Baltics States Have Doubled Arms Spending Since Putin’s Advance

  • Military equipment budgets to rise to $670 million by 2018
  • Lithuania, Latvia, Estonia have been building NATO presence

The three Baltic states that split from Russia at the end of the Cold War have almost doubled their spending on arms since Russian President Vladimir Putin ordered the invasion of Crimea, and it’s expected to double again in the next two years, according to a new IHS Markit report.

In the past two years, their combined spending on military equipment rose to $390 million this year from $210 million in 2014, IHS analysts said. They predicted it would reach $670 million by 2018. Latvia and Lithuania have the fastest growing defense budgets in the world.

Armored vehicle-makers U.S.-based General Dynamics Corp. and Germany’s Rheinmetall AG, are “well positioned” to benefit from the increases, while SAAB AB could see more orders for its military aircraft, IHS analyst Ben Moores said in an e-mail. Missile-makers Raytheon Co. and MBDA -- a joint venture between Airbus Group SE, BAE Systems Plc and Italy’s Leonardo-Finmeccanica SpA -- could also see a windfall, he said.

“The profile of defense spending in the Baltics has changed dramatically in the past two years,” said IHS analyst Craig Caffrey. “Each country will have doubled or tripled their budgets from 10 years ago.”

The Baltic trio have been ramping up their defenses since Russia’s actions in Ukraine, bolstering the presence of NATO troops within their borders. The region’s total defense budget, including non-equipment spending, will rise to $2.1 billion by 2020 from $1.5 billion this year, the report said. By 2018, each country will pass the 2 percent of gross domestic product spending level required by the North Atlantic Treaty Organization.

Putin, who’s vowed to defend Russian speakers across the world, has repeatedly denied he intends to attack the three states, despite each having large ethnic Russian minorities.

Russia itself has been lifting its defense spending since the start of the century, last year reaching a 28.6 percent increase, the largest since 2002, IHS said. The latest budget includes the first reduction in its military spending since the late 1990s as the collapse in oil prices and U.S.-led sanctions hurts its economy. 

Russia still has the fifth-largest defense budget in the world: $49.2 billion this year. That’s about 33 times the size of the Baltic nations’ spending.