the Russian economy will start to suffer badly by next summer, approximately, and it will get harder and harder for Russia to mobilize enough soldiers for the war.It also fuels that notion that Ukraine has to agree to a peace deal soon because there’s no way that they can outlast Russia.
The war between Ukraine and Russia has turned into a war of attrition, which means that largely it has become a war of production. Both sides are losing capabilities in the fighting and they are struggling to replace those losses with new equipment from the factories.
And to sustain that effort, both Russia and Ukraine have transformed their economies into wartime economies where almost everything is directed toward the military and to supporting the military operations. And almost by definition, a wartime economy is not sustainable. You really want to win this war, so you spend more money than you have on producing military equipment. and then you hope that you will win the war before the economy breaks down. And the way that Russia is running its wartime economy is essentially by financing it through using the savings.
the government is pumping all this money into society by making these huge investments in the defense industry. So the inflation is going up because the government is making investments that essentially are financially irresponsible. And then second, there is a labor shortage. So unemployment in Russia is very low and the Russian military is then, according to their own numbers, they’re recruiting about 30,000 new soldiers every month.
these are Russian men that are taken from the labor force and are being sent to the front lines to attack Ukraine. And this is creating a labor shortage in the rest of the Russian society. including in the factories where they produce the equipment that the military uses for the military operations.
And in September, it has been increased again to 19 percent. And the purpose is to try to decrease or to reduce the economic activity in society by making it less attractive to make investments. But it’s really quite a hopeless project when the government then keeps making these enormous investments in the defense industry at the same time.
Russia the inflation is about seven to 8%. But that figure covers that there are significant differences between different types of products. military equipment, it is purchased by the government and it is purchased in the defense industry and it is bought at fixed prices.
But for consumer products like food and other household items, then there will be much bigger price increases. that covers out to maybe 7% to 8%, but it’s much more on those things that you actually buy in the households. many Russians actually don’t feel the negative economic consequences as a result of the war.
Because all that money that the government is pumping into the defense industry and into the war effort, It means that many Russians have experienced that the salary is increasing and that they’re making more money than they did before.
But the thing is that this is not a sustainable way to run an army in a long war of attrition because you can’t just keep doubling or tripling the bonuses every few months because that is pushing the wages up, not only for military service, but across all of society, including the other sectors, where they also have to increase the salaries because they need to compete with the military over labor.
Then ordinary Russians will feel the consequences of the unhealthy economy. on a much more direct and personal level because the prices will keep going up due to the inflation, but they will be forced into doing military services without getting the bonuses or the high salaries that can then compensate for the inflation.
it’s an unhealthy and it’s an unsustainable way to run the economy of a country. the signs that the Russian economy is approaching this tipping point where the negative consequences of this policy of just throwing more money into the society are beginning to become visible .
the Russian defense industry sent equipment to Ukraine, then only a small part of that is brand new equipment. A very large portion of that is old Soviet equipment that they have been having in various facilities stored away for decades. And then when they need a new tank or a B&P, then they go into those stockpiles and they take an old one and they make some modifications to it. They get it up and running again. And it works quite well in Ukraine.
But the problem is that eventually you run out of old equipment from the stockpiles and then you don’t have any more that you can refurbish. And once that happens, then you have to produce only brand new equipment. And that requires more resources.
So there are estimates that about 80 percent of the equipment that Russia uses in Ukraine today is old stuff that they have taken from the stockpiles. So 20 percent is brand new. And some of the resources that is current .
Budanov is right in his assessment that Russia will have to try to win the war in 2025 or in the beginning of 2026 at the latest, because once we get beyond that point, then the Russian wartime economy will no longer be able to sustain the war effort at the current level. And that also means that ultimately it is a political choice in the West whether we want Ukraine to win the war or not.
if we keep the level of support for Ukraine high, then I don’t see how Russia will be able to prevail. The Western economies are not running as a wartime economy. In fact, the way we run our economy in the Western countries is absolutely sustainable. So we can keep this level of support for Ukraine indefinitely if we want to. But of course, there is that variable of political will. The Western support will have to remain high because if it suddenly drops for one reason or another, we might find ourselves in a situation where it’s the Ukrainian wartime economy that then suddenly crashes first.
