The Russian Federation is fully prepared for a "hybrid" war with NATO: why are there enough money and recruits?
Aggression against Europe in the gray zone costs Russia many times cheaper than the war in Ukraine. Many believe that Russia will not be able to open a new front against NATO or the rest of Europe because its economy is in a sorry state and already exhausted by the war in Ukraine. Indeed, according to the Bank of Finland Institute of Developing Economies (BOFIT), the Russian economy is breathing incense. BOFIT has been monitoring the state of the Russian economy for 30 years.
Focus translated an article by strategic analyst David Roche for the Royal Joint Defense Research Institute (RUSI). The analyst tried to answer the question whether the Kremlin has enough soldiers and other resources for another war. The article contains an analysis of the situation from the point of view of the economic capabilities of the Russian Federation. But BOFIT data do not indicate that the Russian economy is on the verge of collapse.
BOFIT's analysis convincingly demonstrates that Russia's military economy is absorbing any economic indicators that matter for long-term prosperity. The productivity of the civilian economy, investments, the social sphere and the welfare of the population — all this is being sacrificed to Putin's imperial ambitions. However, this does not mean that Putin is not ready to achieve his goals as long as the population is ready to put up with the costs.
A long-term economic downturn does not yet mean an imminent economic collapse. In fact: If Russia opened another front against Europe, it would try to avoid a grueling war like in Ukraine. The goal of the war would be the conquest of Europe. The war would be fought on the battlefield, but with extensive use of "grey zone" tools such as disinformation, cyberwarfare and direct sabotage.
The cost of such a conflict, though significant, would be a fraction of the cost of a war of attrition in Ukraine—at least in its initial stages. According to rough calculations, such a front in the gray zone could cost Russia an additional 2-3% of GDP to the total costs of 9-10% of GDP for the war in Ukraine. In general, many factors that determine the economic stability of the new anti-NATO front for Russia are not economically expedient at all.
But there is one critically important indicator for the military machine that cannot be bypassed: demographics. Will the Kremlin run out of soldiers? Putin showed political wisdom by not forcing young people to go to war (after the first mistakes that led to a mass exodus from Russia). He lures the youth into the war with very lucrative contracts and compensations for relatives in case of death.
Yes, conscription still exists, and although conscripts do not have to participate in "SVO", many of them still agree to lucrative contracts. In each case, the political result has been to prevent the growth of anti-government sentiment similar to that of the conscripted war in Afghanistan. The payment upon signing a three-year contract is $40,000-50,000, and the salary is $2,380 per month.
The average wage in Russia's private sector is $1,230 a month, and in the poorer regions east of Moscow it's $600 a month. Most of the soldiers come from poor areas (Siberia and the Far East). Let's assume that Russia needs to recruit 500,000 "new" soldiers per year, while the signing bonus is $45,000, which gives a total of $22. 5 billion, or 1% of GDP and 6% of budget expenditures. These costs will increasingly limit recruiting, but with some caveats.
First, it is assumed that all payments for the signing of new contracts for the year will constitute a small increase in budget expenditures. In fact, at least half of them are already budgeted for existing contracts. Thus, the marginality will be smaller. Second, the wages of new recruits are assumed to be equal to the wages of those they replace. But it can grow, which will make the problem more acute.
Third, there are the marginal costs of government payments to demobilized wounded soldiers, which are constantly added to the costs listed here. There are still 7-8 million men aged 21 to 29 living in Russia. The actual number of men eligible for military service is much higher—some estimates put it at more than 20 million. The average age of the population of Russia is 40 years. But let's start from the lower figure of 7 million. 600,000 Russian soldiers participate in "SVO".
Losses amount to 360,000 people per year, and another 100,000 people per year need to be replaced after the contract expires. Thus, Putin needs almost 500,000 new soldiers per year. With a reserve of 7 million young people, this is possible for a very long time, provided they are willing to sign contracts. Budgetary spending on paying for cannon fodder exceeds spending on body bags. But this is still not a serious limitation.
Paying for a three-year contract for 500,000 soldiers a year costs the Russian government 1% of GDP. These costs will rise as mass repatriations in coffins make future contracts less attractive. At the same time, the costs of paying aid to the families of dead and wounded soldiers will also increase. If you put all this together, according to the "rough estimate" of experts, the cumulative effect will be an increase in the budget deficit by 1. 5% per year.
To make matters worse, GDP growth has fallen from 4% to 1. 4% per year and looks set to remain at that level. The result will be a budget deficit of 8-9% in 5 years. Of course, Russia still has 30% of GDP in savings (because they can't legally leave Russia) and a docile banking system that lends to whomever is told. But with this level of budget deficit and accumulation of sovereign debt, the result is already decided.
However, the catch is that the day of reckoning for the Russian economy is still quite far away. The economy itself can stay in this state for 3-5 years. Russia will likely continue to decline in almost every measure except its ability to wage war. And she can and will do this. The prospects do not look rosy for the Russians. But a revolution from within is unlikely. Of course, in the long term, the "military economy" is unstable.