Russia: Military spending increasing, Federal Council meeting convened

The Russian Presidency is allocating an enormous amount of “secret” funds for a military buildup, the largest since the end of the Cold War. The federal budget that is black, or authorized but not itemized, has doubled since 2010 to 3.2 trillion rubles (or $60 billion) according to estimates by a Bloomberg affiliate. Putin may be turning to spending on defense to revitalize purely domestic industry involved in defense spending – this is backed up by a significant initiative for conscription called “industrial battalions,” where conscripts and draftees have the option of working defense enterprises instead of joining the regular military.

Additionally, the speaker of the Duma’s Federation Council, Valentina Matviyenko, told senators that she may call an emergency meeting at any time – an extremely rare occurrence and typically reserved for major military, foreign policy, or political decisions. The last time such a meeting was called was in March 2014 to approve the annexation of Crimea. The special powers of the council include declaration of a state of emergency, impeaching the President, and declaring early elections. It is speculated that the main issue is the declaration of early elections, which have been discussed in order to ensure that an opposition bloc in the Duma is not established.

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News Briefs:

  • The European Bank for Reconstruction and Development (EBRD) has revised growth outlook for Uzbekistan downwards from 7.8% to 7% reflecting a faster-than-expected drop in remittances from Russia that was a major source of its wealth. The EBRD also announced an investment in Kyrgyzstan of some $70 million in 2015, likely in an effort to spur its economy, which is strongly flagging under the same factor of lower ruble remittances and the difficulty of keeping its re-exportation market going.
  • Tajikistan is hosting a meeting of the CSTO today, where defense ministers from member states like Russian Defense Minister Sergei Shoigu are headed to expand military cooperation and create run-of-the-mill combat readiness exercise schedules – the frequency of which could be an indicator of how worried the leadership of Russia, Tajikistan, Kazakhstan, and Belarus are about the possibility of an Afghan spillover.
  • Russian Vozrozhdenie Bank announced that it is exploring the possibility of a merger between it and Absolut Bank, which would consolidate the two companies into Russia’s 20th largest lender. The pace of these mergers between commercial banks has been accelerating since 2012, and especially in the past year due to Russia’s first recession since 2009. Others include an acquisition of UralSib Financial by Credit Bank of Moscow and Pervobank by PAO Promsvyazbank.

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