The Russian government is introducing significant reductions in its 2025 federal budget amid a sharp decline in oil and gas revenues, with the aviation sector among the first to be affected.
A revised proposal under review by the Russian State Duma’s Industry Committee reduces state funding for aircraft and helicopter manufacturing by 22 per cent—lowering the allocation from RUB 101.2 billion (approx. EUR 1.02 billion) to RUB 78.8 billion (approx. EUR 795 million).
The reductions will primarily target subsidies for aircraft leasing companies and commercial airlines. These funds were initially intended to support the procurement and operation of Russian-made aircraft as part of a strategic shift away from Western suppliers. The government now intends to remove RUB 8.5 billion (approx. EUR 86 million) from these subsidy lines.
The cuts follow delays in the Kremlin’s flagship aviation modernisation effort—the Comprehensive Programme for the Development of the Aviation Industry (KPGА). First approved in 2022, the programme was launched to replace Western aircraft with domestic models such as the SJ-100 and MC-21. Original plans foresaw deliveries beginning in 2023. These have since been postponed to 2025, with further revisions to delivery volumes and targets expected later this year.
In addition to direct cuts to manufacturing, related aviation projects under the federal programme “Scientific and Technological Development of the Russian Federation” will see a reduction of RUB 12.8 billion (approx. EUR 129 million), down from RUB 54.7 billion (approx. EUR 552 million). A further RUB 9.6 billion (approx. EUR 97 million) is to be trimmed from the “Development of the Aviation Industry” programme, previously budgeted at RUB 46.5 billion (approx. EUR 469 million).
These revisions will be considered by the Russian State Duma on 28 May.
The contraction of aviation funding is part of a wider rollback in state support across several industrial sectors. Planned spending on the automotive industry will be reduced by RUB 35 billion (approx. EUR 355 million), high-tech sectors by RUB 46 billion (approx. EUR 466 million), and shipbuilding by RUB 12.6 billion (approx. EUR 128 million). The federal robotics initiative will lose nearly a third of its current budget.
This wave of cuts comes as federal oil and gas revenues—long the foundation of Russia’s budget—have sharply declined. In the first quarter of 2025, energy revenues fell by more than 30 per cent year-on-year. The Russian Ministry of Finance attributes the fall to shrinking market access, weaker demand in Asia, and the continuing impact of international sanctions.
Western sanctions, imposed in response to Russia’s annexation of Crimea in 2014 and substantially expanded following the full-scale invasion of Ukraine in 2022, have systematically targeted key sectors of the Russian economy. In the aviation sector, these include bans on the sale and leasing of aircraft, restrictions on spare parts and servicing, and limitations on financial transactions. Western-built aircraft were grounded en masse following sanctions, leaving Russian carriers reliant on ageing fleets and restricted access to maintenance infrastructure.
The Kremlin’s response was to accelerate a policy of import substitution. This included ambitious investment plans to develop and mass-produce domestic aircraft. However, the complexity of modern aviation manufacturing, combined with an overextended industrial base and prioritisation of defence orders, has hindered progress.
Meanwhile, domestic financial indicators suggest mounting pressure on households. As of May 2025, more than 2.35 million Russian citizens are in arrears on credit card repayments by over 30 days—an indication of rising debt stress and deteriorating consumer confidence.
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