Russia’s Crimea grab impacts neighbours’ defense budgets

Bloomberg

Two years after Russian President Vladimir Putin swiped Crimea, the fallout from his Ukrainian land grab continues to reverberate through nearby budgets.
It’s most visible in Lithuania, whose split from the Soviet Union was among the bloodiest of the communist collapse. The government there raised defense spending by more than 30 percent in 2015, outdoing NATO’s 27 other members. Poland boosted expenditure the third-most, while Baltic neighbors Latvia and Estonia, which share borders with Russia, were fifth and eighth.
The outlays reflect unease at Putin’s intentions: Aside from Ukraine, Russia fought a war with southern neighbor Georgia in 2008 and began operations in Syria last year. Fears are stoked by persistent media speculation over possible Russian steps to destabilize the Baltic region. The spending rush is also part of belated efforts to meet NATO’s defense-spending target of 2 percent of gross domestic product. With Estonia and Poland among only five countries currently meeting that goal, expenditure is set to swell more.
“The Ukraine-Russia conflict is particularly resonant for our region,” said Zygimantas Mauricas, a Baltic economist at Nordea Bank in Vilnius, Lithuania’s capital. “Defense was badly neglected in the past in both Lithuania and Latvia. Unlike in many other NATO members, there’s strong public support to strengthen defense capabilities.”
Lithuania’s Defense Ministry puts public backing to reach the NATO target at two-thirds of the 2.9 million population. Citizens are warier after a surge in Russian military activity in Baltic skies as the Ukraine conflict unfolded. President Dalia Grybauskaite calls the Kremlin’s behavior “a threat to international law.”
Lithuanian defense spending will jump 34 percent this year, more than any other budget category. It’s also the fastest- growing budget item in Estonia and Latvia, which has introduced a “solidarity tax” on its highest earners to fund the increase. Lithuania and Latvia may meet the NATO goal in 2018.
While Russia dismisses talk it’s plotting a Baltic offensive, the mood in the region is unlikely to improve any time soon. A BBC program this month looked at reactions to an insurgency by Russian-speaking separatists in eastern Latvia.