The White House has recently indicated that Russia has been reduced to a wartime economy, concentrating its production and labor on the manufacture of war materials and a so-called "war economy" as a result of comprehensive sanctions. The United States is convinced that this shift seriously weakens Russia's economic power. However, Russia** has not acknowledged that the country has entered a "wartime economic state", insisting that "the Russian economy is very resilient", and denying all claims about the wartime economy.
So the question arises: has Russia really entered a wartime economy after almost 700 days of the Russian-Ukrainian conflict?From current observations, in fact, Russia's economy has entered the wartime trajectory, and defense needs have become an absolute priority. However, since Russia has not declared war and does not recognize the conflict as "war", it is unlikely that the Kremlin will use the term "wartime economy".
Looking at macro data, according to the 2024 budget plan, which has been approved by Putin, defense spending exceeded social welfare spending for the first time, accounting for 29 percent of all budget spending4%, a year-on-year increase of 682%。In terms of GDP, Russia spent 8% of its GDP on the Russia-Ukraine conflict this year, compared to only 3% of GDP spent by the United States on Iraq in 20038%。Russia** expects GDP growth of more than 3% this year, however, it is undeniable that nearly a third of that growth comes from military spending.
Russia has been emphasizing the low domestic unemployment rate, which is currently only 29%。What remains unspoken, however, is that as a result of the expansion of the army and the increase in military production, a large number of laborers have moved into the non-social productive sector, while at the same time Russia's best intellectual resources are constantly being lost.
When it comes to military expansion, since the outbreak of the Russian-Ukrainian conflict, the Russian army has completed two rounds of military expansion. In August last year, Putin signed a decree increasing the total number of Russian troops from 1 million to 1.15 million. And on December 1 this year, the Russian army once again launched a new round of expansion, and the number increased to 1.32 million. This was followed by a skyrocketing increase in military spending. The minimum wage for all contract, mobilized and volunteer soldiers is 210,000 rubles per month, equivalent to 16,300 yuan. In addition, Russia plans to raise the salaries of military personnel and law enforcement officers by 4 next year5%。The decree stipulates that priority needs to be given to helping people participating in the "special military operation" to solve the housing problem. In the first 11 months of the year alone, 5 have been resolvedHousing problems for 60,000 military families, providing rent subsidies for 100,000 people in the amount of more than 73 billion rubles.
These figures may show on the surface that Russia** is soaring in terms of military spending and the welfare of its soldiers, but in reality there are some problems that cannot be reflected in the paper data. During Prigozhin's lifetime and before Strelkov was imprisoned, some sources revealed that there were non-payment of soldiers' salaries and withholding benefits in the rear. For example, fallen soldiers are often only registered as "missing", and the families of these missing soldiers will not receive the benefits they deserve.
From the point of view of industrial production, in October last year, Russia created a Coordination Committee of the Armed Forces, the main task of which is to "coordinate" rear enterprises and ensure that they give priority to meeting the various material needs of the front-line troops. According to data revealed by Defense Minister Sergei Shoigu, in order to meet the needs of the front, the production capacity of the Russian defense industry has increased by 2 times, switching to a "round-the-clock work mode", that is, the implementation of a system of 3 shifts 24 hours a day. Over the past year, the production of infantry armored vehicles has increased by 36 times, the production of tanks increased by 56 times, the production of drones and artillery shells has increased by 16 times respectively8 times and 175 times.
The combination of macroeconomic data and specific data on military production capacity is enough to prove that Russia has actually entered a wartime economy. It is worth mentioning that compared to the Soviet Union during World War II, Russia's wartime economy today is relatively small in size, scope, and execution.
Looking ahead, in order to support the wartime economy, Russia will increase its fiscal budget by 22% next year, while spending will increase by 16%, and the state budget will increase from 17 percent of GDP this year3% to 195%。On the one hand, Russia's international oil and gas revenue will account for 33% to 35% of total revenue in the next two years. On the other hand, Russia believes that with favorable geopolitical and battlefield changes, the West has exhausted the means of financial sanctions, the exchange rate of the ruble will stabilize, and the dollar-ruble exchange rate will remain at the level of 90-92.
Although these are based on the premise of optimism, the current international situation is unpredictable, and the battlefield situation is not one-sided. There is no guarantee that the situation will remain optimistic. Therefore, there is still great uncertainty about whether Russia's wartime economy will be able to sustain itself.