Russia's New Economy

“The Russian economy’s increasingly structural militarisation significantly complicates any efforts to end the war in Ukraine”

“Contrary to the expectations that economic constraints would hinder Russia’s capacity to sustain fighting, the spectre of economic collapse might push Vladimir Putin and his officials to double down on militarisation and seek further confrontation, even if aggression against Ukraine hits a standstill”

“Russia’s economy grew by 3.6 per cent in 2023 and is projected to expand by over 3 per cent in 2024”

“Russian authorities have praised themselves for their short-term success in avoiding a deep recession in 2022 and achieving subsequent strong growth. Much of this success relies on the expansion of the military-industrial complex”

“The delayed and imperfect introduction of the oil price cap has enabled Russia to bolster fiscal revenues and use them to stimulate the domestic economy”

“While export controls impede Russia’s military production and make it more expensive, they have not yet resulted in decisive choke points or disruptions in supply chains”

“Fiscal spending has focused on supporting war-related production. Direct military spending more than tripled to over $100bn (6 per cent of GDP) relative to the pre-2022 invasion of Ukraine. With over a quarter of Russia’s government expenditure hidden from the public, the actual war-related spending is likely to be substantially higher”

“Russia now boasts 6,000 military-industrial enterprises, a notable increase from the prewar figure of less than 2,000. These establishments collectively employ over 3.5mn individuals who operate round-the-clock, with three shifts and six-day workweeks becoming the norm”

“This heightened demand from the military sector, coupled with the loss of life resulting from the war, has propelled Russia’s unemployment rate to an all-time low of 2.8 per cent”

“Industrial output is also on the rise, propelled by sectors such as metal products, machine building and chemical production”

“regions that struggled for years to make ends meet are now experiencing a significant upturn due to the reorientation of production towards the war effort”

“the decision to support the war is no longer merely influenced by political rhetoric and propaganda; it is now also driven by pragmatism … the shift towards war-related activities is no longer merely a cyclical, short-term policy measure—it has become structural”