Putin's Ambitious War Economy Preparation Faces Severe Risks
Moscow – For the first time, the Russian government under President Vladimir Putin is directing more funds towards military and security needs than social spending. Speaking at the 27th St. Petersburg International Economic Forum (SPIEF), Putin announced the expansion of Russia’s war economy, gearing up for what he suggests could be a decades-long commitment.
Vladimir Putin has escalated defense spending significantly, dedicating approximately €110 billion specifically to military purposes and an additional €34 billion for national security. This military expenditure now accounts for 38.6% of Russia's total budget and 8% of its GDP. Pyotr Fradkov, a prominent Russian economist, highlighted that the military-industrial complex is indeed becoming the backbone of the economy—though such dependence carries long-term risks that many in Russia are hesitant to acknowledge.
Despite Putin's assertions of economic resilience against Western sanctions, concerns about the Russian economy's robustness persist. The dramatic decrease in gas exports—exemplified by Gazprom's plummet from 174 billion cubic meters of natural gas exports to Europe in 2021 to just 28.3 billion cubic meters in 2023—reflects the sanctions' toll. This shortfall marks the first year since 1999 that Gazprom failed to make a profit, casting shadows over Russia’s purported economic stability.
Sanctions have also dealt blows to Russia's financial sector. The US has threatened stricter actions against institutions supporting Russia, leading Turkish, Emirati, and even Chinese banks to distance themselves. Vladislav Inozemtsev of the Moscow Center for the Study of Post-Industrial Societies commented on the challenges posed by sanctions, likening Russia’s economy to 'a closed steam boiler full of money,' as capital outflows have been practically halted.
Military Advancements and Recruitment Drive
Parallelly, Vladimir Putin has been emphasizing Russia's military advancements amid the ongoing Ukraine conflict. Addressing the Economic Forum, he noted the capture of 47 localities and effective control over 880 square kilometers in eastern and southern Ukraine. The Russian forces have reportedly improved their operational capabilities, bolstered by a 20% increase in projectile production and enhancements in aircraft and tank technology.
Since January 2024, over 160,000 individuals have enlisted in the Russian military. Recruitment efforts, propagated through social media and street posters, promise attractive terms to potential soldiers. This surge follows a partial mobilization in September 2022, which had driven many Russians to flee abroad. However, Putin affirmed that there are no current plans for another wave of mobilization.
In response to Western arms supplies to Ukraine, Putin has hinted at the possibility of Russia arming adversaries of NATO countries. While he clarified that there are no immediate plans to do so, the threat underscores the escalating geopolitical tensions. Moreover, he emphasized that all conflicts eventually end in peace agreements, asserting that Russia aims for conditions that align with its interests, suggesting an unwavering resolve to strive towards a conclusive victory.
- Putin has also claimed that Russia possesses a substantial nuclear arsenal, although he downplayed the likelihood of a nuclear conflict. Despite having weapons more powerful than those used by the US in Hiroshima and Nagasaki, Putin urged avoidance of discussions on nuclear war.
- Addressing Western countries, Putin accused them of deceit in handling negotiations, citing inconsistent actions contrary to their stated intentions. He reiterated Russia's stance of striving for victory and the necessity of achieving peace conditions favorable to Russian interests.
