Restraint: A post-COVID-19 U.S. national security strategy
The response to the COVID-19 pandemic has weakened the U.S. economy, the foundation of its national power. This has implications for U.S. foreign policy.
Health and economic fallout from COVID-19 makes setting realistic defense priorities more urgent
The response to the coronavirus global pandemic has severely weakened the U.S. economy, the foundation of national power. This reality has vast implications for U.S. foreign policy.
Two economic factors suggest narrowing U.S. foreign policy objectives: (1) U.S. GDP and tax revenue will shrink in 2020, with no certainty about when they might recover. (2) Record deficits and debt endanger future economic growth.
Political reasons for foreign policy restraint augment those economic factors: The public increasingly perceives non-security risks are paramount, and priority will go to domestic spending that aids recovery and increases domestic institutional resilience.
Federal discretionary spending will bear a greater burden because mandatory spending programs are politically harder to cut. Since defense accounts for nearly half of discretionary spending, DoD will likely face sustained cuts.
The U.S. enjoys a favorable geostrategic position with abundant protection from rivals, so it can cut defense spending without compromising security. Indeed, ending peripheral commitments in favor of core security interests strengthens the U.S.
Ending policies bringing failure, overstretch, and drained coffers always made sense—coronavirus makes the case more urgent.
U.S. federal budget authority by category (FY 2019)
Abandon peripheral missions abroad and focus on core U.S. security and prosperity
As the pandemic demonstrates, non-military threats can be far more detrimental to Americans’ well-being than the non-state actors, rogue states, and authoritarian regimes that dominate military planning and drive DoD spending.
The decades-long pursuit of overly ambitious foreign policy goals disconnected from U.S. security contributed to the neglect of U.S. domestic institutions exposed by the coronavirus pandemic.
Recovering requires investment at home: education, health care, infrastructure, research and development, and policies that promote innovation and job creation.
For the past 20 years, the U.S. spent roughly $1 trillion annually on defense-related objectives (DoD, veteran’s care, homeland security, nuclear weapons, diplomacy) while domestic infrastructure in critical industries went under-resourced.
Rebalancing defense priorities to focus more on economic prosperity and public health will enhance U.S. power in the long term.
Middle East: Reduce overinvestment and military presence, which has backfired and weakened the U.S.
Core Middle East interests are (1) preventing significant disruptions to global oil supply and (2) defending against anti-U.S. terror threats. The former requires minimal U.S. effort; the latter requires intelligence, cooperation, and limited strikes, not occupations.
The Middle East accounts for just 4 percent of global GDP, yet for decades, the U.S. has attempted to reshape the region through military force, disrupting the regional balance of power, exacerbating political instability, and allowing terrorist groups to flourish.
Today, the U.S. has 62,000 troops in the region, many of them vulnerable to attacks by local militias. The U.S. is also fighting wars in Iraq, Syria, and Yemen, largely based on exaggerated fears of Iran, a middling power contained by its local rivals.
The U.S. will be able to fund part of its coronavirus recovery by ending its participation in conflicts in the Middle East and nearby areas, such as Afghanistan and Somalia. This would free up tens of billions of dollars annually for higher priorities.
Additional savings can be had by focusing the Pentagon on its core warfighting missions and right-sizing force structure—reducing ground forces in particular, which have been swollen by these commitments.
The U.S., Europe, and Asia account for 81 percent of global GDP
Europe: Shift security burdens to wealthy allies
The U.S. has strong economic and diplomatic interests in Europe, but the continent faces limited direct military threats. Despite the fall of the USSR, the U.S. maintains a heavy military footprint in Europe in the name of securing wealthy, relatively safe allies.
This arrangement served U.S. interests when a big U.S. military presence in Europe balanced the USSR’s military might while enabling allies to recover economically and unify.
As allies grew rich and the USSR collapsed, a sensible balancing policy became a subsidy that let wealthy allies “cheap ride” on U.S. taxpayers, driving excess DoD spending while subsidizing lavish social welfare programs for European nations.
Russia is a declining power (with a large nuclear arsenal). The EU dominates Russia in important metrics of national power: 3½:1 population, 11:1 GDP, and 5:1 military spending. European economies are also more dynamic than Russia’s.
Instead of jawboning allies for shirking their obligations, U.S. policy should shift the security burden onto them by (1) ending the European Defense Initiative and (2) implementing a responsible draw down of U.S. ground and nuclear forces on the continent.
This would not only free up finite U.S. resources for higher priorities at home or in Asia, but also encourage European allies to revitalize their militaries: increasing spending, prioritizing modernization, or increasing military cooperation with each other.
Asia: Fortify Asian allies with A2/AD capabilities to deter Chinese aggression at less risk
U.S. policy toward China—the only conceivable strategic competitor—balances several key interests: deterring Chinese territorial expansion against Asian allies, avoiding war, and ensuring a fair and beneficial trading relationship.
Efforts to balance against China should therefore be based on core U.S. interests and carefully designed and planned to reduce cost, minimize escalation risks, and protect trade.
U.S. goals in Asia are inherently defensive (to preserve the territorial status quo) and are best served by a military approach of “defensive defense”: an operational concept that limits U.S. costs by encouraging allies to develop their defensive capabilities.
By improving anti-access/area denial (A2/AD) capabilities—a network of sensors and missiles—U.S. allies can deter Chinese attacks more effectively and cheaply than via investment in aircraft and surface ships that mimic U.S. capabilities.
Allied defensive capability is less threatening to China than U.S. offensive capability. Reducing the perceived threat of direct attacks, A2/AD is less prone to spark costly, counterproductive arms racing.
Pressing allies to adopt this approach will allow the U.S. to jettison escalatory plans to defend them by attacking the Chinese mainland, lowering tensions and risks of a broader war with China and allowing for cost saving on U.S. forces in Asia.
U.S. force structure: Constrained DoD budgets means more tradeoffs and rebalancing among the services
With the world’s most sophisticated nuclear arsenal, large oceans separating it from rivals, and weak neighbors, the U.S. has a unique advantage over every other nation—security is abundant and cheap.
The U.S. accounts for 40 percent of global military spending—treaty allies account for 22 percent; Russia and China account for 17 percent. The 2020 DoD budget ($757 billion) exceeds Cold War highs in real terms, reflecting a false sense of insecurity.
Reduced DoD budgets can force debate and prioritization among programs and services—between what contributes to U.S. security and what is peripheral or even counterproductive—that large spending authorizations prevent.
Geography makes the U.S. a natural naval power and trading nation. Distance from other major states means the U.S. is perceived as less threatening—unlike China, which borders other Eurasia powers.
The Navy is the key service for projecting U.S. power globally and defending commerce if necessary while avoiding costly occupations. The Navy should command a larger portion of DoD’s reduced budget.
With no nation building and a large reservist pool, the U.S. can reduce Army, Marines, and special operations forces end strength.
Mission-driven reductions to force structure generate savings on personnel and procurement, enabling savings on operational costs, administrative overhead, basing, and other support functions.
U.S. military spending compared to allies and competitors
No major or regional powers are unscathed by the pandemic—strategic thinking will determine who comes out stronger
The pandemic has hit all major powers hard, including U.S. adversaries; the economic pain is well distributed.
China announced its GDP contracted at 6.8 percent in the first quarter of 2020, the first decline since 1976. The CCP relies on steady economic growth for legitimacy, and in a nation with almost no social safety net, job losses could breed discontent.
While earning some goodwill, China’s efforts to help afflicted nations are an attempt to mitigate the reputational damage from its early obfuscation of the outbreak, which led to the global pandemic. Businesses are also taking steps to limit their China exposure.
Record low oil prices could see Russia’s GDP fall by as much as 15 percent this year, resulting in more pressure to limit its military spending and interventions in places such as Ukraine and Syria.
Iran has been crippled by the virus. Infection has killed several of its senior leaders, and the collapse in oil prices has damaged its already shrinking economy, making this middling power even weaker.
Strong fundamentals undergird U.S. power: favorable geography; a technologically advanced society with a skilled, innovative workforce; and abundant natural resources. Post-COVID rebuilding will require focusing on these strengths to restart the economy.
The U.S. grew to become the global superpower by virtue of its productive economy; advanced technology, including nuclear weapons; and skillful diplomacy.
The pursuit of liberal hegemony—militarized democracy spreading fueled by threat exaggeration and hubris—has resulted in strategic failure, military overstretch, and a hollowing out of U.S. internal strength.
The coronavirus pandemic has exposed the extent to which U.S. power has been squandered. To recover its strength, U.S. should focus on the core elements of national power while avoiding excessive military projects and the overspending that entails.
The budgetary demands to recover from this pandemic will be enormous, but the fundamental sources of U.S. security are robust—and insensitive to mild deviations in military activities and spending.
Coronavirus is a terrible tragedy but nonetheless an opportunity to shed illusions and rebuild the real pillars of national strength for the long haul.
As long as U.S. focuses on its prosperity—rather than peripheral distractions—it will grow stronger at home and retain the ability to marshal the resources necessary for competition with any adversary.
This article has been republished with permission from Defense Priorities.
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Benjamin H. Friedman is Policy Director at Defense Priorities and an adjunct lecturer at George Washington University’s Elliott School of International Affairs, a graduate of Dartmouth College, and a PhD candidate in political science at the MIT. He previously worked as a Defense Analyst at the Cato Institute and a Researcher at the Center for Defense Information. He's edited three books on defense policy and strategy and has published academic essays in International Security, Political Science Quarterly, Orbis, Foreign Affairs, and World Affairs. He has written op-eds for many outlets, including The New York Times, Los Angeles Times, USA Today, Politico, The Atlantic, Newsweek, TIME, The Boston Globe, Boston Review, and the Boston Herald.
Top photo credit : Rep. Mike Waltz (Phil Pasquini/Shutterstock); Sebastian /Gorka (shutterstock/consolidated news photos) and Alex Wong (Arrange News/Screenshot/You Tube)
On the campaign trail, Donald Trump promised a very different foreign policy from business as usual in Washington.
He said he would prioritize peace over “victory” in the escalating war in Ukraine, pull the United States back from foreign entanglements to focus on domestic problems, and generally oversee a period of prolonged peace, instead of the cycle of endless Great Power conflict we seem trapped in.
Yet if personnel is policy, as the saying goes, then Trump’s presidency will be far more in line with his Democratic predecessor’s foreign policy than with the vision he laid out over the past year. So far, his National Security Council picks have been a series of hawks with a history of opposing diplomacy and the end of U.S. wars, as well as favoring a more aggressive posture toward China, including intervening in a possible war over Taiwan.
Take Trump’s pick for national security adviser, Rep. Michael Waltz (R-Fla.). Since his selection, Waltz certainly talks in line with the more restraint-oriented vision Trump campaigned on, fretting about the Biden administration’s recent escalation in Ukraine and calling for a “responsible end” to the war there.
But until relatively recently, the Florida congressman viewed the war in very similar terms to those of his hawkish colleagues on the other side of the aisle, reacting to the Russian invasion by warning it “violates the very fabric of international norms” and threatens “our Western values,” lamenting that Biden had not been more confrontational with Russia beforehand, and calling for the United States to “support Ukrainian resistance efforts” and turn the country “into a bloody quagmire” for Russia.
Over the months that followed, Waltz backed escalating the war (“Send the damn MiGs,” he tweeted in March 2022), complained that U.S. policy on the war was a “fiddle fart” that provided just enough arms “instead of going for the kill, instead of going for the win right now,” and charged that Biden was “letting fear of escalation be the primary driver of our policy in Ukraine.”
Waltz has shifted since, but largely because he sees a U.S.-China confrontation as a bigger priority. Waltz views China as “the most threatening adversary America has ever faced,” believes that Washington is already locked in a “Cold War” with Beijing and must “curb” its power, step up military aid to Taiwan, and end the policy of “strategic ambiguity” over the island nation, which has been at the core of decades of successful U.S. policy balancing deterrence without tipping into disastrous war.
He has also disparaged diplomacy with the Chinese government, and thinks U.S. forces should have stayed in Afghanistan to hang on to Bagram Airfield for possible use as a “second front” in a future U.S.-China war.
The rest of Trump’s national security team holds similar views. Sebastian Gorka, nominated for deputy assistant to the president, sees the Ukraine war in literallyindistinguishableterms from hawks in the outgoing Biden administration: it is “unprovoked Russian aggression” that is not about NATO expansion but rather enlarging Russian territory; negotiations, peace, or an off-ramp are as futile as Neville Chamberlain’s deal with Hitler was; and the United States must continue military aid “to make the Russians bleed,” or Vladimir Putin will “take Poland and the Baltic states.”
Gorka is also a hawk on China, which he calls “the greatest threat to America.”
“We know the regime there wishes to have every nation in the world a defeated, vanquished nation, or a satrapy, a tributary nation,” Gorka said this past October, while giving a fawning interview to Gordon Chang, a discredited “China expert” who has repeatedlypredicted the imminent collapse of the Chinese state.
In his 2018 book, Gorka called China’s undoubted goal of becoming a world power, and partly doing so through economic investment in the Global South, a form of “irregular warfare” (even as he admits it is little different from the actions “of the West a couple of centuries ago”). He has repeatedlysuggested that China was about to invade Taiwan, including after its wayward spy balloon, gave former House Speaker Kevin McCarthy “kudos” for taking the inflammatory step of traveling to the island, and implied that U.S. lives should be expended to defend it.
Alex Wong, Trump’s pick for deputy national security adviser, agrees. Wong believes that Americans “have to be prepared for a level of tension, regional destabilization, and — yes — possible conflict [with China] that we have not seen since the end of World War II.” Wong noted he deliberately used that destructive, hot conflict as a reference point and not the Cold War.
A former foreign policy adviser for the super-hawkish Sen. Tom Cotton (R-Ark.) and the merely hawkish 2012 Mitt Romney presidential campaign, Wong served most recently as vice chair of a congressional commission that recommended training Taiwanese troops on U.S. soil — a highly provocative move to China’s leadership.
Because China is, unlike the former Soviet Union, highly integrated into the “system of the free world,” Wong has said, the U.S.-China conflict requires not just “out-competing them but extruding” — meaning, pushing out — “China from certain systems, whether economically, technologically, politically.” What that means for Wong is not just continuing the Biden administration’s economic warfare with the country, but also “an increased U.S. military presence” in the Indo-Pacific and to “seriously look at new investments in strategic nuclear forces, intermediate-range missiles, our naval fleet, and certain capabilities tuned to turning back an invasion of Taiwan,” as well as “expand[ing] the aperture of our military alliances” in the region, specifically with Japan and under AUKUS.
Wong does seem to favor extricating the United States from Ukraine, but, like Waltz, it’s because he views “Ukraine as an unfortunate diversion of U.S. attention from the Indo-Pacific” and wants to “responsibly shift U.S. military resources eastward” — in a way that, to take his words literally, will ramp up conflict with China and see the U.S. go directly to war in the case of a Chinese invasion of Taiwan.
None of these appointments bode well for advocates of U.S. foreign policy restraint, let alone for those who voted for Trump hoping he would prioritize domestic problems over endless foreign wars. At best, Trump’s picks will seek to simply replace one dangerous, nuclear-tinged Great Power conflict with another. At worst, they will not do the former, and embroil the United States into two of the latter.
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top photo credit: Men hold a Syrian opposition flag on the top of a vehicle as people celebrate after Syrian rebels announced that they have ousted President Bashar al-Assad, in Damascus, Syria December 8, 2024. REUTERS/Firas Makdesi
Embattled Syrian President Bashar al Assad, who had survived attempts to overthrow his government throughout a civil war that began in 2011, has reportedly been forced out and slipped away on a plane to parts unknown (later reports have said he is in Moscow).
Washington says it raced (in the words of the Washington Post) to help secure the country by engaging in airstrikes against ISIS weapons stockpiles and operatives Sunday night, and that it "strongly supports" a "peaceful transition" via an "inclusive Syrian-led process." According to Secretary of State Antony Blinken:
"After 14 years of conflict, the Syrian people finally have reason for hope. The Assad regime’s refusal since 2011 to engage in a credible political process and its reliance on the brutal support of Russia and Iran led inevitably to its own collapse," he said Sunday, adding that the U.S. will support international actions to hold Assad's regime accountable for its abuses and atrocities against its own people.
As for the rebels who have overthrown the government, "We have taken note of statements made by rebel leaders in recent days, but as they take on greater responsibility, we will assess not just their words, but their actions."
Enter Abu Mohammad al-Jolani, leader of Hayat Tahrir al-Sham (HTS) who had led the shocking and successful attack on Aleppo, Hama, Homs, and other strategic towns and cities in the northwestern region of the country this week. HTS is a Sunni Islamist group once linked to al-Qaida and the Al-Nusra Front and is still considered a terrorist group by the U.S. government (there is still a U.S. bounty on him), though for days, the mainstream media has been reporting that the group has rebranded itself as more moderate.
Photos Sunday morning showed cheering amid Sunni populations that had been opposed to Assad's rule and the victims of his brutal crackdowns over the decade, though the fighting had remained in a largely frozen state over the last few years until this week's uprising.
According to Al Jazeera, "opposition fighters" released their own statement on TV Sunday:
“The city of Damascus has been liberated. The tyrant Bashar al-Assad has been toppled. All the prisoners have been released from the prison of Damascus,” a leader of the group said.
“We wish all our fighters and citizens preserve and maintain the property of the state of Syria. Long live Syria,” he added.
It is not clear, however, how the news is being taken by the Alawite and Christian populations, Assad's support base, in Damascus, and how the new dynamics will affect the Kurdish advances (supported by the U.S.) in the northeast, the Turkish moves against both Assad and the Kurds, and Israel's interests in maintaining its control over the disputed Golan Heights (though there have been reports of Tel Aviv bombing Assad military assets in Damascus this morning and taking over the Golan Heights UN buffer zone ). Israeli Prime Minister Benjamin Netanyahu reportedly called the overthrow of Assad an "historic day."
Russia, too, has been involved in the war all along, and was providing airstrikes on behalf of Assad in recent days.
Egyptian officials out of the gate seemed to warn of factionalism and historically have no love lost for Islamist uprisings. In a statement they urged “comprehensive political process” to establish peace and support for Syria’s “sovereignty, unity and territorial integrity."
Turkey for its part, according to Al Jazeera, has said it is ready to help “guarantee security” in Syria, whatever that may mean. Iran, which has been a military supporter of Assad's regime, is urging against interference in Syria’s internal affairs. “Achieving this requires ending military conflicts as soon as possible, preventing terrorist acts, and starting national talks with the participation of all segments of Syrian society to form an inclusive government that represents all Syrian people,” the foreign ministry said in a statement.
Weighing in later Sunday, President Biden hailed the demise Assad. “It’s a moment of historic opportunity for the long-suffering people of Syria to build a better future for their proud country,” Biden said from the Roosevelt Room Sunday. “It’s also a moment of risk and uncertainty. As we all turn to the question of what comes next, the United States will work with our partners and the stakeholders in Syria to help them seize an opportunity to manage the risk.”
As of Sunday night, according to U.S. Central Command, the U.S. has engaged in no less than 75 airstrikes against ISIS targets to secure the northeastern part of the country. The U.S. military used using Air Force assets including B-52 bombers, F-15 fighter jets and A-10 aircraft, according officials.
“There should be no doubt — we will not allow ISIS to reconstitute and take advantage of the current situation in Syria. All organizations in Syria should know that we will hold them accountable if they partner with or support ISIS in any way,” Gen. Erik Kurilla, commander of CENTCOM, said in a statement. The U.S. currently has 900 troops in the country.
Meanwhile, Vice President-elect J.D. Vance posted on X a warning about celebrating when there are Christian minorities in Damascus at risk. "As President Trump said, this is not our fight and we should stay out of it."
(Ret.) Col Doug Macgregor warns that with all of the external interests, the fate of Syria is likely factionalism, if not a partitioning. "In the near term, Israel and Turkey divide Syria to their liking, while Moscow and Tehran prepare for talks in Doha and Tehran prepares for all out war with Israel and the United States," he tells RS. "In the long-run, the volatile mix of Kurds, Turks, Israelis and Islamist Arabs will make the partition of Syria tenuous."
For his part, Trump said on Truth Social Russia had "no reason to be there in the first place" turned the situation into another call for negotiations in Ukraine.
"They (Russians) lost all interest in Syria because of Ukraine, where close to 600,000 Russian soldiers lay wounded or dead, in a war that should never have started, and could go on forever. Russia and Iran are in a weakened state right now, one because of Ukraine and a bad economy, the other because of Israel and its fighting success. Likewise, Zelenskyy and Ukraine would like to make a deal and stop the madness. They have ridiculously lost 400,000 soldiers, and many more civilians. There should be an immediate ceasefire and negotiations should begin."
UK's Prime Minister Keir Starmer said the UK welcomes the fall of Bashar al-Assad’s “barbaric regime” and called for the restoration of “peace and stability.”
This story is developing and we will be updating throughout the day.
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Russia's President Vladimir Putin speaks during a session of the Valdai Discussion Club in Sochi, Russia October 19, 2017. REUTERS/Alexander Zemlianichenko/Pool
On December 1, Russian President Vladimir Putin signed the budget law for 2025-2027. The Duma had earlier approved the law on November 21, and the Federation Council rubber stamped it on November 27.
The main takeaway from the budget is that Russia is planning for the long haul in its war with NATO-backed Ukraine and makes clear that Russia intends to double down on defense spending no matter what the cost. While the increased budget does not shed light on expectations for a speedy resolution to the war, it is indicative that Moscow continues to prepare for conflict with both Ukraine and NATO.
More importantly, the recently signed budget only reinforces Russia’s move towards a war economy at the risk of exacerbating growing problems in the domestic economy related to labor shortages and inflation.
According to Russia’s Ministry of Finance (MinFin), the largest portion of budget expenditures will be dedicated to national defense. According to published figures, 32.4 percent ($126 billion) will be specifically allocated to defense. In comparison, the figure for 2024 was 29.4 percent of the budget or $98 billion. In 2026 and 2027 the expected budget increases are estimated at $69.5 billion and $125.1billion, respectively.
The figures suggest that military expenditures are crowding out spending in other areas of the economy. Planned spending on "national defense" is more than twice that allocated to social spending. Defense expenditures are followed by social policy (15.7 percent), national economy (10.5 percent) and national security and law enforcement activities (8.3 percent).
In addition, the new budget threatens to exacerbate existing pressures within the domestic labor market. According to Reuters, heavy recruitment by the armed forces and defense industries has drawn workers away from civilian enterprises, as has emigration, pushing unemployment to a record low of 2.3 percent.” Figures from Rosstat indicate that unemployment is at the lowest level since the collapse of the Soviet Union in 1991.
Furthermore, last week Anton Kotyakov, the minister for labor and social defense, appeared before the State Duma where he announced that labor market demand by 2030 could face a deficit of 2.4 million people. The shortage is expected to be most critical in manufacturing, logistics and IT. The Labor Ministry is fearful that as Russia's labor woes intensify it may contribute to slowing economic growth.
Overall, Russia’s GDP growth, which is approximately 3.9 percent for 2024 according to the Russian ministry of economic development (MinEcon), will slow to about 2.5 percent in 2025 and level off at 2.8 percent by 2027. This contrasts with the International Monetary Fund’s estimate of 1.3 percent growth for 2025.
As a result of the new budget, MinFin forecasts an increase in state debt of nearly 50 percent in ruble terms through 2027. That would translate to 15 percent in 2023 of GDP to 18 percent in 2027. This runs counter to previous Russian economic policy that emphasized budget surpluses to counter Russia’s persistent inflation.
Inflation in Russia is currently running at about 8.7 percent. The MinEcon forecasts a decline to 7.3 percent by the end of the year. .
One result of the rise in inflation will be a 7.3 increase in pensions at the beginning of 2025. This will be higher than the expected figure. Pensioners make up a significant portion of Russia’s populace and can be a source of protest and public discontent. According to Sergei Chirkov, head of Russia’s Social Fund, more than 42 million people, or nearly 25 percent, will receive a pension in 2025.
It must be noted that Putin approved the increase in military expenditures as the United States announced that it is preparing a new $725 million military aid package for Ukraine. The assistance includes counter-drone systems, munitions for High Mobility Artillery Rocket Systems (HIMARS), and antipersonnel land mines. Previously, President Biden committed to expending all allocated Congressional funds for Ukraine's military support before leaving office on January 20. His latest package brings the total U.S. aid to roughly $7.1 billion in Pentagon stockpiles since the start of 2023.
Thus, both sides continue to see doubling down as the only option both militarily and fiscally. Until this cycle of escalation is broken, the risk of direct conflict, possibly even nuclear exchanges, appears ever more likely. Indeed, the absence of restraint from either side appears to be the course of action at least until the change of U.S. administrations.
For Russia, expanded military expenditures are a worrying development for the long-term health of a Russian economy that continues to expend greater amounts of financial resources on its war versus NATO-backed Ukraine. According to the Center for European Policy Analysis (CEPA), “for the first time on Putin’s watch, pure military expenditure is expected to rise above social spending, including social policy, education, and healthcare.” Moreover, CEPA notes “increases in overall tax rates contribute a larger share, not least because the extra revenue (including from a higher corporate tax rate) will be diverted into the federal budget and not given to the regions.”
Minister of finance Siluanov noted last week that overall regional budgets will shift from a surplus of one trillion rubles to a deficit of approximately 100 billion rubles in 2024. Declining finances in the regions are primarily attributable to declining exports and export revenues. He cites lower coal exports in the Kemerovo region as one example. This development is important as inhabitants of Russia’s regions are doing most of the fighting.
Combined with Russia’s labor shortages, fears of consumer inflation, and budget pressures on non-defense items, like pensions, education and social services, it is doubtful that the Kremlin can continue on this course indefinitely without risking popular opposition.
Likewise, the Trump campaign’s promises to reduce government spending and increase the real income of most American workers are likely to affect its support for Ukraine. While Trump will almost surely increase defense spending, it will probably not be directed to Ukraine if one believes his campaign rhetoric.
Russia’s leadership must understand this and, therefore, the condition of the Russian economy must be part of the formula for when and under what conditions Russia agrees to negotiations. Perhaps the newly signed Russian defense budget is a signal to the new Trump administration that Moscow is willing to up transaction costs of the war until it reaches a point where restraint and negotiation becomes possible if not necessary.
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