Why Putin's “war economy” is crumbling | BR24

“Economic life in Russia has become exotic,” said Russian economist Igor Lipsitz on his Telegram channel. He pointed out that Moscow has recently been importing US cash from Rwanda in Africa, most recently 29 million dollars weighing around 300 kilos.

And that's not all of the bizarre manifestations of Putin's war economy: the Russian central bank has lost track of exchange rates in the face of a volatile black and grey market. Lipsitz advises his readers to follow the advice of the romantic writer Fyodor Tyutchev (1803-1873) in view of the economic upheavals: “Be silent, hide yourself and keep your feelings and dreams secret…”

Optimism prevails “only on paper,” say the Kremlin-critical Russian experts “Neoreshkins” (external link): “There is simply no longer any reason for economic growth; even doping through armaments no longer has the desired effect, but at best accelerates inflation.” And the minister has also “forgotten” to supply industry with important raw materials such as epoxy resin. Bankruptcies are threatened by the sanctions.

Attacks on Russia: “Everything is very new and unknown”

According to official figures, the Russian war economy is running hot. Armaments are creating growth, there is full employment, the income of employees in the military sector is rising significantly, and Putin personally recommended increasing the supply of goods to counteract the associated inflation and the flood of money. The Russian political scientist Vladislav Inozemtsev, who also publishes in Western media, has been speaking ironically of “Deathonomics” (death: English for death, -onomics: English for economics) on his Telegram channel for some time: “Nobody is fighting for Putin, everyone is fighting for money.” The Ukrainian air strikes on Russian infrastructure are irrelevant to economic strength as a whole, but not to social awareness.

“It seems to me that Moscow has not yet realized (or does not want to realize) that armed clashes in the Kursk region or drone debris falling on Moscow are reflected in the public consciousness in a completely different way than fighting in the Donetsk region or shelling in the Kherson region, although formally all of these areas are considered Russian,” said Inozemtsev. Some evacuated Russians dated the “start of the war” to August 7 this year, the same day that Ukrainian troops advanced into Russian territory near Kursk. This is a “dangerous trend” in the consciousness of broad sections of the Russian population who, unlike most Ukrainians, are not used to missile strikes in their own country: “This is all very new and unknown.”

Forecast: “Total economic collapse”

The fact that the war economy is having significant psychological, cultural and social effects is demonstrated by numerous reports that are not very flattering for the Kremlin. According to the independent online newspaper “Fontanka” (external link), the Russian Central Bank feared that in the worst case scenario all budget reserves would be used up next year and that the “apocalypse” was looming, as Russian newspapers put it: “As Putin recently said, the war has become the engine of this state's economy. Russia is now in a complete dead end – it is living off its assets and is eating up the entire economy,” was one gloomy reader comment. Others mocked the “storytellers” in the Kremlin.

Foreign Minister Lavrov proposes “barter trade”

At the same time, foreign trade has become so difficult that Foreign Minister Sergei Lavrov recommended a return to “barter trade” (“Why not?”) and some Russian companies are already sending couriers with gold bars to Hong Kong in order to be able to pay foreign bills, as the Reuters news agency reports (external link, possibly paid content).

The advice of propagandist Elena Panina (174,000 fans) is quite serious. On her channel she demands: “A planned economy and strict state control would help.” In view of the cited “deathonomics” with the ramping up of the arms industry and mutual bombardment, one of the leading Russian political bloggers on Telegram (166,000 fans) asks: “Winter is just around the corner. Is Russia prepared to cope without light and heat if the enemy continues to take out inadequately protected facilities in our energy sector? So far, there is no impression that anyone 'at the top' is thinking about it.