Russia’s economic survival hinges on prolonging the Ukraine war, think tank expert says

  • Russia needs to keep its war with Ukraine going or risk an economic hard landing, Elina Ribakova wrote for the Financial Times.
  • The country’s military industry has been a major driver of structural economic strength during the war.
  • If the conflict ends, a recession could unfold, adding pressure on the Kremlin, Ribakova said.

Russia has seen strong growth lately, but the fate of the nation’s economy hangs on whether it can keep militarizing — something only accomplished by keeping the Ukraine war going, a think-tank analyst wrote in the Financial Times.

According to the International Monetary Fund, Russia’s GDP is set to considerably outpace other Western economies this year, forecasted to grow 3.2%. But while this may look good on paper, the country is actually at risk of a hard landing if war efforts cease, Elina Ribakova said.

“Contrary to the expectations that economic constraints would hinder Russia’s capacity to sustain fighting, the specter of economic collapse might push Vladimir Putin and his officials to double down on militarization and seek further confrontation, even if aggression against Ukraine hits a standstill,” the Peterson Institute for International Economics analyst said. 

Since Moscow’s Ukraine invasion in 2022, its economic success is chiefly thanks to military-industrial expansions, heavily bolstered by fiscal support from the Kremlin.

According to the senior fellow, direct military spending has more tripled since the war’s start, now accounting for 6% of GDP. That number is likely to be much higher, she said, as a large portion of government expenditures are not publicly known.

That’s brought profit to regions that have struggled for years, and are now seeing huge upside from the production shift. Local governments are reporting a surge in jobs, production facilities, and enterprises, Ribakova cited.

In total, military-industrial establishments have exploded across the country, rising from 2,000 to 6,000 in the war’s timeframe. These employ more than 3.5 million workers.

At this point, the pivot towards war-based growth is structural, and aggression needs to keep up to preserve the economy, she said.

“Reversing the structural investments made in the war will present a monumental challenge. For decades,” Ribakova wrote. “Russia has struggled with under-investment and regional inequality, with only a handful of primarily commodity-producing regions being the net contributors to the budget transfer system.”

If hostilities were to end, a Russian recession isn’t unlikely. To avoid such a conflict at home, this only incentivizes Moscow to keep its fight going:

“Should the authorities attempt to halt militarisation, a hard landing could add pressure to the government, which already resorts to oppression to maintain power,” she wrote. “Internal conflicts over limited resources may also intensify.”

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