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Russia government mulls 5 percent cut in defence procurement spending – sources

By Margarita Papchenkova, Lidia Kelly and Darya Korsunskaya

MOSCOW (Reuters) – Russia’s government is considering cutting spending on defence procurement this year by 5 percent, four official sources told Reuters, a move that would extend the budget squeeze to a sector that up to now has been immune from real cuts.

The proposal has support across several ministries and in other state institutions, enough for it to go forward for discussion at a Cabinet meeting, the sources said. Until now, the idea has not gained traction beyond the finance ministry.

That it is now poised to be put on the agenda of the full government is a sign that, as Russia begins its second year of recession caused by low oil prices and Western sanctions, no area is safe from budget cuts.

Cutting defence spending is symbolically important because President Vladimir Putin has made restoring Russia’s military might a priority, a stance reinforced by military engagements in Ukraine and in Syria.

Russia spent 1.65 trillion roubles ($ 21.60 billion) on defence procurement in 2015, according to defence think tank CAST. That represented about half of total budget spending on national defence, the think tank said.

A 5 percent cut in defence procurement spending is unlikely to bring in significant additional budget revenues. The saving would be not more than 100 billions roubles, according to an estimate from one of the officials who spoke to Reuters.

“But this is not about money, it is about a political precedent,” the official said.

One of the sources, who all spoke to Reuters on condition of anonymity, said that there had been talk about a 7 percent cut, but there was “mighty opposition” from the defence ministry to that plan and most likely the cut will be 5 percent.

There is no final decision and it is yet to be approved by the prime minister or the president, two senior officials said.

“But we are trying to persuade our bosses, that it is impossible for the budget to bear such spending today”, a source in the finance ministry said.

A spokeswoman for the Finance Ministry did not return calls seeking for comment. Defence Ministry did not immediately reply to Reuters request seeking for comment.

(additional reporting by Jason Bush; writing by Lidia Kelly; editing by Christian Lowe)

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