How much does Russia’s foreign policy cost? This seemingly simple question is actually very difficult to answer. First, foreign policy comprises a huge number of many diverse processes and factors, and these are not easy to evaluate in terms of money. Second, many parts of Russia’s federal budget that concern foreign policy are either too general or they are classified. Finally, the amount of available information on different foreign-policy sectors differs considerably.

Nevertheless, this article is an attempt to analyze Russia’s budget spending on foreign policy. A generalization of these spending figures has produced interesting and, at the same time, contradictory results, making it difficult to draw any unequivocal conclusions on their basis. Yet an analysis of the situation, presented with diagrams and graphs, is very useful and provides much food for thought.

SOME METHODOLOGICAL EXPLANATIONS

Russia’s budget spending is classified into three categories. These include functional (budget allocations for national defense, police, state security, education, etc.), departmental (allocations among government agencies) and economic.

First, there is no item listed under “foreign policy” in the functional distribution of spending. Rather, it is financed from a sub-item category called “International Relations and International Cooperation” (before 2005 it was called “International Cooperation”), which is included in the “General State Spending” item. However, business trips abroad and international contacts of all state organizations, such as the Audit Chamber, the Federal Tariffs Service, the Ministry for Regional Development, etc., are financed from the same source. So, as regards functional classification, allocations for foreign policy and diplomacy merge with other spending.

It would be logical to assume that the “cost” of foreign policy will be apparent from the departmental classification. Theoretically, the budget of the Foreign Ministry (in former years also the Ministry for CIS Affairs, the Ministry for Cooperation with the CIS Countries, and the Russian Center for International Cooperation in Science and Culture under the Foreign Ministry) must reflect all foreign-policy allocations. But things are not that simple. For example, allocations for the Foreign Ministry in 2000 in the open (unclassified) variant of the federal budget stood at 589 million rubles; in 2001 they made 706 million rubles, and in 2002, 1,065 million (all the sums are given in current prices).

Apparently, everything seems clear: the budget of the Foreign Ministry is small but growing (even if adjusted for inflation). However, if we look at the budget execution report for 2001, we will find the figure of 13.5 billion rubles (instead of 706 million). The point is not that the spending proved to be much greater than planned, although such things happen and we will discuss that scenario below. The point is that not all foreign-policy allocations were made through the Foreign Ministry. For example, the international organizations’ dues and other expenditures involved in foreign-policy activity were for many years paid through the Ministry of Finance. (In 2001, part of the expenditures was paid from the budget of the Ministry of Finance, although the budget execution report attributed this spending to the Foreign Ministry’s budget.) For this and other reasons, in 1995-2001 the Foreign Ministry received meager allocations in the open variant of the federal budget. It would seem that one could simply look at corresponding categories and sub-categories in the departmental classification of the Finance Ministry’s spending and add the expenditures specified there to the foreign-policy budget. However, in some years the Finance Ministry was not mentioned in open variants of the departmental classification of spending.

Given these factors, the author has worked out his own method for estimating Russia’s expenditures on foreign policy. In brief, these expenditures include:

– allocations under the sub-category of “International Relations and International Cooperation,” received by the Foreign Ministry (minus allocations for “Implementation of Interstate Agreements Within the CIS Frameworks,” also received by the ministry);

– all allocations for “Implementation of Interstate Agreements Within the CIS Frameworks.” Although this budget item is included in the sub-category entitled, “International Relations and International Cooperation,” I have singled it out because allocations for this purpose are not made through the Foreign Ministry alone;

– allocations received by the Foreign Ministry under other categories and sub-categories of the functional classification (for education, construction, etc.).

In 1995-2001, the sub-category “International Cooperation” obviously was not fully presented in the Foreign Ministry’s budget – a significant amount of funds is paid through the Ministry of Finance. But even there they are not always fully reflected because of the budget structure, as well as for reasons of secrecy. Allocations for foreign policy under the “International Cooperation” sub-category must have stood then at 90 percent of the Foreign Ministry’s budget (this is only an estimation, because such a ratio has been in effect since just 2002 when the budget became less classified).

Importantly, the federal budget expenditures under review do not include additional incomes that Russian institutions abroad receive from allowed kinds of activity (these incomes are for the first time fully included in the 2007 budget; however, this data is inaccessible to the public and is contained in a classified supplement). Throughout the years under review, there have existed such incomes that increased foreign-policy budgets by an unknown value (hardly a significant one, though).

* Current prices for 2003 were converted into fixed ones by means of a GDP deflator, which was calculated by the Federal State Statistics Service (the deflator index for 2006 and 2007 is estimated at 1.09 and 1.08, respectively). Inflation rates differ in different sectors of the economy. Therefore, the GDP deflator used for a particular category of expenditures cannot produce an absolutely precise adjustment for inflation – for foreign-policy expenditures the inflation was probably higher or lower than the GDP deflator. Yet, however notional the deflator index may be, there is no alternative to it. The inflation rate calculated for each specific year may not be absolutely precise, but in any case, the figures produced are commensurable and, at least, must adequately reflect the present tendencies.

Graph 1 shows the following three curves:

1) “initially planned” – allocations approved when adopting the federal budget;

2) “adjusted” – allocations adjusted as the federal budget was being fulfilled (as of the end of the fiscal year);

3) “actual” – actual expenses specified in reports on the federal budget execution (such reports have been adopted only since 1999, and two years after the termination of a corresponding fiscal year; so at the time this article was written only data for 1999-2004 was available).

The three curves do not always coincide. This is a widespread practice: budgets are often adjusted in the course of a fiscal year. Moreover, sometimes they may exceed even the adjusted targets. The years 2000, 2003 and 2004 are particularly indicative in this respect: in those years, the originally planned, adjusted and actual budgets had absolutely different values.

The period between 1998 and 2002 saw a continuous growth in foreign-policy allocations. Interestingly, the 2000 budget provided for an essential increase in these allocations as compared with the previous year. However, the actual expenditures in 2000 were less than planned. The same tendency was observed in other spheres as well: the Defense Ministry and security services, for example, whose budgets for the 2000 fiscal year had been considerably increased (due to additional budget incomes), did not utilize all the funds allocated to them.

Allocations reached their peak in 2002, while actual expenditures (according to budget execution reports) peaked in 2001. In 2003-2004, both parameters considerably decreased. In 2004, general allocations for foreign policy returned to the 1998 level. Since 2005, foreign-policy allocations have been moderately growing.

EXPENDITURES ON FOREIGN POLICY MINUS THE CIS

Graph 2 shows that the volatility of foreign-policy expenditures is much less if the CIS is not taken into account. The difference between a planned budget and actual expenditures was insignificant before 2003.

The budget execution curve reflects a minor decrease after the 2001 peak; foreign-policy expenditures remain much higher than in the late 1990s. One can even say that these expenditures (provided that spending on foreign policy in the CIS is not taken into account) have stabilized at a level that is rather high for Russia.

Therefore, expenditures on CIS policy since 2000 have essentially influenced the dynamics of all foreign policy spending, and in some way actually “distorted” it.

EXPENDITURES ON CIS POLICY

The aforementioned volatility of foreign policy spending is perfectly illustrated in Graph 3. Throughout the last decade, there has been a discrepancy between budget allocations on foreign policy and actual spending: in some years, the spending was more than planned, while in others it was less. Indicative in this respect is the year 2001, when foreign policy spending was planned in lesser amounts than the allocations and actual spending in 2000. However, actual foreign policy spending in 2001 by far exceeded the figure for the previous year. The year 2001 was a peak year for investment in foreign policy in the CIS.

In subsequent years foreign policy allocations essentially decreased. And although in 2005-2007 the budget has been somewhat growing, still it remains at the level of the late 1990s. In 2004, however, actual spending was more than 300 percent higher than initially planned. Most likely, the same is for the period of 2005-2006 (figures for these years are still unavailable). Nevertheless, spending for 2004-2007 will be much less than it was for 2001 and 2002.

* Spending on CIS policy comprises allocations for the program entitled, Implementation of Interstate Treaties Within the CIS Frameworks. This budget item includes allocations not only for policy toward the CIS proper, but rather for policy in the CIS space, as well as spending on the Collective Security Treaty Organization, the Eurasian Economic Community (EurAsEC) and other organizations. Allocations for CIS policy were for the first time made a special federal budget item in 1998. No precise figures concerning CIS policy in the previous years can be obtained from open sources.

TOTAL/CIS SPENDING RATIO

These figures are given in Graph 4 (it contains only actual spending figures, so it refers only to the period of 1999-2004, for which there are budget execution reports). This factor simplifies the diagram; besides, actual spending figures are more important than planned allocations. We have already seen discrepancy between planned and actual allocations with regard to all foreign policy spending (Graph 1) and spending on CIS policy (Graph 3).

Graph 4 shows that since 2001, funds spent on CIS policy have been steadily decreasing. In the late 1990s, approximately half of all allocations that were set aside for foreign policy was spent on neighboring countries. In 2001, this ratio was repeated due to a sharp increase in actual financing. In subsequent years, however, spending on CIS policy steadily decreased, amounting to just 25 percent in 2004.

After 2004, judging by allocations in the federal budget, the share of funds for CIS policy within the entire category of foreign policy spending decreased even further to 17-20 percent. In 2005 and 2006, however, spending on CIS policy grew faster than all foreign policy spending (although the 2007 budget is marked by a reverse trend). If actual spending in 2005-2007 does not radically differ from the budget plans, the share of CIS policy spending will stabilize at about 20 percent.

SOME CONCLUSIONS

The abovementioned figures suggest the following conclusions:

• the period 2000-2003 saw unusually high spending rates on all foreign policy projects (it grew particularly high in 2001 but then decreased, although remaining at a high level in the next two years);
• the foreign-policy budget (not including spending on CIS policy) decreased after 2001; yet it stabilized at levels considerably higher than in the late 1990s;
• allocations for CIS policy after 2000 fluctuated violently and eventually fell to the level of the late 1990s. Correspondingly, after 2001 their share in total foreign policy spending steadily decreased to half the figure of the late 1990s.

If we convert these quantitative (budget) parameters into qualitative (political) ones, we can assume that after Russian President Vladimir Putin came to power, he took an active foreign-policy position, backing it with an increased foreign-policy budget. After a sharp growth and subsequent decline, this budget (not including CIS policy) has stabilized at a level that is high for Russia.

The uncertainty and inconsistency of foreign policy in the post-Soviet space brought about considerable fluctuations in spending. In correspondence with statements about the high priority that CIS policy plays for Russia, financing in this field increased considerably in individual years. Of special interest is the year 2001 when actual spending increased to particularly high rates.

Today, statements concerning the high priority of foreign policy in the CIS are still made, but they are not consistent with the continuing decrease in spending on this policy within foreign-policy allocations.

Let’s once again return to a factor on which we focused our attention above: it often happens that initially planned, adjusted and actual budget allocations differ essentially. In my view, this is a telltale sign (even though indirect) of the insignificant role that parliament plays in the implementation of foreign policy. The executive branch makes decisions and implements them at its own discretion, without letting parliament in on its plans – even when the federal budget is to be endorsed. Actually, the executive branch spends as much funds as it sees fit.

At the same time, the volatility of foreign policy spending reveals the main problem: political decisions in Russia are poorly translated into budgetary categories and specific plans with a particular price tag. As a result, the executive branch often fails to stay within specific budgetary limits.

The inability to estimate and plan the financial parameters of a particular policy is an adverse factor that may have negative consequences. There is a danger to assume superfluous political and, therefore, financial obligations, or, on the contrary, to be too cautious and leave part of the resources unused unwittingly and without any grounds. In the first case, risks increase; in the second, efficiency decreases. A country seeking to return to the global stage as a major actor must find a well-planned solution to the problem of providing its foreign policy with sufficient resources.