bne IntelliNews – COMMENT: Russia’s debt relief scheme masks war spending in regional budgets

A quiet reshuffling of budget lines in several Russian regions is revealing how the Kremlin is using a federal debt write-off programme to subsidise military recruitment, according to Janis Kluge, fellow at the Stiftung Wissenschaft und Politik (SWP), Eastern Europe and Eurasia Group.

In mid-June, Tomsk Oblast cut its official spending on “payments to citizens participating in the special military operation” from RUB1.1bn to RUB300mn. Almost simultaneously, a new line item appeared: “Activities related to the special military operation at the expense of funds freed by writing off the regional budget debt,” which grew from zero to RUB800mn. “Apparently, Tomsk Oblast shifted military spending from one line item to another,” Kluge said.

The changes coincide with a debt relief programme announced by President Vladimir Putin in February 2024 and implemented later that year. It allows regions to write off up to two-thirds of their debt if freed funds are spent on “noble” purposes such as housing or public transport. “At least, that’s the official rhetoric,” Kluge noted. In practice, the rules contain a little-publicised exception: regions with a fiscal capacity below 0.65 may use the money for war-related expenditures.

According to Kluge, 27 Russian regions and all six illegally annexed Ukrainian regions qualify for this exemption, enabling them to fund sign-on bonuses and compensation for soldiers using federal write-offs rather than local revenues. By late July, Tomsk had allocated RUB1.4bn for enlistment bonuses, Orenburg Oblast RUB3.2bn, and the Republic of Mari El RUB2.1bn. “It is now clear that these regions are not financing this spending themselves, at least not entirely. The federal government pays for it by writing off these regions’ debt,” Kluge said.

The mechanism, he argued, solves a “puzzle” over how poor, indebted regions could afford such high recruitment payments despite shrinking revenues. Yet the case of Tomsk raises further questions. Official finance ministry data show its fiscal capacity at 0.668 in 2024 and 0.675 in 2025 — above the 0.65 threshold, meaning it should not qualify.

Budget monitor

Kluge has produced a Russian budget browser that draws on the official data and can be viewed here. All data can be organized in three ways: By budget chapter, by ministry and by budget program. Classified data can sometimes be attributed to budget chapters. It is calculated as the difference between total spending and open spending.

You can use a built-in filter to select only military spending. This filter is mostly in line with Stockholm International Peace Research Institute (SIPRI) definitions of military expenditure. Some minor elements are not included (estimates on FSB Border Protection, National Guard procurement etc.), which explains the difference between the total value of SIPRI and the budget browser.

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