Russian elite could turn on Putin as Russia leader walks tightrope over Ukraine war costs

Officials in Russia’s Finance Ministry and central bank have warned the Kremlin that the current level of projected defence expenditure could widen the country’s budget deficit, Bloomberg News reported.

The officials have grown more concerned over Russia’s economy and state budget and have proposed spending cuts. But there appears to be a divide between Defence Ministry officials and some in the Kremlin over how to address the problem.

It has been reported that Putin has asked the Finance Ministry to find cut spending in other areas of the budget before taking money from defence.

Reducing defence spending could harm the Russian economy because so many businesses are reliant on military-related contracts, Bloomberg reported.

The scale of any spending cuts rest entirely on Putin as no major budget decisions are made without his approval.

In addition to refusing cuts, the Defence Ministry is demanding additional funding, according to two people close to the Russian government.

When the 2026 budget was drafted, officials understood that a funding gap of roughly 1.2 trillion to 1.5 trillion rubles could emerge in the second half of the year, money that might be needed for the defence sector.

There were hopes the war would end after a summit last August between Putin and US President Donald Trump, which would have made a reduction in defence spending in the second half of 2026 a logical assumption, it was reported.

The deliberations took place both before and after the US-Israeli war in Iran began and remain a live discussion among senior policymakers and Putin, the people familiar said.

Russia’s economy is walking a tightrope after the country cut its growth forecast in May.

The Economy Ministry now expects gross domestic product to expand by 0.4% in 2026, down from a previous estimate of 1.3%. Official data show the economy contracted in the first quarter for the first time in three years as the country teeters on a recession.

In April, Putin publicly ordered government officials to explain why the economy was performing below expectations.

The admission that the economy was facing trouble appeared to signal his frustration that officials had not managed to avoid a slowdown.