Has Putin pushed Russia’s economy too far? | The Economist

Key Concepts

• Casualties & Attrition: High Russian military losses, exceeding those of the Soviet-Afghan War.
• Mercenary Warfare: Russia’s reliance on mercenary forces (particularly recruited from rural areas) to minimize societal impact and avoid full mobilization.
• Fiscal Strain: Increasing economic pressure on Russia due to war expenditure, declining oil prices, and rising recruitment bonuses.
• War Economy & Atrophy: Transformation of the Russian economy into a war economy, leading to the decline of non-military sectors and long-term economic weakening.
• “Death Zone” Analogy: The Russian economy is likened to a climber in the “death zone” – consuming resources faster than they can be replenished.
• Mortgaged War: The war is being financed by sacrificing future economic growth and investment.

Russia’s War in Ukraine: A Choice and its Consequences

The discussion centers on the premise that Russia’s involvement in Ukraine is a “war of choice,” initiated by Vladimir Putin, distinct from a war of survival for Ukraine. The core argument revolves around how Putin has strategically chosen to prosecute this war, specifically focusing on minimizing domestic impact through the extensive use of mercenary forces and the resulting economic consequences.

1. The Human Cost: Casualties and Mercenary Reliance

The scale of Russian casualties is presented as extraordinarily high, estimated at 1.2 to 1.3 million casualties, including over 300,000 deaths. This figure is described as “20 times more” than the Soviet Union’s losses in the 1980s Afghan war, a conflict that generated significant national dread and protest.

The key to understanding why widespread public dissent isn’t occurring, despite these losses, lies in Putin’s strategy of employing mercenaries. These forces are largely recruited from distant, rural areas of Russia, motivated primarily by financial incentives – currently around $32,000 as a signing bonus – and a perceived (but limited) social status. They are not presented as defending the homeland, but rather as individuals making a financial choice, thus distancing the war’s impact from the broader population. This approach effectively disengages the social and moral consequences of the war for most Russians. The infantry is described as “pure cannon fodder,” deployed in massive numbers to absorb casualties.

2. Intensified Attrition Rates & Recruitment Challenges

Recent months (the past two to three) have seen particularly intense Russian losses, with 30,000 to 35,000 soldiers lost per month. This represents a remarkably high attrition rate, straining the army’s capacity to replenish its ranks. While recruitment continues, it is becoming increasingly expensive, requiring larger financial incentives. The combination of monetary rewards and a manufactured sense of patriotic duty are used to attract recruits, but the reliance on mercenaries inherently limits the potential for full mobilization.

3. Economic Strain and Fiscal Deficit

The war is placing a significant strain on the Russian economy. While the economy has proven surprisingly resilient in the initial years, largely due to oil and gas revenues, this is no longer sustainable. The current budget deficit stands at 2.6% of GDP, and the economy is slowing down due to low oil prices.

The discussion highlights a shift in funding sources: initially, the war was financed by oil and gas revenues without significantly impacting living standards. However, Russia is now forced to extract money not just from natural resources but also from its people, investment, and future growth – a “mortgaged war.” This is impacting Russia’s ability to replenish troops and is creating an unstable economic equilibrium.

4. The “Death Zone” Economy & Irreversible Weakening

The Russian economy is described as entering a “death zone,” analogous to a climber at high altitude where the body consumes resources faster than it can replenish them. All resources are being diverted to the war effort, leading to the atrophy of other sectors and a lack of labor.

A Russian economist’s metaphor is used to illustrate this point: the economy is fundamentally changing and weakening in a way that may be irreversible and irreparable. While a complete collapse is not imminent, the long-term consequences are severe. The economy is “eating its own future.”

5. Shifting Equilibrium and Uncharted Territory

The war is altering the existing economic equilibrium in Russia. Every attempt to expand power through military action leads to a corresponding decline in overall power. The initial ability to finance both the war and maintain living standards is diminishing. This shift pushes Russia into “uncharted territory,” characterized by instability and a precarious balance.

Notable Quote:

“It’s kind of eating its own future. …This is a mortgaged war if you like and it is consuming itself.” – Akadi (referring to the impact of the war on the Russian economy)

Technical Terms:

• Attrition Rate: The rate at which personnel are lost due to casualties, illness, or other reasons.
• Mercenary: A professional soldier hired to serve in a foreign army.
• Fiscal Deficit: The amount by which government spending exceeds government revenue.
• GDP (Gross Domestic Product): The total value of goods and services produced within a country's borders.
• Military-Industrial Sector: The industries involved in the production of military equipment and supplies.

Conclusion:

The discussion paints a picture of a Russian war effort sustained by a cynical and strategically calculated approach that prioritizes minimizing domestic disruption over genuine national mobilization. While the Russian economy has demonstrated initial resilience, it is now facing significant strain and undergoing a fundamental transformation into a war economy. This shift is characterized by unsustainable resource allocation, declining investment, and a long-term weakening of the economic foundation, ultimately creating a precarious and unstable future for Russia. The war, while a “choice” for Putin, is increasingly mortgaging Russia’s future.