Photo: Reuters
Russia’s high military spending threatens to overheat the economy, but Moscow still has the resources to continue the war despite Western sanctions. This was reported by the Washington Post, citing Russian economists, including Vladislav Inozemtsev, a fellow at the European Centre for Analysis and Strategy. According to the analyst, thanks to oil export revenues, Russia can finance the war against Ukraine for another one to three years, although this requires serious cuts in other areas of the economy.
Despite oil revenues, inflation in Russia is rising, and production capacity is almost exhausted. The head of the Central Bank of Russia, Elvira Nabiullina, said that maintaining high interest rates for a long period of time could help fight inflation, but the results have not yet met expectations.
In addition, the Russian economy is facing a labour shortage. According to a survey conducted by the Russian Union of Industrialists and Entrepreneurs in October, 83% of businesses are experiencing difficulties in finding staff. In particular, there is a shortage of bus drivers in Siberia, and farms are paying milkmaids salaries similar to those typically received by IT workers to keep them employed. The hotel sector is short of waiters, cleaners and cooks.
Against the backdrop of financial and resource constraints, Putin may have to cut social spending, including on education, healthcare and infrastructure, to finance the war. However, Russia’s military-industrial complex is not capable of producing modern weapons, limiting itself to producing primitive equipment in large volumes.
