Russia's military-industrial complex is gaining momentum. Where does the money come from, and who helps Russia produce missiles? 29 May 2023

...The increased military spending could have led to significant cuts in other programmes and disrupted the economy, but Moscow has managed to avoid this so far.

Although federal budget expenditure does exceed income, the shortfall is insignificant. The gaps are covered by the "war chest" - the National Wealth Fund (NWF). It now holds RUB 12 trillion (US$95.7 billion) in its accounts, which the Kremlin has been amassing from excess oil revenues in recent years.

The Russian government has also been able to acquire more money by borrowing roubles from its citizens and banks and raising taxes on businesses...

The Russian Ministry of Finance plans to introduce a windfall tax on private companies’ profits, which will contribute another RUB 300 billion (US$2.39 billion) to the budget. The government will also raise excise duty on tobacco products, gaining an additional RUB 100 billion (US$797.8 million).

The tax authorities are getting tougher about "shaking down" businesses to meet military needs. The number of "tax claims" has increased by 80% since 2021.

The tax frenzy has also affected Western companies that still operate in Russia. The Russian authorities have accused the French companies Auchan, Leroy Merlin and Decathlon of tax evasion and are preparing for inspections.

Overall, there are still about a thousand Western companies in Russia.

They continue to operate in Russia, earning tens of billions of dollars in revenue and paying taxes to the federal budget, which is spending increasingly more money on the war and less on social programmes and development...

Another "Western" source of replenishment for the aggressor's military budget is conventional trade. The sanctions regime allows Russian companies to sell certain goods to the US, EU and UK and increase their profits.

Russia earned US$20 billion from exports of metals and diamonds to Western countries in 2022 alone - and the aggressor continues to generate revenue because these goods have not been banned...

Western countries have not been able to completely cut off Russia's access to their technological components over the past year. There are still ways to circumvent the embargo - enough to manufacture certain equipment...

Semiconductor exports to Russia from Türkiye, Armenia, Kyrgyzstan, Kazakhstan and Serbia have increased tenfold. None of these countries are manufacturers of microchips. They play the role of intermediaries.

It is difficult to control the resale of critical components because it is impossible to determine the end user. Moreover, depending on the level of technology control, the Russians cover their tracks in every possible way...