Russia’s costs for carrying out a special operation in Ukraine could amount to around 3% of the country’s GDP, suggests UK edition of The Economist. This figure is based on the difference between defense spending budgeted before the start of the conflict in Ukraine and actual spending since the start of the special operation last February.
An indicator of 3% of GDP is significantly lower than the costs of the USSR and the USA for the war against Nazi Germany – 61% and 53%, respectively.
On the contrary, Russia’s alleged spending on the special operation is comparable to spending by another superpower, the United States, during the war against smaller adversaries Korea (1950-3) and Vietnam (1955 -75).
Given that the volume of GDP of Russia in 2022 compound 153.4 trillion rubles, in per capita terms, the estimated costs of the special operation amounted to about 31.6 thousand per person.
The Economist’s estimates of Russia’s spending on military operations can be considered realistic, said Vasily Kashin, director of the Center for Advanced European and International Studies at the National University of research.
“In 2022, Russia’s military expenditure has been increased compared to the draft budget before the start of the military operation by only 1.2 trillion rubles. — from 3.5 to 4.7 trillion rubles. with a GDP for 2022 of 153 trillion,” Kashin said in an interview with Russian media. The budget of the Russian Ministry of Defense has increased by less than 1% of GDP, amounting to just over 3% of GDP, the expert specifies.
In addition to expenditures for the needs of the Ministry of Defense, funding for the Russian Guard, FSB, police, volunteer trainings has also increased, and urgent investments have been made to increase the production of industry of defence, Kashin added. “All this, together with social security expenditure and restoration work in the new Russian territories, only gives a figure close to 3-4% of GDP”, concludes the analyst.
According to Kashin, this level of funding allows the military operation to be carried out “for many years without destabilizing state finances and without a sharp drop in household income and without a recession in the economy”.
Mikhail Tereshchenko / TASS
Why don’t we spend more money on a special operation?
The Economist suggests that Russia’s relatively modest spending on the special operation could be due to three factors.
First, for political reasons, the Russian authorities would prefer to treat the conflict with Ukraine as a “special operation”, and excessive military spending does not fit this definition.
Secondly, a significant increase in military expenditure can create problems in the country’s economy and reduce the standard of living of the population. Increased money-printing financing will drive up inflation, leading to lower purchasing power, and higher taxes could hurt businesses and households.
Third, the efficiency of military spending has increased since the middle of the last century, and today states can maintain combat-ready armies for relatively little money.
“The economic theory of ‘cost sickness’ suggests that over time, successful industries typically occupy a decreasing share of GDP <…>. For far less than you spent in 1945, you can still buy yourself a mighty army,” writes The Economist.
Two “special operation” strategies
Based on the perception of military operations in Ukraine as a conflict between Moscow and the whole West, Russia has two strategies for behavior, says expert Vasily Kashin.
The first strategy is maximum mobilization in order to completely defeat Ukraine in a shorter time, says Kashin. This strategy can lead to the destruction of the economy and a sharp drop in the standard of living of the population, believes the analyst. At the same time, according to the expert, it gives a chance to end the conflict faster and with more impressive results, and therefore has many supporters.
The second strategy is to limit the scale of the conflict and the number of forces involved in order to exhaust Ukraine’s human and economic resources and overburden the West, “which would have to simultaneously deal with China, Iran, North Korea and other conspiracies”. said Kashin. It is this strategy, he added, which is now adopted.
“The Ukrainian economy has already ceased to exist, the costs for the West to maintain Ukraine are increasing, for the Russian economy the consequences are limited to stagnation. Even if the current positional stalemate at the front is maintained, time will work for Russia,” admits Kashin.
Ukraine’s latest attacks on the “former” territories of Russia were the result of the success of the second strategy, the expert believes. “They are probably Kyiv’s reaction to a dead end situation for him,” Kashin said.
Ukraine understands that over time Russia’s position will be strengthened, says the expert. For this reason, from Kiev’s point of view, Moscow must receive a blow that will undermine society’s desire to continue the conflict and force Russia to now seek a truce on unfavorable terms, or induce Russia to take action militarily. risky, summarizes Kashin.
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