“Russia has strengthened its war economy and adapted to sanctions”

UA year after February 24, 2022, it seems that Vladimir Putin hopes to exhaust Ukraine’s resilience by prolonging the war. After all, Russia’s economy, population and military are larger than Ukraine’s. Moreover, Russia hopes that Western public opinion will grow weary of a protracted war and give Ukraine less support.

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Yes, Russia’s gross domestic product (GDP) has been affected by war and sanctions, but less than independent forecasts suggested last year. The IMF now estimates that Russia’s economy contracted by 2.2% in 2022 and is expected to grow by 0.3% in 2023 and 2.1% in 2024. Large oil and gas revenues in 2022 and reliance on fiscal policy enabled Russia to cushion the blow. In short, Russia’s economic base is not much weaker than a year ago.

However, according to British Defense Secretary Ben Wallace, until mid-December 2022 Russia has lost 4,500 armored vehicles, 63 aircraft, 70 helicopters, 150 drones, 12 ships and more than 600 artillery systems. . At the height of the invasion, Russia was firing around 20,000 artillery shells a day, according to US officials. As a result, Russia had to dedicate an increasing share of its economy to its defense industry. Military spending has thus been increased to at least 5% of GDP, or some 90 billion dollars (85 billion euros), perhaps more given the lack of budgetary transparency.

Reorientation of the economy

In addition, the Kremlin forced regional and local authorities to use their resources to equip newly recruited soldiers. Russia’s budget has gone from a 1% surplus to a 2% deficit, despite record oil and gas revenues. Early figures for 2023 indicate that Russia’s public finances are showing a larger deficit due to falling revenues, Russian oil being traded at a steep discount, and increased military spending. In other words, the Russian economy is now largely war-oriented. Ukraine’s military expenditure, 30 billion dollars, is therefore much lower than that of Russia. Yet two major factors improve Ukraine’s chances.

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First, the military commitment of the Western coalition amounted to 41 billion euros, according to December 2022 data from the Ukraine Support Tracker of the University of Kiel (Germany). Maintaining such a level of support is not a financial challenge – it represents around 0.1% of the GDP of the West’s top five arms suppliers – but rather a bureaucratic, logistical and political one when it comes to to increase the production of weapons and ammunition. Even a measured increase would allow Ukraine to significantly exceed Russian military production. Admittedly, the deliveries have not kept pace with the consumption of ammunition by Ukraine, but the West does not really need a war economy: it simply needs to solve its logistical… and political problems.

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