Expensive Donbas as burden for Russian budget

Author : Vadym Kolodiychuk

Source :

Last week Ukrainian politicians argued about how much Russia spends on the occupied part of Donbas
21:28, 17 January 2017

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112 Agency

Every year, Russia allocates about $ 3 billion to finance, and actually hold under control the occupied territories of Donbas, stated the chairman of the Donetsk military and civil administration Pavlo Zhebrivskyi. According to Zhebrivskyi, it is the sum of military, administrative and social costs allocated for this region.

“We are keenly aware that today, regarding the financing of the occupied territories there's a very small part of the taxes from so-called DNR and LNR republics. Yes, they tear off some money from the business, from the turnover, but the key financial resources come from Russia.

According to my estimates, maintenance of this area costs to Russia around 3 billion dollars per year. Today, it is - the whole bureaucracy, teachers, doctors, and a lot of pensioners. Some funds may be directed, for example, for the roads and transport.

A lot of money was embezzled by "local officials", and those Russians who sit on these financial flows, and they are interested. When the amount of financial resources is reduced, there is definitely a need to show the aggravation of situation”, said the chairman of the Donetsk military and civil administration.

Probably, in the official documents and the main Russian estimate these costs are showed as funds allocated for solving other different issues. But for comparison, almost as much Russia plans to spend on Crimea, stated Russian politician Vladimir Milov. In his budget analysis MP indicated that this year the State Duma decided to allocate for the needs of the peninsula about 195 billion rubles from the federal budget. According to the current exchange rate - it is $ 3.3 billion, which is 2.5 times higher than the Russian government’s expenditure on environmental protection (77 billion rubles), or more than half of the budget spending on health care (379 billion rubles), writes Milov on the Echo of Moscow site.

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After all, the occupied East of Ukraine doesn’t receive all the funds, most part of which is simply stolen, says MP from the Narodnyi Front political party Yuriy Bereza: "In fact, up to 75% was embezzled. It just goes through all accountancy, showing how Russia supports the occupied Donbas, how many humanitarian missions it sends there, but in fact the money is only deducted from the Russian budget."

To these Russia’s expenditures we should also add the sanctions due to which Russian Federation is losing much more than the money allocated for the maintenance of Donbas and Crimea - says MP from the Petro Poroshenko’s Block Ivan Vynnyk.

"$ 3 billion for the Russian Federation, even in the context of their defense budget is relatively small sum. Especially in view of the fact that Ukraine continues the general sanctions policy with the involvement of our international partners in this process, so Russia is losing much more than hundreds of billions of dollars”, says MP.

If you look again at the Russian financial plan, you will the impact of the sanctions. In the budget of 2017 defense spending was drastically reduced - from 3.9 to 2.8 trillion rubles as compared to the 2016 year, or from 4.7% to 3.3% of GDP. However, it is still higher figure concerning the share of GDP compared with the NATO countries. Security forces, along with the officials and the financing of government economic projects and subsidies to public corporations together make up almost half of the Russian expenditure. And about one-third goes to pensions and social benefits, and only 6% is allocated for  "expenses of the future", education and health, says Vladimir Milov.

But despite the words, it is impossible to officially count the subventions for Donbas. Moreover, Ukraine is also partly financing the occupied territories, says MP Semen Semenchenko. "According to my calculations, about $ 800 million – it is a benefit that the occupied territories obtain by trade and yet not closed trading window with Ukraine. It is somewhere about 35% of total expenditure, which Russia has allocated for the occupied east", he says.

The Ukrainian government is optimistic about the return of the occupied territories of Donbas. Not least because the occupied territories burden the Russian budget. 3.2 or even 1 billion dollars per year – it is not such a high price for such escapade. But if we add the effect of sanctions, the numbers would be much greater.

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