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World News | How Russia pivoted to a wartime economy in the face of international sanctions


Streaks of light seen in California. (Image source: video capture)

LONDON, June 8 (Dialogue) As Russian advances in Ukraine have stalled, causing huge material and human losses, the frustrated head of Wagnerian mercenary Yevgeny Prigozhin has called on Russia to switch to an all-out war economy:

The Kremlin must announce a new wave of mobilization to call in more fighters, declare martial law and force “everyone” to participate in the production of ammunition in the country. We must stop building new roads and infrastructure and work only for war.

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His words echoed similar sentiments expressed by Margarita Simonyan, head of Russia’s state broadcaster RT — a key supporter of Russian President Vladimir Putin — recently express:

Our people risk their lives every day. We sit at home. If our industry isn’t keeping up, let’s all hurry up! ask anyone. Aren’t we all ready to help out two hours after get off work?

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Russia has faced Western sanctions and had to adapt to a series of increasingly severe economic penalties since it annexed Crimea in 2014 and seized territory in Ukraine’s eastern province. And, while Putin clearly planned a relatively short “special military operation,” the conflict has become a protracted and costly war of attrition.

The Economist estimates Russia’s annual military spending at 5 trillion rubles (£49bn), or 3% of its gross domestic product, a figure it says is “minimal” compared with what it spent during World War II. Other estimates are higher – the German Council on Foreign Relations (GDP) puts it at $90bn (£72bn), or closer to 5% of GDP.

But international sanctions have hit the economy hard. They affect access to international markets and the ability to acquire foreign exchange and products. The speed at which Russian forces use equipment and ammunition has put pressure on the country’s defense industry.

The Kremlin thus faces a choice: massively intensify the war effort to achieve a decisive breakthrough, or continue the war of attrition. The latter aims to outlast Ukraine, hoping international support falters in the face of a global cost of living crisis.

equipment shortage

Russia lost a lot of weapons and ammunition. In March 2023, British Armed Forces Minister James Heappey estimated that Russia had lost 1,900 main battle tanks, 3,300 other armored fighting vehicles, 73 manned fixed-wing aircraft, hundreds of unmanned aerial vehicles (UAVs) of various types , 78 helicopters, 550 tube artillery systems, 190 rocket launchers and 8 naval vessels.

Russia must address several important military-industrial challenges. For one, its high-tech precision-guided weapons require access to foreign technology.

This is not available right now – or is limited to sanctions-violating deals that only provide a fraction of what is needed. Most of the high-tech electronic components used by the Russian military are produced by American companies.

So it has to replace these components with low-grade domestic components, which is probably why the Russian military rarely uses its high-tech weapons. But the shells it depends on are running out.

The Center for Security and International Studies, a US think tank, reported that US intelligence estimates that since February 2022, export controls have reduced Russia’s ability to replace more than 6,000 pieces of military equipment. Sanctions have also shut down production at major defense industrial facilities and caused shortages of key components such as tanks and aircraft.

Make do, tinker—and spend

There are clear signs that efforts are being stepped up to address shortages. Dmitry Medvedev, deputy chairman of Russia’s Security Council, recently announced plans to produce 1,500 modern tanks by 2023, The Economist reported. Russia’s TASS news agency recently reported that Medvedev also plans to oversee the mass production of drones.

The government is reportedly extending large loans to arms manufacturers and even issuing orders to banks to do the same. Official statistics show that output of “finished metal” was 20 percent higher in January and February than in the previous year.

GDPP reported in February: “As of January 2023, several Russian arms factories operate three shifts, 6 or 7 days a week, and offer competitive salaries. production of those weapon systems that are still capable of being manufactured.”

So the Kremlin appears to be playing a delicate balancing act, reallocating massive resources to the military and related industries while minimizing disruption to the broader economy, which could otherwise lose much of its popular support.

The IMF expects the Russian economy to grow by 0.7% this year (which would outpace the UK’s projected growth of 0.4%). This will be largely supported by hydrocarbon export revenues and arms sales to various client states happy to defy Western sanctions.

Meanwhile, diversification of import sources has kept stores well stocked. However, Russian pollster Romir reported that while most people were not concerned about the absence of sanctioned goods, about half complained about the reduced quality of alternatives.

As a result, ordinary Russians—those who have not been bereaved in battle or exiled—remain relatively optimistic about everyday life. But a longer, more intense conflict that would require a shift to an all-out war economy might be something else entirely. (dialogue)

(This is an unedited and auto-generated story from a Syndicated News feed, the content body may not have been modified or edited by LatestLY staff)


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