Logistics: Russia Adopts a Wartime Budget


November 5, 2023: Russia expects its 2024 government revenue to be a record $349 billion. There are plans to sustain this level of revenue by keeping Russian military spending at record level. This means more purchases of weapons and equipment from Russian suppliers as well as continuing generous death and disability payments to soldiers or their families. The impact of these payments is obvious on poor regions of Russia that have a lot of men in the military. So many local men have been killed or disabled that the families of the dead are now relatively wealthy and spending money on new cars or upgrading their housing and lifestyles in general. This is intentional because the government is desperate to avoid large-scale dissatisfaction with the war effort.

The Russian defense budget is now a wartime budget. For the first time since the Soviet Union collapsed the defense budget will be six percent of GDP and exceed spending for social welfare programs. Russia plans to maintain this higher defense spending until they win the Ukraine war. That is unlikely to happen because the Ukrainian war effort is subsidized by weapons and military equipment supplied by NATO countries. Collectively, NATO nations account for about half the global GDP. Despite the fact that NATO is far wealthier than Russia, the Russians believe the massive NATO support for Ukraine won’t last as long as the Russian determination to prevail. Russia notes that NATO has 31 member states. Not all these nations agree on long-term policy or how much should be spent on continuing support for Ukraine. At the same time, NATO members agree that Ukraine should be allowed to join NATO. That can only happen when the war with Russia is over. At the moment the Ukrainian forces are better armed and equipped than the Russian invaders. That is one reason why Russian forces are largely on the defensive and suffering much higher casualties and equipment losses than the Ukrainians.

By spending so much on military production and social welfare, Russia expects to maintain popular support for the war effort. The problem is that Russia does not have enough income to sustain a wartime economy. Spending too much on defense was a major reason why the Soviet Union went bankrupt and collapsed in 1991. It was later discovered that the Soviet government had inadequate financial controls and lacked a realistic financial plan. This was revealed to the world, and most Russians, after 1991. Up until 1991 Russia was spending about 15 percent of GDP on defense and not enough on more urgent matters like managing the economy prudently in order to avoid a financial collapse. Russian leaders did not believe national bankruptcy would cause the collapse of the Soviet Union. Misunderstanding or ignoring a problem won’t solve that problem or eliminate the consequences.

Most of the current Russian leaders consider the collapse of the Soviet Union a great tragedy. The war in Ukraine is seen as a step towards putting back together the empire the Soviet Union presided over. The 1991 collapse of the Soviet Union created 15 independent nations, including Russia and Ukraine. Most of these former Soviet Union subjects believe inept leadership by the Russian dominated Soviet government was the cause of the problems that lead to the bankruptcy and dissolution of the Soviet Union. While many other nations still consider the Russians clever, those who live in Russia or nations that were once part of the Soviet Union are less admiring. This includes China, which regards Russian leaders as prone to making poor decisions. Publicly, the Chinese profess their admiration of and friendship with Russia. Privately, the Chinese are less admiring of the Russian leadership. China does not discuss this with the Russian government because China wants to maintain good relations with its large nuclear-armed neighbor. China has not forgotten the 1960s rumors about Russia suggesting that the United States cooperate with them in destroying China with a joint nuclear attack. While Russia fears growing Chinese military power, the Chinese fear Russia making another dumb mistake that will not benefit China.

The Chinese regard Russia’s current military budget policies as another example of Russian self-delusion and poor policy decisions which might help Russia but will make neighboring states more wary of what Russia is going to do next. The Russian invasion of Ukraine is considered another example of bad decision making and Russia appears to have learned nothing useful from their defeats inside Ukraine. Russia is already in bad shape economically and militarily and current plans to vastly increase defense spending will make their situation worse. That’s what Russian leaders tend to do. They often find the worst decision and embrace it.




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