December 7, 2023:
The Russian war in Ukraine has been a disaster for Russia’s economy, military, and global reputation. It is a war Russia is losing, although the Russian government has declared it illegal to discuss or criticize the mess in Ukraine. The problems Russia is having in Ukraine increase the longer they remain there.
For example, Russia is having some unique problems in the part of Ukraine they still occupy. There Russia is seeking to Russianize the Ukrainians. This is a difficult process and often takes a generation or two of effort to make it work. Ultimately Russia wants to do this throughout Ukraine, but the Ukrainians are resisting. To speed up the process the Russians are concentrating on the children in Russian occupied Ukraine, in some cases the children are sent to Russia for medical care or purportedly to protect them. Ukraine complained to the UN, which agreed it was wrong and declared Russian leader Vladimir Putin a war criminal because of this policy. Putin continued with his Russification program and only the expulsion of Russian troops from Ukraine will stop it.
Ukraine is in the process of pushing the Russians out. Putin is resisting despite the damage economic sanctions have done to the Russian economy. Even though over half of Russian military personnel are now volunteers serving on contracts, or career officers, the ability of the military to hold onto those contract (“contrakti”) soldiers is always weakened if there are a lot of casualties or too much chance of being sent to a combat zone. Volunteering to be a contract soldier used to be considered a smart move because the Russian economy had been increasingly weak over the last decade. After the fighting began in Ukraine, the contract soldiers suffered as much as the conscripts and junior officers did. The result of this was contract troops refusing to renew contracts. Most of the combat units sent into Ukraine were composed of contract troops who, once in combat, were killed in large numbers. When the survivors got back to Russia, either because of wounds or because many combat battalions returned because of heavy losses, there was a sudden shortage of contract soldiers. That was because many contract troops were near the end of two-to-three-year contracts and refused to renew. The army had signed up many soldiers for the new (since 2016) short term (six to twelve month) contracts for former soldiers, or conscripts willing to try it, and found that there were far fewer vets willing to sign these short contracts because, so few recent short-term contract soldiers had survived service in Ukraine.
The government tried to solve this reluctant contract soldier problem by changing the contracts so that contract soldiers had to remain in the army for as long as the fighting continued. Realizing that it was a death sentence if they were sent back to Ukraine, many contract soldiers simply refused to go. There were so many men refusing to go that the government backed off from threats to prosecute the reluctant contrakti. Soldiers with time left on their contracts were a liability because they told anyone who would listen that the Ukraine operation had been a disaster for Russian troops because they were confronted by determined and well-armed Ukrainians who had numerous anti-tank weapons and were regularly ambushing columns of Russian armored vehicles and quickly destroying most of them. While Russian troops were forbidden to take cell phones with them into Ukraine, the Ukrainians still had them to take photos and videos of the aftermath of these battles, and these were getting back to Russia where Russian veterans of the fighting confirmed they had seen the same grisly evidence of Russian losses or even survived one of these battles.
Russia played down these losses, but the Ukrainian military maintained and published daily updates of Russian losses in terms of soldiers killed, wounded, or captured as well as equipment losses. After thirty days of fighting the Ukrainians were claiming that over a third of Russian troops sent into Ukraine had been killed, wounded, or captured with even larger quantities of vehicles and weapons lost. After six weeks the Russian military admitted that losses were heavier than previously acknowledged but would not give exact figures.
One of the many economic impacts of the war in Ukraine is the decline in the value of the Russian versus the dollar. During 2023 the value of the ruble reached a record low of 100 rubles per dollar. After the Soviet Union dissolved in 1991, most of the 1990s were spent with the new Russian economy getting used to the real world. By the late 1990s the Russian currency had reached a realistic value of about 30 rubles per dollar. In 2017 it was 60 rubles per dollar. In 2016 it hit 80 rubles to buy a dollar. In 2023 it took 100 rubles. All of these declines are because of low oil prices and sanctions.
More sanctions were imposed in 2018 as the U.S. unilaterally sanctioned about a hundred Russian business and government officials for their role in various illegal activities. While the travel and banking sanctions applied to these people is a minor inconvenience, being named and having your misdeeds explained is embarrassing and could cause long-term problems. After the 2022 Russian invasion began in early 2022, the sanctions multiplied and remained a problem for the ruble, which briefly hit 134 rubles per dollar. After a few months that came down to 65 rules. Since then, the ruble has continually lost its value versus the dollar. This causes problems for Russian oil exports because the primary currency for international trade is the dollar. China has been trying to change that, but without much success. This is partially due to the current problems the Chinese economy is suffering from. Russia wanted to help itself and China by building pipelines for its natural gas and oil exports that used to go to Europe. Those stopped when Russia invaded Ukraine. Europe coped with the loss of Russian oil and gas, something Russia did not believe possible. The Chinese pipelines may be equally improbable because of the cost and time required to make it happen. Meanwhile the value of Russian oil and natural gas exports declined from $49 billion a month just before the 2022 Ukraine invasion to about 60 percent of that currently.
The 2022 invasion of Ukraine had multiple negative effects on the Russian economy. One of the less obvious ones was a labor shortage. As Russia mobilized more and more young men, it deprived many manufacturing or maintenance facilities of key staff. Military-age men who had manufacturing or equipment maintenance skills were forced into the military even though their employers warned that this would disrupt production of items needed by the military. Such exemptions were granted during World War II, but now the government has decided that additional soldiers were more important than production of weapons and military equipment.
What the Russian government did not consider was that, since the war began, nearly a million military-age Russians have left the country. This continued even after the government outlawed the migration of military-age men from Russia. Corruption in the government and military made it possible for military-age men to get out of Russia. The government was told by employers that unless the government acted on the problems, production of key military items would continue to decline. Sanctions led to the loss of key components normally imported from Western suppliers. It took nearly a year for Russia to line up alternative suppliers as well as smuggling routes to get banned items to Russian factories or existing equipment like armored vehicles, warplanes and warships.
There was little success in dealing with the labor shortage. Ukraine has identified Russian plants that produced key electronic components and recently began attacking them with armed UAVs, severely disrupting or halting production of key electronic components. Now Russia has to devote air defense systems to many of these plants. This is what the Ukrainians did for their own defense manufacturing plants after the war began. That led Russia to concentrate on urban areas and infrastructure targets like power plants and water distribution facilities. Western sanctions plus Ukrainian attacks have reduced the number of land-attack missiles Russia can produce and use against the Ukrainian military. That led to Russia shifting its missile attacks to less well prepared and defended civilian targets.
In late 2023 Russia ordered mass production of its T-80VM tank to replace the many T-72B3M and T-90M tanks lost in Ukraine. While the T-80 was designed to be a successor to the T-72s and similar T-90s, that did not happen because the T-80 was more expensive to build and operate. The latest version, the T-80VM, purportedly solves most of those problems, especially if it is mass produced. That is why Uralvagonzavod (or UVZ), the largest Russian tank manufacturing plant, has been ordered to retool and start mass production of the T-80VM. This will not be easy because it is expensive and the Uralvagonzavod plant has its own problems.
Russia has previously supplied production contracts as well as more loans, to keep Uralvagonzavod from going out of business. Uralvagonzavod, the firm that developed the Armata T-14 tank and T-15 IFV, has been bankrupt since 2016 and survived because of state-owned Rostec, a holding company that takes over failing, but essential defense firms, to keep them operating. Uralvagonzavod has produced tanks and other armored combat vehicles since World War II and continued after the war. After 1991, most of those military orders stopped but Russia has learned the hard way that, once a lot of these skilled workers are out of work, they use their skills to find new careers or even emigrate and are virtually impossible to get back later. UVZ obtained enough orders for new armored vehicles or upgrading existing ones in an effort to maintain the workforce that, once lost, is extremely difficult and time-consuming to rebuild.
Uralvagonzavod, like many defense manufacturers of high-tech equipment like combat vehicles, aircraft, ships, missiles, and electronics, had a difficult time staying in business and retaining its skilled workforce after the Soviet Union dissolved in 1991. That meant orders for armored vehicles disappeared. In 2014 the Russian economy and defense budget took major hits from lower oil prices plus Western sanctions resulting from the Ukraine invasion. The situation got desperate for Uralvagonzavod as it was surviving on loans and whatever commercial work it could get. The company gambled on developing and marketing the revolutionary Armata T-14 and T-15 vehicles. Russian leaders were impressed but there was no money to place large orders and there were no export customers either. The government encouraged work on the T-14 because it was a prestige item that proved Russia was still a major defense developer and manufacturer. That was not true, but the government was willing to scrape up the cash to make it appear so. Rostec stepped in to buy UVZ and keep it going so work on the T-14 and T-15 IFV version could continue.
That attitude is being exploited by Russia because of much reduced post-Cold War procurement budgets. For example, in early 2021 Russia announced that the army would receive over 400 upgraded tanks and IFVs in the coming year, but none would be the new T-14 Armata tank and T-15 Armata IFV. Upgraded tanks like the T-80BVM filled the gap for the missing T-14s. The Armata was a radical new design for tanks and IFVs but too expensive given the defense budgets available. This was due to a 2013 plunge in oil prices that did not recover while the 2014 Ukraine invasion resulted in many economic and trade sanctions. Since then, the Russian replacement program for elderly Cold War era gear has had to settle for more rebuilds than brand new stuff. Russia did announce plans to start building more T-14s in 2022. As of 2023, Armata production is still stalled, but permanently this time because all the problems with the T-14 have been revealed. The T-14 does not work and never came close to working as an effective combat vehicle.
Most of the new tanks the Russian army has received since 2000 have been refurbished and much upgraded T-72B3s. In late 2021 the Russian Army had about 3,000 tanks in service and most (65 percent) were T-72B3s, which you hear little about. Russian troops prefer the T-72B3M over the T-80 and T-90, and few have any personal experience with the T-14. There were more serious problems with the Russian tank forces. When Russia invaded Ukraine in 2022, they had 2,600 tanks, 62 percent of them older models while the rest were improved and updated T-72B3s which took the Russian tank industry about ten years to produce. More than half the tanks sent into Ukraine were destroyed or captured by the Ukrainians during the first few months of the war. This was a major loss to the Russian army. The T-14 revelations were a minor footnote to the sad state of Russian tank production and usefulness in combat.
The latest Russian solution is to have UVZ produce up to 250 T-80VMs a year while also continuing to repair all models of damaged tanks. This is something a different facility of Omsktransmash specializes in but has been overwhelmed by the amount of work created by the Ukraine War. Replacing all the tanks lost in 2022 will take nearly a decade.