Russia’s Military Expenditure During Its War Against Ukraine,” SIPRI, June 2023

War in Ukraine: Day 495
By Sreeja JS

War on the Ground
On 04 July, Rafael Grossi, Director General of IAEA, said that Zaporizhzhia Nuclear Power Plant lost connection to its main external power line forcing the plant to rely on backup power supplies for essential nuclear safety and security functions. He said: “This time the plant avoided a complete loss of all external power - which has happened seven times previously during the conflict - but the latest power line cut again demonstrates the precarious nuclear safety and security situation at the plant.”

On 04 July, according to president.gov.ua, Volodymyr Zelenskyy, the President of Ukraine and Jens Stoltenberg, Secretary General of NATO, “coordinated positions” ahead of the upcoming NATO Summit in Vilnius (11 July to 12 July) over a phone call. Zelenskyy expressed hope for further cooperation, and the leaders discussed the frontline situation and the developments in Russia. 

On 04 July, Hanna Maliar, Deputy Defence Minister of Ukraine, mentioned in Telegram that Ukrainian forces have been advancing in the South, around Bakhmut, and there is no significant progress in Northern Ukraine. 

On 04 July, Ukrinform quoting Oleksandr Tarnavskyi, the Commander of the Tavria Operational-Strategic Group of Troops, reported that the Armed Forces of Ukraine are advancing in Tavria. The report also mentioned that they dislodged numerous Russian troops from their positions.

The Moscow View 
Claims by Russia
On 04 July, RT News reported the attempted drone attacks against Moscow. According to Sergey Sobyanin, the mayor of Moscow, the air defence forces repelled the attacks, destroying all the drones. Russia’s Defence Ministry stated that there were five drones, of which four were shot down over Novaya Moskva while one crashed in Odintsovo after being disabled by “electromagnetic warfare.” The ministry called it a “terrorist attack,” blaming Kyiv. It said: “These attacks would not be possible without the help provided to the Kyiv regime by the US and its NATO allies.” According to Financial Times, Maria Zakharova, the Foreign Ministry spokeswoman, called the attacks “international terrorism.” 

On 04 July, according to RT News, Russia’s Foreign Ministry announced that Moscow sees “no grounds” to extend the Ukrainian grain deal beyond 17 July. The ministry stated that the deal has turned into a” purely commercial” scheme directing produce towards the wealthy countries instead of the poor countries. Meanwhile, the blockade on Russian food and fertilizer exports “continues to degrade,” says the Ministry. It also noted that the five “system” goals highlighted in the Russia-UN memorandum remain unattained. The five “system” goals consist of including Rosslekhozbank back in the SWIFT payments system, enabling the delivery of agriculture machinery spare parts, restoring the Tolyatti-Odessa ammonia pipeline, sorting out insurance and logistics, and “unfreezing” Russian assets. According to the ministry, the first three goals are no longer in the agenda and there is no significant progress in ensuring the last two. 

The West View 
Responses from the US and Europe  
On 04 July, Deutsche Welle reported that the value of the German government’s defence exports approved for the first half of 2023 stood at EUR 1.65 billion. According to Germany’s Economy Ministry, the total defence export approvals are around EUR 5.22 billion, in contrast to EUR 4.2 million for the same period in 2022. Additionally, the export approvals for Hungary, second in the list of countries receiving German arms exports, are around EUR one billion in the first half of 2023.

References 
“Operational information as of 18.00 on 04.07.2023 regarding the Russian invasion,” Facebook, 04 July 2023
“Update 170 – IAEA Director General Statement on Situation in Ukraine,” iaea.org, 04 July 2023
“President of Ukraine had a phone call with NATO Secretary General,” president.gov.ua, 04 July 2023
“Defense forces make gradual progress on one of flanks around Bakhmut and in south,” Ukrinform, 04 July 2023
“Ukrainian forces advancing in Tavria direction, Russians lost some of their positions - Tarnavskyi,” Ukrinform, 04 July 2023
“Russia says West enabled drone attacks near Moscow,” France 24, 04 July 2023
“Drone attack on Moscow takes Ukraine war closer to Russian capital,” The Financial Times, 04 July 2023
“Russia comments on grain deal extension,” RT News, 04 July 2023
“Moscow targeted by drones – mayor,” RT News, 04 July 2023
“€1.65 billion in German defense exports to Ukraine in first half of 2023 — ministry,” Deutsche Welle, 04 July 2023

IN BRIEF
By Sneha Surendran and Prerana P

FRANCE
Concerns over women returning from Jihadist territory 
On 04 July, The Guardian reported on the repatriation of 25 children and ten women back to France from the suspected Jihadists prison camps in north-east Syria. The return of the French women, who had once voluntarily gone to places across Iraq and Syria, stimulates fear for France. France faced condemnation from international bodies after it put an end on its “case-by-case” repatriation approach. On May, France repatriated 15 women and 32 children after the UN blamed France for violating the UN convention against torture, cruelty, and inhumane and degrading treatment. The Foreign Ministry of France has expressed their gratitude towards the Northern-Syria for its cooperation. Under France’s new policy, the country opted for a targeted repatriation and the women has agreed to reject their parental rights. (“France brings back women and children held in camps in Syria,” The Guardian, 04 July 2023)

Macron on the deeper reasons for the riot’s outrage
On 04 July, Emmanuel Macron, France’s President, addressed hundreds of French authorities to discuss the deeper reasons which have plunged the country into serious riot. More than 300 mayors reported on the damages across their municipalities and the government witnessed various riots, and accused on the systemic racism among their security forces. Police mobilization raised to around 45,000 across the country with the mayors requested the protesters and stated: “return to republican order.” Macron has expressed the essentiality to understand the deeper reasons for the riot, while the right and left wing pointed fingers on one another. The President raised an idea of fines to the parents whose children performed vandalic activities and he promised to introduce new law that can assist rebuilding of the damaged buildings, transport and public spaces. (“France demands answers as Macron declares riots 'peak' passed,” Le Monde, 04 July 2023)

KOSOVO
Dutch President urges the member states to stay united during its vulnerable state
On 04 July, the prime ministers of the Netherlands and Luxembourg has urged Serbia and Kosovo to normalize their relations through the EU-led Dialogue, in order to prevent Balkan’s destabilization. The Dutch Prime Minister Rutte stated: “With a war raging between Russia and Ukraine on our continent, it's more important than ever that we act together.” Serbia and its former province hold a long history of territorial disputes, with Serbia refusing to recognize Kosovo’s 2008 self-declaration of independence. Belgrade considers the act as a breakaway state. Since May 2023, violence erupted after the ethnic Albanian mayors took office into the Serb-majority northern region of Kosovo. The Western efforts to resolve the crisis have increased, as war in Ukraine escalated to a greater extend. (“Kosovo: Dutch, Luxembourg PMs urge de-escalation,” Deutsche Welle, 04 July 2023)

THE UK
Train operators move to shut rail ticket offices amid criticism 
On 05 July, The Guardian reported that train operators across England will be closing rail ticket offices in a move that will escalate the strife between unions and the government. Labour has condemned the decision, saying: “The rushed closure of ticket offices without proper consideration for the wellbeing of staff or vulnerable passengers could contribute further to the managed decline of our rail network.” This comes after train operators were ordered to find ways to save costs to compensate for the revenue lost during the COVID-19 and changes in travel patterns. The staff who will lose their jobs have been assured of employment in other customer service positions in the station. While the government is aiming to make people use self-service machines and buy tickets online, campaigners and unions have protested the decision, saying that ticket offices are essential to elderly, disabled, and vulnerable passengers. (Gwyn Topham, “Labour criticises ‘rushed’ plans to shut hundreds of rail ticket offices in England,” The Guardian, 04 July 2023) 
 
Police investigations into ‘partygate’ scandal reopened
On 04 July, the British police resumed investigations into the parties at the Conservative Party headquarters that were in violation of COVID lockdown rules in 2020. The police reported that they were probing a gathering in the Parliament on 08 December 2020 that was allegedly attended by House of Commons and House of Lords members. This was after they got hold of a video showing staff drinking and dancing at a 2020 Christmas party. When it first came to public notice, the ‘partygate’ scandal sparked outrage due to the flouting of lockdown norms by leaders while the common people had strictly followed the lockdown rules. It also led to then-Prime Minister Boris Johnson being ousted from power. (Jill Lawless, “UK police reopen partygate probe into lockdown-breaching Conservative ‘jingle and mingle’ bash,” Associated Press, 04 July 2023)

SCIENCE AND TECHNOLOGY 
EU court ruling on data privacy upsets Facebook  
On 04 July, the European Court of Justice ruled that anti-trust agencies can check whether tech companies are complying with privacy rules, a probe that is usually conducted by national data privacy regulators. This has come as a complication for Facebook which had appealed against a 2019 German antitrust ruling. The issue was the manner in which Facebook sells ads to users by analyzing data on how users spend time on the platform. The European Court of Justice ruling said that Facebook “cannot justify” using personal data to serve ads citing “legitimate interest.” Under the EU privacy rules, users need to consent before their data can use be used. Facebook responded to the ruling saying that they will evaluate the court’s decision before further response. (“Facebook faces legal setback in EU court decision on data privacy and ads,” Associated Press, 04 July 2023)

ENVIRONMENT
Ofgem investigates on the Drax power plants sustainability
On 04 July, BBC reported that the House of Lords has expressed their concern regarding the environmental credentials the Drax site which burns wood pellets. The Drax industry is sustainably sourced and had strict governance to oversee compliance. While the House of Lords stated that Drax holds over EUR 11 billion in government subsidies for its renewable schemes. The labour peer Baroness Jones has requested independent scientists to verify the industry’s sustainability. The Lord Callan stated: “Ofgem are investigating whether the biomass is sustainable or not. Let's wait for the outcome of that investigation.” Further Drax has ensured that the industry delivers positive outcomes for the climate and nature. (Alex Moss, “Drax power plant could lose subsidies over compliance,” BBC, 04 July 2023)

REGIONAL 
NATO extends Secretary General’s term  
On 04 July, BBC reported on NATO’s decision to extend the tenure of current Secretary-General Jens Stoltenberg to another year. This is his third term extension. Stoltenberg’s current tenure was supposed to end in October. Responding to the news, Stoltenberg tweeted: "Honoured by Nato allies' decision to extend my term as secretary general until 01 October 2024. In a more dangerous world, our alliance is more important than ever.” An economist and former Norwegian Prime Minister, Stoletenberg’s continuation as the Secretary-General points to NATO’s decision to not change leadership amid the ongoing Russia-Ukraine war. NATO is scheduled to hold its next summit in Vilnius, Lithuania on 11-12 July. (Francesca Gillett, “Jens Stoltenberg to stay as Nato chief for another year,” BBC, 04 July 2023)

INTERNATIONAL
Russia extends its support towards SCO during the Council head meeting
On 04 July, Kremlin.ru reported on the Meeting of the Council of Heads of States of the SCO. The meeting was chaired was the Indian Prime Minister and was attended by the Presidents of Kazakhstan, Kyrgyzstan, China, Pakistan, Tajikistan and Uzbekistan. Further, the President of Belarus, Iran and Mongolia was invited as the head of the states and the observers. During the speech, Vladimir Putin, Russia’s President expressed his support towards the New Delhi Declaration. Putin declared that the country supports multipolar world order which recognises mutual cooperation among the countries. He has urged the members to focus on sustainable economic growth and risks, which includes financial and economic risks that can deteriorate the developing countries. He called Ukraine, “anti-Russia” which has restrained the Russia’s growth and has declared that Russia would further resist the sanctions and external pressures. He emphasised that the ties with SCO have increased to a record of USD 263 billion and promised to support in building the SCO framework. The meeting ended with leaders signing and adopting several packages of documents. (“Meeting of the Council of Heads of State of the SCO Member States,” Kremlin.ru, 04 July 2023)