Russia’s Financial Bid to Entrench Its Control Over Occupied Ukraine

Russia's draft federal budget for 2027-2029 earmarks around 865.6 billion rubles ($10 billion) for a state program aimed at restoring and fostering socioeconomic development in the occupied Ukrainian regions of Donetsk, Luhansk, Zaporizhzhia, and Kherson. The budget, submitted to the State Duma on September 30, allocates 293.82 billion rubles for 2027, 290.11 billion for 2028, and 281.65 billion for 2029.

The program, initiated in December 2023, aims to consolidate Moscow's control over internationally recognized Ukrainian territory through infrastructure and administrative investments.

This allocation represents approximately 0.6 percent of Russia's planned federal expenditure in 2027, but its significance lies in its continuity. While military spending is projected to increase by 6 percent, social policy, education, and healthcare funding are set to decrease by 7-6.8 percent. The program allocates significant funds to construction, with 124.1 billion rubles in 2029 designated for the Unified Customer in Construction, while 60 billion rubles annually will restore communal infrastructure through the Territorial Development Fund, and 30 billion for administrative and security-agency building maintenance.

Despite declines in the program's budget, the proposal underscores Russia's commitment to maintaining a dedicated funding stream for occupied territories. The government has also allocated emergency transfers for pension payments and utility enterprises in the affected regions. Additionally, Sberbank has opened its 32nd full-service office across the occupied regions, signaling a substantial physical presence but not directly correlating with widespread bank usage.

Russia's preferential mortgage program offers Russian citizens low-interest loans for housing in the occupied areas, further incentivizing settlement.