Russia can finance war against Ukraine for several more years despite overheating economy – WP

The Washington Post (WP) has reported that the Kremlin's extensive spending on the war against Ukraine is pushing Russia's economy into overdrive, but it retains enough resources to sustain the war for another few years.

Source: The Washington Post

Details: The newspaper notes that heavy military spending, including high payments to the occupying military, has contributed to economic growth, as well as high wages and inflation, as companies are forced to match military salaries to attract workers.

"Russia can afford to fund its war on Ukraine for several more years, according to economists, because of massive oil revenue and Western sanctions failures, particularly the oil price cap put in place by the Group of Seven nations, which has failed to squeeze Russia’s oil income," the newspaper said.

The country's economy is overheating partly because Vladimir Putin seeks to replace approximately 20,000 soldiers lost monthly in the ongoing war, based on data from the Institute for the Study of War in June. Regional governors have been offering unprecedented recruitment bonuses to attract personnel, with Belgorod Oblast recently setting a new high, paying out US$31,200 (RUB 3 million).

Rising military salaries are driving rapid wage growth in Russia, putting significant pressure on private companies that are struggling to keep up. A recent survey by the Russian Union of Industrialists and Entrepreneurs found that 82.8% of firms are facing challenges in hiring staff. Meanwhile, Russia's Federal State Statistics Service (Rosstat) reported a drop in the unemployment rate to 2.4% as of June.

The newspaper cites an example of a job advert for a Snickers chocolate bar packer with a salary of US$4,100 per month – significantly above the national average of US$763 in 2023.

Rosstat reports that real wages in Russia rose by 12.9% year-on-year during the first half of 2024, though independent analysts have raised doubts about these figures. Notably, the lowest-paid workers experienced the most significant increase, with a surge of 67%, as reported by the independent Russian newspaper The Bell in March.

Putin's ally and one of Russia's largest agricultural oligarchs, Alexander Tkachev, recently lamented the high salaries of dairy farmers, who once received small wages and now demand a monthly salary of US$1,550.

The newspaper reports that Siberia is facing a shortage of male bus drivers, leading to closed routes and lengthy queues, as drivers in the military can earn significantly higher wages – up to twice as much. In response to this personnel crisis, Sergei Kuznetsov, the head of the small Siberian city of Novokuznetsk, has suggested forming a "women's battalion" of bus drivers to address the shortage.

In the past, Russia relied on Central Asian migrants to fill low-income jobs; however, following a terrorist attack at the Crocus City Hall shopping centre, the country deported tens of thousands of these workers and imposed entry bans on many others. Reports from independent Russian media indicate that a significant number of migrant workers were also conscripted to fight in the war.

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