How Putin got trapped in endless war

The halt of the military-industrial complex will trigger a total economic crisis in Russia; on the other hand, further development of the defense industry is possible only by siphoning resources from healthcare, education, and the social sector.

First, about the trap. The Russian leader has become engrossed in war and plans to fight for the rest of his life, as reflected in the 2025 budget. Defense and national security expenditures will officially account for 40% of all federal spending - the highest level since the collapse of the USSR. For the first time since the fall of communism, military spending has surpassed social spending and is accelerating away.

The war industry has become the essence of the Russian economy. Russia's defense spending is unlikely to decrease in the coming years, and it's not just about the aggression against Ukraine: war has become a part of the country's economy. Military expenditures, along with social payments (salaries for soldiers and death benefits), have become the primary drivers of economic growth and household incomes. The military-industrial complex has turned out to be the only market capable of development.

Funding for the military complex is being extracted from education, healthcare, and social policies. Already, "at the request of the working people," belts are being tightened so the population consumes less food, drink, and more. For example, following the established Soviet propaganda practice, officials justify tax hikes on sugary products as an effort to "protect citizens' health."

The Russian leadership prioritizes military power over long-term economic stability. However, the resources Putin can gather are not limitless. By pouring more and more money into defense, the Kremlin exacerbates economic imbalance.

Two main limitations hang over Putin's economic strategy - a shrinking workforce and the burden of international sanctions. The Russian labor market is already facing difficulties. A shortage of workers will undermine the defense industry's ability to ramp up production, despite efforts to expand capacity.

Additionally, there is an "energy risk": as soon as global oil prices fall below $50 per barrel, Putin's economic magic will vanish.

This is the trap of perpetual war: it becomes increasingly difficult for the state to finance military actions in Ukraine without worsening the standard of living.

On the other hand, if military spending is reduced, it will inevitably lead to a significant structural shock, the recovery from which will take a long time. In any case, ordinary Russians will pay the price.

The conclusion is clear: the West must focus on a long-term strategy that further limits Putin's military machine and enhances Ukraine's economic resilience. By strengthening sanctions, Putin’s capabilities will be even more constrained.

Hidden inflation in Russia indicates that Western financial sanctions are far more effective than many observers believe. Russia cannot borrow money abroad and is forced to live solely on taxes and reserves, which are also dwindling. In 2021, the National Wealth Fund was at its peak, with $183 billion in its accounts. By March 2024, the fund’s reserves had decreased to $55 billion, with most of these funds already invested and not liquid.

The U.S. and the EU are making a major mistake by observing Putin’s supposed readiness for perpetual war: weighing their strengths and analyzing their values, Ukraine's Western partners conclude that "eternal war" is not feasible for them and thus entertain thoughts of a "permanent truce" with the Russian leader. Meanwhile, the world’s most developed countries should play on their own technological field - the field of sanctions. And they must play seriously, so that harmful thoughts do not cloud the minds of decision-makers.

Source

About the author. Orest Sokhar, journalist, editor-in-chief of Obozrevatel

The editors don't always share the opinions expressed by the blog authors.