Russo-Ukrainian War 2014-25

[Legbiter]

One interesting aspect about this "Kursk Invasion" is that it shows that Russia will actually not use nuclear weapons to defend its territory. At least not yet.

Unless your name is Jake Sullivan hardly anyone believes the nook ook ook threats from Medvedev.

[The Brain]

Are the Russians burning tires in a cooling tower? Seems like they are desperately combining objects and actions like they're stuck in a 90s point-and-click game.

[Josquius]

Ukraine invading Belgorod now too it seems.

[CountDeMoney]

[Norgy]

I think this "Special Military Operation" of theirs soon needs special ed as well.

Here's an excerpt from Foreign Policy's editor Patrick Lane for your perusal:

Hello from London.

In my very first economics lesson at school, we began with the basics of the theory of demand. "Demand", I recall Mr Hills saying, "does not mean 'need' or 'want'. It means 'demand backed by money'." Put another way: we should understand that economics was an unsentimental discipline. See the world first as it is, not as you might like it to be. That lesson came back to me when I read our analysis of Russia's economy, published today.

However much you sympathise with ordinary Russians, you might wish that two and a half years after Vladimir Putin's full-scale invasion of Ukraine, Russia would be paying a high economic price for its aggression, giving the dictator cause to think again. But no: it is thriving, thanks to a splurge of public spending—not only on the war but also on welfare, pensions and more. The one cloud (or, for those wishing Russia ill, bright spot) is rising inflation. But with incomes rising faster than prices, Russians' patience isn't wearing out yet.

On the battlefield, Russia's unannounced summer offensive is yielding advances in the Donbas, in eastern Ukraine, as we reported this week. But Ukraine has made a foray of its own—not into territory captured by Russia since 2022, but into the Kursk region of Russia itself. Ukraine has taken 350 square kilometres. The scale of the raid (and plenty else) remains unclear, but as our report of interviews with some of those who have taken part make clear, it has been a terrific boost to morale.

The war in Ukraine, like that in Gaza, has brought widespread death and misery. It has also been a proving ground for new types of projectile, from battlefield drones to long-range missiles—and hence for systems to counter them. As missile technology advances, renewed interest in missile-defence systems is growing. Remember Ronald Reagan's proposed "Star Wars" shield? Our story today runs the rule over its modern counterparts.

So, Russia's actually doing fairly well economically despite sanctions.  No wonder Tucker Carlson had such an orgasmic field day when he went to a Russian supermarket.

[Tamas]

So, Russia's actually doing fairly well economically despite sanctions.

Numbers shared by the Kremlin clearly show it so.

[Josquius]

I have certainly heard that the Russian economy is doing well from the perspective of ordinary workers - wages are shooting up and keeping pace with the cost of goods.

They're in kind of the opposite place of many western countries I guess. Things are actually going terribly in Russia with businesses in trouble but all seems fine for the regular man.

[The Minsky Moment]

I agree with most of what you said, but saying the US has the most clear national interest in seeing russia lose is myopic. Poland and the Baltics come to mind.

That's certainly true, but the US has far more capacity to tip the balance.  The American failure has been decisive.

[Tamas]

I have certainly heard that the Russian economy is doing well from the perspective of ordinary workers - wages are shooting up and keeping pace with the cost of goods.

They're in kind of the opposite place of many western countries I guess. Things are actually going terribly in Russia with businesses in trouble but all seems fine for the regular man.

They have lost half a million skilled workers who had the means to flee abroad, of course the remaining workers will get paid more. Irrelevant.

[Sheilbh]

I don't think I'd go that far

There was a big shock, but Russia's economy is adjusting to the new reality. There's smart sanctions arbitrage (like European exports to, say, Armenia or Kyrgyzstan reaching untold heights) and Russia is still broadly able to export particularly oil but in the same way as Europe pivoted from pipe gas to LNG, so has Russia. In fact I think European imports of Russian gas are now climbing again. And again there's an element of sanctions arbitrage - for example re-exporting oil via Turkiye. Ultimately Russia still sits on a lot of energy and the rest of the world is paying for it - Russia's got around the oil price cap and perhaps slightly always would because you can no more cut Russian oil out the world than you could Saudi or the US.

And if your country isn't being destroyed by bombs, war is good for the economy. Putin's generally always run a pretty austere fiscal policy but the taps are now being turned on (ish). There's a lot of money being spent on construction and weapons - spending on production in the military-industrial complex is up by over 50%. Similarly spending on the military has significantly increased (doubling the bonus for signing a contract for example). Plus some infrastructure spending for example pipes and other infrastructure being re-oriented towards China. This means Russia is now running a (small) deficit which is unusual under Putin.

At the same time there are impacts from sanctions and some import substitution - especially for consumer goods. Russia has increased interest rates to close to 20% and the financial sector is being subsidised to prevent that from being felt too much by regular people but it is. But that is making consumer spending more difficult (again not necessarily a bad thing from a Russian perspective). The moves to a more militarised economy aren't just by increasing spending but by cannibalising other budgets. This is particularly felt in regions with a lot of recruits or military industries  where those workers are really benefiting but other workers, including in the public sector are experiencing a squeeze. There's reports of a lot more day to day corruption - not quite at the levels of the 90s but far more than under Putin previously as police, especially, try to supplement their state income. Similarly social services etc are all being cut or constrained as the state focuses more and more on war. And also real wages in the military and war industries growing very significantly - in other sectors, not really.

And underpinning all of this are Russia's enormous foreign reserves which was built up over years as one of the world's largest energy exporters. On current trends I think they're projected to last about 4-5 years. I think it becomes a lot more challenging for Russia once they're spent.

I said earlier but I think this is why simply a more effective technocratic defence minister may not matter. The options (and you could try both) is possibly between actually eliminating the corruption and profit-taking in the war industries and military (which is partially the elite basis of Putin's support), or, as Patrushev etc push for, properly going for a fully mobilised war economy (which hits Putin's popular support basis). The former might make it possible to get more bang for your buck from the reserves and export income, the latter would spend both quicker. I think Russia's at the peak of what it can do without a big decision one way or the other - and it can last for a while, it is spending billions subsidising the financial sector and degrading the state and economy in everything but war industries/military spending (and possibly fossil fuels).

[The Minsky Moment]

I have certainly heard that the Russian economy is doing well from the perspective of ordinary workers - wages are shooting up and keeping pace with the cost of goods.

Back in the 70s they called that a wage-price spiral. The historical evidence indicates that it is rarely sustainable and not easily contained without Volckerian shocks.  The Russian government is trying to contain inflation fallout by increasing pension benefits but that is just more fuel on the fire.

Last year, the Central Bank doubled interest raised rates to 16%, and reported inflation levels dropped below 3 percent. But they have been steadily rising ever since and now the Bank has raised rates again to 18%.  Since the 16% rate implied a real interest rate at over 8 percent, and yet was not sufficient to keep inflation under control that suggests to me that: (1) inflationary expectations have become strongly entrenched, and (2) the reported rate probably understates the actual inflation rate.

Admittedly these are first world problems compared to the Ukrainian economy. It's nothing that would hinder the war economy. On the contrary it is a typical development in a mobilizing war economy, with the next step being price controls and rationing as needed.

[Tamas]

I bet there were people in like the mid-80s, talking how the Eastern Bloc economies weren't that bad, just look at the stats they are producing.

[Syt]

 

[The Minsky Moment]

I bet there were people in like the mid-80s, talking how the Eastern Bloc economies weren't that bad, just look at the stats they are producing.

It's not quite the same; Russia is not a command economy and has real market interactions with the outside world notwithstanding sanctions.  It has a professional central bank that appears to retain some autonomous authority, at least for rate setting. I do think the inflation numbers are being goosed down.

[crazy canuck]

I bet there were people in like the mid-80s, talking how the Eastern Bloc economies weren't that bad, just look at the stats they are producing.

No, it was clear the Soviets were not doing well.