From Sanctions to Success: Russia’s Economic Triumph Amidst Conflict

by SIMPLICIUS THE THINKER

Today, we start with some economic news. There has been a spate of recent headlines decrying Russia’s economic elasticity and resilience:

 
Several outlets this week are crying woe because they’ve crunched the numbers and have concluded that Russia is spending a comparatively tiny amount on the war, and that the U.S.’s Brzeszinski Redux plan to pull Russia into another Afghanistan-like quagmire is not working.

 
The article goes on to state the following:

The direct fiscal cost of the war — spending on soldiers and machines — is estimated to be about 3% of Russia’s GDP, or roughly $67 billion a year, according to the report. That figure comes from a comparison of Moscow’s pre-invasion spending forecasts for defense and security with what it actually spent.  

By historical standards, the current war pales in comparison. The Soviet Union during World War II, for example, spent about 61% of GDP, and the US at the same time put about 50% of its GDP toward the conflict.

The headlines are all drawing from the same well of the Economist deep dive, which gives the following chart:

 
Their article begins thusly:

Since russia invaded Ukraine in February 2022 it has caused enormous damage. Thousands of people have died and billions of dollars’ worth of infrastructure has been destroyed in Ukraine. Yet all this damage has come at a relatively mild cost to Russia. As we have reported, its economy is holding up much better than almost anyone expected. And the direct fiscal cost of the war—what it is spending on men and machines—is surprisingly low.

What’s most interesting is that typically such articles would try desperately to find some ‘silver lining’ for their audience, expose some weakness by which Russia is actually being hurt despite these figures. But they were able to find nothing. The article gives reasons for why the expenditures are so low, which include:

Plus, the technology underpinning armed forces today is more advanced than ever, which means militaries require fewer people and machines for a war effort.

So they’re admitting that Russia’s armed forces are so advanced that they need to spend relatively little money in order to decimate all of NATO in Ukraine?

Their other reason does make a good point:

The second is economic. Russia would struggle to expand the war effort without costing its citizens dearly: printing money would spur inflation, eroding living standards; loading up banks with public debt might have a similar effect; tax rises or a big shift in public expenditure towards defence would also eat into personal incomes. This is a problem for Vladimir Putin, who has presidential elections in 2024. Mr Putin’s victory seems certain, but he does not want the potential embarrassment of large demonstrations, as happened for example in legislative elections in 2011. “Of course, national defence is the top priority,” he said recently, “but in resolving strategic tasks in this area, we should not repeat the mistakes of the past and should not destroy our own economy.”

They attempt to frame this economic decision by Putin as something bad, yet clearly they’re tacitly agreeing with the wisdom of the decision, as they themselves state that the war is costing very little and Russia’s economy is balanced and unharmed. So where’s the rub?

All they could find to gloat about was that Russia incurred many sanctions and lost energy dominance in Europe. But does it look like Russia is the worse for wear on that account?

 
The quote at the end is interesting as well. It gives insight into many of the things we’ve discussed before, that Putin’s decisions around the SMO are tuned towards keeping the Russian economy strong as the primary concern. Some will balk and say, ‘well doesn’t he care about the lives of Russian servicemen, Donbass civilians, etc.! By slow-walking the war while privileging the economy, he’s causing more suffering and harm to the people!’

And it’s a fair point, it really is. Nothing in war is black and white, as I constantly remind you. There is no one perfect, silver bullet decision. Sure, Putin’s decisions have ramifications that are negative. But the overall positive likely outweighs them, in the long run at least. People who focus on the short term now are often incapable of projecting conflicts and geopolitical imperatives into the distant future. The truth is, making Russia economically powerful can bring far less overall harm and suffering in a grander, long-term timeline, but you have to take off your blinders to be able to see such a ‘gestalt’ perspective.

Putin is preparing Russia for the long term plans that the West/NATO have in store for it, most people simply can’t extrapolate that far because they don’t have the facts or experience necessary to see what’s happening on the ground. It’s clear that NATO is preparing much wider wars for Russia. They are setting the stage for a variety of conflicts to engulf the Russian borders with all neighboring hostile states. From Lithuania and Latvia to Poland (Kaliningrad provocations) to Kazakhstan, Georgia, and many more. This Ukraine conflict is just another small step in a much grander design. Putin is slowly and correctly developing Russia’s economic engine to withstand those future much more pernicious conflicts.

As evidence of this, news from yesterday has updated us on some of Russia’s grander developments for its armed forces:

Russia says it will form two new military districts and two armies this year. This was announced by Deputy Chief of the General Staff of the Russian Federation

The districts are Moscow and Leningrad, and Defense Minister Shoigu announced their formation back in December.

As for the armies, one will be combined arms, the second air assault,

It is also planned to create an army corps, the Azov naval region and the formation of five new divisions and 26 brigades.

According to Western experts, on the formation of two new armies and two military districts in Russia, the production of the necessary new equipment and the training of personnel are almost complete.

Under the leadership of the new Stavka, the Russian Army aims to return to the principle of active attack, and the concept of active defense moves to the second plan.

According to the principle of the Soviet shock army, a much more numerous and well-equipped new structure, suitable for deep breakthrough operations, is being formed.

So, Russia is forming, by some accounts, two huge new army corps and two entire new military districts, which is big news. This is part of Russia’s continued expansion under Shoigu’s directives to increase the total ground forces by something like 300k troops to a standard professional contract force of 600-700k ground troops.

This follows other rumored tidbits like the following:

‼️ 🇷🇺‼️ Something big is brewing – Russia pulls 3,000 more tanks out of storage – But not all of them are going to Ukraine‼️

This past weekend, starting last Friday, Russia pulled three thousand more tanks out of various warehouses and began loading them onto trains.

Not all of these trains go to Ukraine, some go to the western border regions of Russia.

Specifically, areas near Murmansk/Kola, not far from the Norway/Finland border, north/northwest of St. Petersburg, near Vyborg, which is not too far from the Finnish border ⚠️⚠️⚠️

Don’t mind the hysterical tone of the above, but the news would coincide with the planned creation of new military districts, one being the Leningrad zone, which is precisely on the Finnish border that the above post mentions.

The point is that, Russia is clearly preparing itself very calmly and methodically for much larger global conflicts on the horizon in the medium to long term future.

I hate to say it, but it’s looking more and more likely that the West will have no choice but to spark off a WW3 type scenario. The West is losing far too much ground far too fast, economically and by every other measure. Western economies are dying while Asia and China are ascendant. There are movements being made now that are so dangerous to the West as to threaten its existence. Months ago, when Brazil’s Lula had made a passive mention of a Brics currency, we all commented on it, but didn’t think too much of it. Now he’s outright calling for all South America to have its own currency; he’s doing what got Gaddafi killed by NATO.

 
The West’s time is running out for their ability to control the world. Their hegemony relied on the Western financial system and its tentacular grip on every developing country of the ‘global south’. But now they’re being bypassed and obsoleted. For instance, just last week it was announced that China’s UnionPay has surpassed VISA for the first time in total global transactions:

CHINA’S UnionPay surpassed Visa for the first time in 2022, securing 40.03 percent of global debit card transactions, China Media Group (CMG) reported on Sunday, citing latest statistics compiled by industry platform Nilson Report.

“Debit cards with the UnionPay brand held a market share of 40.03 percent of all debit card purchase transactions, an increase of 139 basis points (bps),” read the Nilson Report.

Visa’s share of debit card transactions was down 82 bps to 38.78 percent in 2022, ranking second to UnionPay, according to the report.

While these formative, gestational events shake the bedrock of the world, Putin remains disciplined while calmly prosecuting a war he’s winning with a tiny fraction of his country’s resources.

 
But I don’t want to alarm people too soon. I don’t think it’s yet written in stone that WW3 will in fact go down just because we are careening towards it. There’s still a decent amount of time left—particularly a few European election cycles—where I think the right political moves will stave off that outcome. But it will have to come down to citizens’ movements slowly throwing out their leaders over the next few years and electing ones capable of pumping the brakes. That’s much harder than it sounds, given that democracy no longer exists in the West and all Western countries’ election processes are likely fully compromised at this point, but there’s still a chance.

The citizens clearly hate their leaders, just yesterday Scholz was widely booed by his people:

🇩🇪Germans disrupted the performance of German Chancellor Olaf Scholz at the SPD festival in the city of Falkensee, calling him a bandit and a deceiver.

In the video, a crowd of people boos the politician’s speech, calling him a “warmonger”, a “liar” and a “bandit”.

Germans remember the war and do not want a repeat.

And that’s become more and more common of late:

 
CBS now reports:

Amid growing concerns of security risks to members of Congress, over 50 senators have been issued satellite phones for emergency communication, people familiar with the measures told CBS News.

The satellite phone technology has been offered to all 100 senators. CBS News has learned at least 50 have accepted the phones, which Senate administrative staff recommend senators keep in close proximity during their travels. 

In testimony before the Senate Appropriations Committee last month, Senate Sergeant at Arms Karen Gibson said satellite communication is being deployed “to ensure a redundant and secure means of communication during a disruptive event.”  

Gibson said the phones are a security backstop in the case of an emergency that “takes out communications” in part of America. Federal funding will pay for the satellite airtime needed to utilize the phone devices.

I guess not all kooky rumors turn out to be fake.

But my point in making the parallel is simply to underscore the fact that Putin is creating order and livable harmony in his Russian society. You don’t see Russian Duma members being issued emergency phones for a ‘disruptive event’ nor citizens storming their capitol buildings, nor forecasters predicting catastrophe if an emergency debt bill isn’t passed.

With that said, in other economic news, Russia has to some extent too much of a good problem, as oxymoronic as that sounds.

 
It’s being reported that Russian unemployment has dropped to a record, historic low. This may sound like a great thing but Western press has sprung into action to find the hidden downside. Which is, according to them, that the unemployment is so low only because everyone is working and employers can’t find more unemployed people to staff needed positions.

To some extent it’s true, though it’s difficult to say how much of a ‘bad thing’ this is exactly when your entire country has jobs. But specifically from the military lens, I had already written last month about how many Russian arms corporations are struggling to fill the positions in their expanded production lines. Since every arms manufacturer is now whizzing along at a minimum of a 3X shift increase, they’re reportedly having trouble filling all the new job openings. Of course, pro-Ukrainian press reports this being the fault of ‘low wages’ for these positions. However, most Russian arms manufacturers are located in rural Siberian regions, famously east of the Urals as per Stalin’s strategic withdrawal of Russian factories there during WW2 to keep them out of reach for German bombers. And so the wages are in fact commensurate with the regions they operate in, though they may be considered lower than average by Moscow’s standards.

But the article above tries desperately to paint Russia’s record low unemployment in a bad light despite the fact that their own listed figures show Russia’s remarkable economic recovery:

GDP rose 3.3% in April, the economy ministry estimated, while retail sales and industrial output demonstrated strong growth in annual terms, according to statistics service Rosstat, benefiting from the low base effect from last year.

This commenter encapsulated the truth of it: