Russia's economy is completely dominated by its war in Ukraine, so much that Moscow cannot afford either to win or lose the war, according to one European economist.
Renaud Foucart, a senior economics lecturer at Lancaster University, pointed to the dire economic situation facing Russia as the war in Ukraine wraps up its second year.
Russia's GDP grew 5.5% year-over-year over the third quarter of 2023, according to data from the Russian government. But most of that growth is being fueled by the nation's monster military spending, Foucart said, with plans for the Kremlin to spend a record 36.6 trillion rubles, or $386 billion on defense this year.
"Military pay, ammunition, tanks, planes, and compensation for dead and wounded soldiers, all contribute to the GDP figures. Put simply, the war against Ukraine is now the main driver of Russia's economic growth" Foucart said in an op-ed for The Conversation this week.
Other areas of Russia's economy are hurting as the war drags on. Moscow is slammed with a severe labor shortage, thanks to young professionals fleeing the country or being pulled into the conflict. The nation is now short around 5 million workers, according to one estimate, which is causing wages to soar.
Inflation is high at 7.4% — nearly double the 4% target of its central bank. Meanwhile, direct investment in the country has collapsed, falling around $8.7 billion in the first three quarters of 2023, per data from Russia's central bank.
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That all puts the Kremlin in a tough position, no matter the outcome of the war in Ukraine. Even if Russia wins, the nation can't afford to rebuild and secure Ukraine, due to the financial costs as well as the impact of remaining isolated from the rest of the global market.
Western nations have shunned trade with Russia since it invaded Ukraine in 2022, which economists have said could severely crimp Russia's long-term economic growth.
As long as it remains isolated, Russia's "best hope" is to become "entirely dependent" on China, one of its few remaining strategic allies, Foucart said.
Meanwhile, the costs of rebuilding its own nation are already "massive," he added, pointing to problems like broken infrastructure and social unrest in Russia.
"A protracted stalemate might be the only solution for Russia to avoid total economic collapse," Foucart wrote. "The Russian regime has no incentive to end the war and deal with that kind of economic reality. So it cannot afford to win the war, nor can it afford to lose it. Its economy is now entirely geared towards continuing a long and ever deadlier conflict."
Other economists have warned of trouble coming for Russia amid the toll of its war in Ukraine. Russia's economy will see significantly more degradation ahead, one London-based think tank recently warned, despite talk of Russia's resilience in the face of Western sanctions.
by Khabooem
24 comments
Can’t afford to win, can’t afford to loose, and can’t afford to keep fighting. That’s Russia.
What Foucart fails to note is that Ukraine is likely the richest country in Europe due to its expansive natural resources. If putin can take Ukraine, he profits far more than anything he spent, including rebuilding. putin is thinking he can take Ukraine and pay for everything with the resources he pulls out of the ground.
So the question is, how much will the russian citizens take before having enough?
Russia’s defeat in this war will not be solely on the battlefields of Ukraine. Once this war comes to an end, as all wars do, the Russian economy will likely collapse. If sanctions can be largely kept in place then Russia may weaken to the point where it breaks up as a single nation.
Given Russia’s history, I expect this would lead to a second Civil War. If this is what must happen to guarantee the security of western democracies then let it happen.
Psychotic dwarf has to go
The whole point of the invasion was to steal the people and industries of Ukraine to prop up the hollowed out rotten economy/society of Russia. Hopefully, failure in Ukraine has this gangrenous state and its puppets collapse entirely.
I mean I remember reading about how russias economy couldn’t sustain the war…now its reliant on the war…let’s be honest…we don’t know. Russias resilience has surprised us all as much as ukraines ability to kick ass.
Can’t fail if you also can’t succeed, big brain Russia.
Ppl keep talking about how Putin is smart. How is ruining his country’s economy smart? He is a moron.
It won’t be up to them once the materiel stockpiles run out.
This economist isn’t looking at the whole picture. He’s not doing his research. The liquidity in the russian economy is collapsing. Their gold reserves, National Reserves, and the amount of Yuan they have available has plummeted by about half this year alone. The demand for russian government bonds is cratering also. There isn’t enough money in oil and gas to make up for this bleeding. It is not going to be pretty but they will hit a liquidity wall where they won’t have any money to pay for anything. That’s when the fun will start.
With Europe weening itself off Russian oil, the post-war economic prospects are…not great. It will be years at least until Russia can sell the same volumes to Asia, and who’s to say at what price? And even if western sanctions were lifted on the first day of peace, it could also take years before Russian and western businesses are willing to engage with one another again across many sectors. Not to mention the unpredictable effect that reintroducing the ruble to free trade might have.
Well, I think this may explain trumps pronoucement of wanting to relieve sanctions on Russia.
Fuck Trump. Fuck Russia. They earned this
He really wants the Natural Gas/Oil Reserves off the Coast of Mariupol, Crimea, the Black Sea alll to himself, the whole area is Rich in Resources
Imagine how shit your economy must be when a devastating war that kills or maims hundreds of thousands of your most economically productive citizens is a huge benefit.
If Russia wins, then there will be NO SHORTAGE of investors waiting to go back to business as usual. The US in particular is so weak that I’m sure they’d lift the majority of the sanctions immediately.
Any article that quotes Russian GDP and economic figures loses me immediately, as no one outside Russia has audited or verified these figures since 2021, and there are numerous market indicators that tell a far darker story on Russia’s GDP, inflation, employment, military spending, etc.
Putin pulled the most evil of ponzi schemes ever.
I stopped reading after «payment to salaries, ammunition etc. Putin isn’t paying for anything. He needs soldiers, he takes from prisons and satellite countries, he needs ammo and trucks – he takes from N.K, China, belarus. Funny numbers, not so funny numbers….
Not to point out the obvious, but they can’t afford to continue the war in perpetuity either. They eventually will run out of manpower.
He fucked it up bigly
I think China supporting Russia is making Russia become like a drug dependent to China and will take advantage of it’s weakened state once Ukraine wins. Like concessions of gaining back it’s lost territories from the Russians and becoming the top communist state. China has nothing to lose and Russia deserves it. China would love to have Russia’s Oil and Gas to make it more independent.
EXCELLENT news
It’s like eating your own body to stay alive!