Has Putin pushed Russia’s economy too far? | The Economist

Whereas Ukraine is fighting a war of. survival, Russia is fighting a war of. choice. So, let's look inside Russia at. that choice. And I think we start with. the casualties. And perhaps um Al Cardy, you can talk us through the chart that. we have here. I would say this is uh the war of. Putin's choice because I wouldn't say. this was the war of of the Russian. people's choice. Uh they never asked for. this war and we'll come back to that. And yet, yes, you see this extraordinary. uh figures uh which is. uh 10, you know, uh.

1.2 million casualties. Uh more than 300,000. uh death. That that's. um. you know, 20 times more if my my math is. right uh of what the Soviet Union. incurred in in Afghanistan. uh in in the 1980s. And that war was the. dread of the whole nation and it was. also hugely unpopular. I remember the. fear in Moscow of people being sent. Uh. you know, the protest um of the of the. mothers uh also in the Chechen war. So,

why we're not seeing his is is this here. given the losses? And here the answer is. this extraordinary, ingenious, evil, and. cynical way in which Putin chose to. prosecute this war. It's basically the. war fought by largely by mercenaries. He's disengaged the social and the moral. impact of this war from the most of the, you know, from most of the population. who feel, "Okay, well, this man have. decided to take the money. Um they've. gone into the war." Putin never managed.

to make it a great patriotic war, sort. of a genuine, you know, mobilization of. the nation. Partly because he knew this. was uh impossible. Partly because he. actually fears mobilization of that. kind. Everything needs to be controlled. So, he's come up with this idea of a. mercenary force which as I said. disengages people saying, "Okay, it's. happening somewhere there. This is the. man who've taken money. Fair enough, it's their choice." And they're not seen. as heroes. Adam, I think it's just worth. saying on the on the casualties there.

that the past two or three months have. been incredibly intense in in terms of. Russian losses. Um per month losing 30 to 35,000. soldiers is an remarkably high attrition. rate for any army to cope with. And as. Akardi says, mercenaries, these are. people who are recruited from the. distant rural parts of Russia. They're. not coming from Moscow. They're being. paid to come and do this fighting. They're not actually motivated. They're. not defending their country. They're not. sort of believing in their mission. They're doing it to make money. And then. they're seeing the cost of of what.

they're up to what the the threat of. what they're up against. Incredibly hard. for them to sustain it. >> And it's worth also adding that added to. the money is the sense of you have the. social status or you will have social. status as a patriotic and noble thing. It's an act of duty. So, the combination. of the money and the sense that, okay, this is. also covered by this. immunity and this sense of. of patriotism. I think also matters. But. that's why Russian infantry in such a. awful state because the man they.

basically take is just pure cannon. fodder which they throw. They fight this. war by throwing masses. >> I mean, as you say, it's a clever idea. as you say, but it and it gets you the. ability to absorb that that number of. casualties. But at the same time it kind. of places a cap on how easily you can. you can really mobilize people. It's a. It seems to me a a sort of a limited but. successful way of approaching this war. Well, yeah, that's one way of putting. it. It is and it's also becoming. increasingly expensive. I mean, I I hate. having heard these casualty figures to. put things into dollars and cents, but.

it you know, to get these these people. to sign up now, the signing bonuses have. had to have risen a lot. I think it's. $32,000 now, the equivalent of a signing. bonus. That is taking up ever more. fiscal resources. The budget deficit is. about 2.6% of GDP which may not sound. too bad, but it is. The economy is. slowing, oil prices are low. Essentially, it's you know, Russia is. not facing a fiscal crisis, but the. squeeze from this is becoming ever. bigger and it's going to prove harder to.

lure these people. Presumably, Vladimir. Putin will have to pay ever more and. that will become an ever bigger fiscal. drag. So, I think there is a sort of. economic problem with trying to continue. this. It limits him, but it doesn't it. doesn't stop him recruiting people. You. can he can borrow, can he stop against a. hard constraint there? One of the. striking things about the Russian. economy is how resilient it has been. through this last four years. I mean, I. I remember when I in fact, three of us. were having these conversations at the. beginning of the war. Adam, you were. doing something else at that point and.

we were expecting that the sanctions. would essentially the Russian. economy very quickly and it didn't. They. didn't and the Russian economy did much. better than we were expecting. However, now I think you are beginning to see. very, very deep changes to this economy. It's not about to fit face, you know, macroeconomic collapse, but I do think. the fiscal is not sustainable and and. more deeply, the economy is changing. very dramatically because it's become. this war economy and we have a really. interesting piece in this week's issue.

by a Russian economist who was once at. the Russian Central Bank and she lays. out and she uses a brilliant metaphor. that it is like a a climber who gets. altitude sickness after what is it? 8,000 m you you go into the death zone. where essentially you are your body is. using its resources faster than it can. replace them and that's what's happening. to the Russian economy. All resources. are going to the war effort. The rest of. it is atrophying, is becoming, you know, ever more lawless. There is no labor for. it. Arkady sort of describes it.

extremely well in a briefing that he's. put together for this week's issue. and it's not and Arkady, tell me if you. disagree, but I when reading your. briefing, I didn't think that this was. an economy that was about to collapse. tomorrow morning, but it was an economy. that is fundamentally changing and. weakening in a way that will actually be. irreversible and possibly irreparable. Yes, I think that's right. I think it's. kind of eating its own future. I mean, what's changed is that in the. first 2 years of the war when they were. throwing money at it, which was coming.

from oil and gas revenues, it could. actually do both things, finance the. military industrial sector and the war. and keep the living standards pretty. much at the same time, not getting into. people's pockets too much. It can't do. that anymore. So, this is the economy. that in order to continue spending on. the military and on the war, they have. to extract money now not just from the. ground, but from the people, from. investment, from its future. So, it's a. kind of a mortgaged war, if you like, and it is consuming itself. And this is. why Russia is struggling to replenish.

the troops. This is also why it's changing this. equilibrium which was there. So, no, Russian economy I don't think is about. to collapse or or politics is not going. to collapse, but this equilibrium is. changing and it moves Russia into really. unstable and I would say uncharted. territory where every step he takes to. expand power basically leads to the. decline of power.