By Xhabir Deralla
We are witnessing the paradox between the unyielding resilience of the Russian war economy and the unserious approach of the West in the fight for a stable and just world. Have profit and interests overshadowed the need for peace? How does the relentless machine of Russia’s war economy keep turning, despite heavy losses and sanctions? And what role does Western inaction play in this brutal equation?How do economic interests, politics, and power games affect the lives of millions? How do these forces influence the course of the war, and how can global society choose a better future? Let’s explore, or at least scratch below the surface of, the dark intersection of profit, geopolitical hesitation, and the brutal realities of war.
We must confront the facts. The economic restructuring of Russia has created an adaptive model within its war economy—a change that can withstand Western attempts to curb the Russian war machine, unless it is countered with more serious and consistent sanctions and other measures. Recently, I have critically reflected multiple times on the indecisiveness of the West, but this has often pertained to political hesitation. However, wavering and ineffectiveness, as well as disunity, are not the only factors that enable Putin to continue his bloody campaign against Ukraine and wage a hybrid war against democracy elsewhere in the world. We must open our eyes to the scandalous fact that corporate lobbying and economic and legal loopholes in democratic countries in the West shed new light on the situation, questioning the integrity and credibility of the West.
If we analyze the Russian war economy, we must look beyond the propaganda screens and perceive the fragility of Putin’s strategy. He constantly treads the fine line between short-term resilience and long-term sustainability. Neither side is faring well for him, except when aided by his allies, the “neutrals,” and, unfortunately, the West itself. It must be understood that the costs of the Russian war economy are devastating for Russia, despite the fact that some simply want to see only what is visible on the surface—that is, to believe in the propaganda and the high profits.
Instead of Crumbling and Causing Collapse, as Was Widely Assured in Europe and the World After Sanctions Were Imposed on the Kremlin, the Russian Economy Is Mobilized and Even Records Growth.
Recently, The Washington Post published an analysis claiming that the Russian economy is so energized after restructuring into a war economy that it faces the danger of “overheating.” What does this mean? Analysts find the answer in the fact of enormous military expenses, including high payouts for soldiers, which have led to economic growth. At the same time, there has been a huge jump in wages, as well as inflation. On the other hand, companies are forced to “counter” military wages to attract workers.
After nearly three years of fierce war against Ukraine and opening hybrid fronts against the West, Russia shows signs of resilience that contradict the predictions of Western political elites from two years ago. It is revealed that Russia, with this “economic momentum,” can afford to finance the war against Ukraine for another two or more years. One of the main reasons that help the Kremlin survive in the war is the enormous oil revenues on one hand and the failure of the sanctions imposed by the West. For example, the attempt to strike against the Russian economy by limiting oil prices (price cap) has failed. That measure came too late and does not yield the expected results.
The aforementioned analysis notes that the Russian economy, however, is “overheating,” meaning it cannot withstand the ambitious military demands from the economy as a whole, partly due to Putin’s need to continuously replace 20,000 soldiers who are killed or wounded on a monthly basis, as reported by the Institute for the Study of War in June. This causes wage mobilization. To “feed” the front where mass casualties occur, Russian generals need soldiers, so the authorities offer large sums to go to the front. Thus, Russian regional governors pay unheard-of bonuses to soldiers, with Belgorod recently breaking the record with a bonus of $31,200, Washington Post reported.
The result of Putin’s war economy is, reportedly, almost full employment in Russia and skyrocketing wages. But despite this, the workforce is by no means unlimited, and economic capacities are being pushed to the maximum. This could lead to stagflation—a sharp spike in prices and a decline in production, which may be followed by a deep recession. This was also warned by the governor of the Central Bank of Russia, Elvira Nabiullina, who is making maximum efforts to ensure sufficient financing for continuing the bloody war against Ukraine.
On the other hand, when looking at Putin’s economic priorities outlined in the budget strategy, one can conclude that the Russian dictator is more than overconfident in his projections. His budget strategy forecasts military and security spending to reach $142 billion by 2025. This means a staggering 40% of total budget expenditures, or more than 8% of gross domestic product. He anticipates high percentages for “investing” in the war in both 2026 and 2027. There is no need for further comments—Putin is determined to continue and, very likely, to expand the war. But what do the reports and economic analysts I spoke with recently say—do Putin’s projections align with reality?
For example, there are no longer enough men to drive buses. On Russian farms, women milking cows have salaries comparable to those of professionals in the information industry. Hotels and restaurants struggle to find waiters, cleaners, and cooks. There aren’t enough workers in factories.
Half-jokingly, it can be said that Western sanctions against Russian oligarchs are functioning, but in a different way than planned. Salaries in the military skyrocketed. This forces business owners in other sectors to compete with the war-designed economy and pay their workers more. As a result, they profit less. The difference goes into the endless maw of violence in Putin’s aggressive war against Ukraine and democracy.
Economic analysts claim that the real inflation in Russia is much higher than what official statistics indicate. The Stockholm Institute of Transition Economics (SITE), which is part of the Stockholm School of Economics. In September, SITE launched “The Russian Economy in the Fog of War”, a report that raised doubts about the credibility of Russian official inflation data.
“Key economic indicators such as inflation and real GDP growth should be treated with a significant degree of care and official numbers of these variables should not be cited without an explicit warning that they are part of the Russian propaganda narrative,” the report asserted.
However, there is another dimension to this story that seems even more concerning than all the others. Russia’s capacity to wage war for years is a consequence of the failure of Western sanctions. In addition to the lack of unity in the EU and hesitance among some Western nations, there are increasingly frequent discoveries of lobbying by large corporations “behind the scenes,” as well as a lack of political will.
The shocking revelation by Robin Brooks from the Brookings Institution – as quoted by Washington Post – states that “shortly after the invasion, Germany and several other major European nations, including Italy, Spain, the Czech Republic, Poland, and Austria, began to send huge quantities of goods through Turkey and Russia’s neighbors, including Kazakhstan, Kyrgyzstan, Georgia, and Armenia, clearly intended for Russia.”
Brooks claims that the West could also reduce Russia’s oil revenues by imposing sanctions on more Russian tankers, including against its shadow fleet used to transport 45% of Russian oil.
The Kremlin, Beijing, and other autocratic and dictatorial regimes interpret this as a weakness and unseriousness on the part of the West. Specifically, over these three years, if not much earlier, it has become evident that the West, from companies to certain political elites, has one single priority—quick profit and high returns. Democratic values, long-term stability, peace, and freedom mean very little to them; in fact, they mean nothing at all.
In that spirit, although in a more measured tone, Erwan Fouere, an expert on European and security policies and a former top diplomat, speaks in an interview with Civil Media. “It is concerning that there has been some indecision among some Western allies regarding the continuation of support for Ukraine. I believe much stronger support is needed, not just military but also financial, for Ukraine to repel Russian aggression,” Fouere stated in an exclusive interview with Civil Media.
That sanctions are not working was evident as early as the first year of Russia’s aggression against Ukraine. This is corroborated by analyses from the beginning of 2023, nine months after the onset of the full-scale Russian invasion. “During the war, the Russian economy saw enormous gains. It should suffice to mention that Gazprom’s profits skyrocketed in 2022. Why? Among many other reasons, the EU calculated too long with the price cap on gas. Thus, looking at these figures, we can conclude that, in fact, Russia is doing exceptionally well, especially considering that it is waging an aggressive war,” states an analysis titled “Our Sanctions Are Working—Say the EU. Really?” published on Civil Media on January 9, 2023.
Russia’s imports and exports decreased by 20.8% and 12.3%, respectively, which initially pleased EU strategists at the beginning of 2023, as noted in the analysis. The EU predicted that the Russian economy would collapse and be forced to halt its military aggression against Ukraine, especially due to the sanctions. That did not happen.
However, the effect of the heavy losses of infantry, inflicted by Ukraine’s defenders, work better than sanctions. Russia’s aggression costs a lot, including soldiers that get killed or wounded in great numbers at the frontlines. There are labor supply constraints that heavily affect the Russian economy, regardless of the official reports from the Central Bank of Russia. These losses cause “macroeconomic imbalances and the potential for medium-term growth”, the SITE report asserted.
“As the economy is working at its potential, the massive fiscal stimulus from the war economy will mostly result in wage inflation and even higher interest rates from the CBR. Such imbalances significantly undermine the short-term economic boost from fiscal stimulus and lead to negative consequences for long term real economic growth. The quality of human capital is also affected, as those feeling most threatened by conscription are the young, and the young and educated are the most internationally mobile group of the workforce”, SITE reports.
Thus, the historic responsibility to end Russia’s brutal aggression and threat to global peace once again rests squarely on the shoulders of Ukraine’s soldiers and civilians—the same civilians indiscriminately targeted by Russia’s terror. Those clinging to half-measures and cautious compromises may want to reconsider just who and what they’re defending. The cost of inaction has already been made clear, but for those still unsure, perhaps a second look is in order—lest democracy and freedom in Europe and beyond slip even further from their grasp.
As Ukrainian defenders bear the unimaginable cost, it’s time to question where democracy and freedom truly stand against the lure of profit.
🕊️ Is it enough to watch and wait? Or does a new commitment to global peace demand a stronger stance?
The views and opinions expressed herein are those of the author. Source: CIVIL TODAY
