The Waste Of Putin’s War
How Much Blood And Treasure Can Russia Afford To Pay?
Vladimir Putin’s hyperbolic reaction to Ukraine’s latest drone strike deep within Russian territory is but the latest demonstration of how Russia’s greatest liability is none other than Vladimir Putin himself.
For all his nationalistic and even jingoistic bluster, Putin’s dogged insistence on ever more war is writing metaphorical checks that Russia is finding increasingly difficult to cash. As the war in Ukraine nears the completion of its third year, eventually Russians will have no choice but to confront the eternal question which hovers over all war: How much blood and treasure can Russia afford to pay?
By now, the cycle has become disturbingly routine: Ukraine launches a drone strike deep into Russian territory, after which Putin denounces the attack, often punctuating his disapproval with a missile and drone barrage over Ukraine.
The latest attack came on Saturday against high-rise buildings in the Russian city of Kazan, located in the oil-rich Republic of Tartarstan over 600 miles from the Ukraine border and more than 500 miles east of Moscow.
Speaking to the Tartarstan leader on Sunday, Putin vowed—again—a harsh retaliation for the attack.
“Whoever, and however much they try to destroy, they will face many times more destruction themselves and will regret what they are trying to do in our country,” Putin said.
The “whoever” is, of course, Ukraine.
Perversely, as Putin was uttering his usual bombast about the drone attacks, Ukraine carried out another one, this time against the Stalnoy Kon oil terminal in Oryol Oblast, much closer to the front lines in Kursk.
We should bear in mind that the drone strikes are all part of a war which began when Russia invaded Ukraine in February 2022, ostensibly to execute a “special military operation” which has instead devolved into a largely stalemated and extremely bloody war of attrition.
No matter how one views the geopolitical situation in Eastern Europe, regardless of whether one views the conflict as the product of a militaristic posturing by Putin or reckless and largely corrupt NATO expansion efforts designed to “surround” Russia, the practical consequences of war emerge not from the motives or reasons, but from the choice to go to war. Even as we concede the obvious, that NATO is, first and foremost, an “anti-Russia” military alliance, we must also concede that the decision to invade Ukraine was solely Vladimir Putin’s.
It is scarcely a remarkable observation to note that wars are always costly, and the war in Ukraine has been no exception. Indeed, it was predictable even before Putin ordered his soldiers across the border into Ukraine that this war would be an expensive proposition.
Three years on, this war has been extremely expensive for Russia, and even more wasteful.
Note: I shall be doing a separate examination of the costs of the war on Europe. Suffice to say for now that Europe’s situation in this regard is no better than Russia’s.
Just how wasteful this war has been for Russia is made immediately obvious when we consider how little the front lines have shifted over the course of 2024.
Russia has suffered absolutely horrific casualty rates over the past year—literally thousands of soldiers every day—yet overall the battle lines in Eastern Ukraine have not shifted that much.
This is where the front lines stood on January 1, 2024:
This is where the front lines stood at the end of last week.
At first glance, one might easily assume that there is no change. A closer view, however, reveals that Russia has advanced somewhat in Eastern Ukraine.
The salient north of Kurakhove is the bulk of what Russia has achieved over the course of the year. For such military gains Russia is estimated to have suffered over 125,000 casualties in just September, October, and November alone. Recently, Russia is reported to have lost as many as 2200 soldiers in a single day, and seems determined to close out 2024 by repeatedly setting new records for most casualties in a single day.
One has to go back to either of the two World Wars of the 20th century to find casualty figures of comparable magnitude.
If the scale of Russian deaths in the war have resonated with Putin, he appears to hide it well. In a year-end media address, he managed to continue his bravado and bluster against NATO, going so far as issue an open challenge to NATO for a “missile duel.”
In one of the most eyebrow-raising moments of the marathon session in Moscow, Putin claimed Western air-defence systems are incapable of intercepting Russia's new Oreshnik hypersonic missile - and threw down the gauntlet of a duel.
"There is no chance of shooting down these missiles," Putin said.
If the West had any doubts about the missile's capabilities, it could name a target in Kiev protected by all available air-defence weapons which would then be targeted by the Oreshnik, Putin said.
This would be an "experiment, a high-tech duel of the 21st century," according to the Russian leader.
It would then become clear whether Western powers could stop the missile, he said, expressing Russia's readiness to participate.
To be sure, it is quite understandable why Putin would be directing such marks against the NATO powers. While the war itself rages on Ukrainian soil, in geopolitical terms the war has always been a contest between NATO and “the Western Powers” on the one hand, and Russia on the other. That has always been the reality of this conflict, and indeed the military war of attrition in Ukraine has been matched in an economic war of attrition between the EU and Russia, with both sides getting severely battered early on, and having continued to batter each other ever since.
However, Putin seems almost as undeterred by the economic costs of the war as he has been by the human casualties. In the same media address where he challenged NATO to a missile duel, he made the bizarre assertion that Russia is somehow “stronger” for the war.
That is, of course, complete nonsense. War weaken nations. Throughout the entirety of human history war has never made a nation stronger.
Despite the bombastic assertion that Russia was stronger now, Putin nevertheless conceded that inflation was on the rise in Russia, despite the draconian interventions of the Russian Central Bank intended to keep inflation under control.
However, there is no denying that the war in Ukraine has imposed a terrible cost on the Russian economy. A quick glance at the Moscow Stock Exchange over the past few years shows just how much of a beating Russian businesses have taken as a consequence of that war.
By fall of 2022 the MOEX index of Russian-traded stocks had fallen by more than 50% from its pre-war high. While it has recovered somewhat, it is still down by more than 35% from that pre-war high.
The economic pain has been felt across the whole of the Russian economy. After enduring a full year of economic contraction as a result both of the war and of the sanctions imposed by the EU and G7 countries, even the transition to a wartime economy has not sustainably brought the Russian economy to the levels it briefly enjoyed before the war.
Russia’s economy has never been a powerhouse of economic resiliency, and the war has most emphatically not helped in that regard.
While the manufacturing sector has gained—mainly due to the focused output of war materiel—even those gains have been somewhat less than one would expect given the magnitude of the war raging in Ukraine.
Putin’s bluster notwithstanding, Russia has been battered and bruised by the war in Ukraine, and stands to take an even greater battering and bruising the longer the war in Ukraine drags on.
The cost of the war to the Russian people is easily seen in the wartime inflation that is steadily creeping further and further into the Russian economy.
Again, this is a fairly typical consequence of converting a country’s economy over to a war footing. Massive government expenditures for the implements of war coupled with a relative scarcity of consumer goods almost invariably produces a significant distortion in consumer prices in the form of ever-rising inflation.
While the Russian Central Bank had been successful in preventing hyperinflation initially, over the past eighteen months inflation has steadily returned in Russia.
That inflation is now getting progressively worse.
When the month on month inflation rate doubles, as it did in Russia in November, that is not a good sign. If the trend of rising month on month inflation continues, Russia will very soon find itself in the grip of runaway hyperinflation.
Perhaps the most dire consequence of the war of attrition in Ukraine has been the damage it has done to the Russian ruble. To borrow a bit of Joe Biden’s bombastic rhetoric about Russia, the ruble really is becoming “rubble”.
What other conclusion can we draw from the fact that the ruble has depreciated against the yuan by some 10% in just the past year alone?
That decline is by far the most devastating for Russia, as China has become Russia’s principal trading partner as a result of sanctions imposed by the EU as a consequence of Putin invading Ukraine.
The ruble is faring somewhat worse against the dollar, having declined some 12% over the same period.
About the only reason the ruble has not declined further against the yuan is likely because the yuan, responding to China’s own economic woes, has fallen roughly 2% against the dollar as well.
However, this is also bad news for Russia, for if trade with Russia, with a wartime nation’s rather voracious appetite for goods, is not helping pull China out of its economic crisis, a question arises as to how long China will be willing to stand beside Russia in the face of opposition from the EU and the US.
Indeed, the war has only served to exacerbate the ruble’s weakness. Since 2019, the ruble has declined some 35% against the yuan, and while a considerable portion of that decline occurred prior to 2022, the ruble is weaker against the yuan now than it was at the start of the war.
Whatever else may be said of the state of the Russian economy, the one thing which may not be realistically said is that the Russian economy is in any way “stronger” as a result of the war.
Perversely, while the cost of war has been ginormous for Russia, and will continue to be so, putting Russia on a wartime footing means Putin faces another economic challenge when Russia at last does sue for peace.
The economic challenge of peace after war is that of transition, and rarely is that transition gentle or slow. Rather, once the guns fall silent, the demand for more guns, more munitions, and more war production immediately ceases, or very nearly so. At the same time, the production of civilian consumer goods takes time to ramp up again. The result is an inevitable economic “peacetime shock”.
Nominally, the Russian economy has grown as a result of the war.
However, with much of that growth coming in the form of government demand for war materiel, when peace does come, Russia is facing an inevitable significant economic contraction at least as great as the 11% contraction it endured in 2023 during the extended (and therefore painful) transition to wartime footing.
Depending on how the peace takes shape, and to what extent Russia can repair its relations with Europe, Russia may have to endure a contraction in the Russian economy to 2020 levels or even further.
Bear in mind that a post-war economic contraction is not a hypothetical possibility. Rather, it is an established historical reality1. When countries transition from war to peace, an economic contraction is part of the process. That was the case for the United States after the Civil War, as well as WW1 and WW2. It was the case for the United Kingdom after WW1 (the economic situation in Europe after WW2 holds no real comparison as the devastation of the war itself left most of the continent without much in the way of a functioning economy).
Is Putin prepared for that transition, and the economic dislocations that must come as a consequence? There is, of course, no way to know for certain, but it is certain that Putin’s current level of bluster and his desire to project strength both internally and externally shows no indication of even an awareness of such challenges once peace arrives.
Yet as history has shown time and again, the longer war drags on, the greater the cost of transitioning back to peace. The longer Russia remains mired in an attritional war in Ukraine, the greater its cost will be when at last peace comes and the guns fall silent.
War is a costly undertaking, and attritional warfare is especially costly—by every measure such is an horrific shedding of national blood and treasure. War is costing Russia dearly, just as it is costing Ukraine dearly and just as it is costing Europe dearly. War will continue to cost Russia dearly, and even ending the war is going to cost Russia dearly.
Can such costs ever be justified? If one accepts Putin’s rationale that the war is existential for Russia, perhaps. Depicting the war in existential terms removes most other alternatives from the table, including peace. When one frames the choices as war or extinction, questions of cost are largely set aside.
Yet while framing the war in Ukraine as an existential battle for Russia might set aside questions about the cost of the war for Russia, that framing cannot set aside the costs themselves.
Casualties happen in war, existential crisis or no.
Similarly, economic consequences arise from war, existential crisis or no. The pressures of inflation, of scarcity and wartime rationing, and of manpower dislocations arise because of the demands governments make on the nation in order to prosecute a war.
There is a cost to war. There is a cost to ending war. Neither cost can be avoided, and both costs are made greater the longer war is extended.
Putin seems willing to extend the war in Ukraine, at least for now. Yet the longer he does, the more the Russian people will have to pay for that war in Ukraine, and the more the Russian people will have to pay to transition from war to peace once war is concluded.
Somehow, I rather doubt the Russian people are all that enthusiastic about having to pay either for war or for peace—not that Putin is giving them any say in the matter.
Total Military Insight Editorial Team. Understanding Post-War Economic Depression: Causes and Impacts | Total Military Insight. 7 July 2024, https://totalmilitaryinsight.com/post-war-economic-depression/.
Peter. thanks for this immersive account. Seems as though NATO and US have many reasons to extend the conflict as long as Ukraine still has meat for the grinding.
I thought I read maybe through your posts that Russian leaders are nearly mandating a switch to a digital ruble? What kind of bearing would such a move have on the economic situation you described here
Great data, Peter. It sheds more light on the situation than the mainstream media ever provides, so thank you!
One the one hand, any political leader who repeatedly promises “severe consequences” at some point has to carry through on his threat, or he loses all credibility and thus is susceptible to being overthrown. Putin’s precariousness is probably increasing exponentially now.
On the other hand, probably his best bet is to wait another month and negotiate a deal with Trump. Can he wait that long? I’m no expert, so I don’t know. Peter, have you seen any current bets by true Russian experts?