How the war with Ukraine is pushing Russia into the economic and social abyss
Today, Russia looks like an old steam locomotive hurtling into the abyss at breakneck speed. Putin's obsession with the war against Ukraine is starting to affect all areas of life. State administration, economy and social services transferred to the war regime do not have time to deal with any other challenges. Problems that, in conditions of peace and huge export revenues in foreign currency, would be solved immediately, or at least planned, are ignored and significantly worsen. The key economy begins to acutely feel the lack of key resources: people, money and goods.
In conditions of lack of resources, the body begins to devour itself. Believing in the infinity of its resources in the face of continuous attacks in human waves, Russia faced the threat of complete demilitarization and undermining of the country's defense capabilities. According to analysts' calculations, at the current rate of production and restoration of armored vehicles, it will be enough for at most one more year. There is an acute lack of manpower at the front. Losses after the Kharkov adventure began to significantly exceed the fill rate.
It is a snowball of problems rolling uncontrollably through Russia that makes it shout through the mouths of its agents about the need to stop the war on the current borders. What exactly happens behind the reinforced concrete facade of the supposed stability of "Potemkin's Village".
Despite throwing huge money into the defense industry and military problems, which ostensibly gave growth to the economy, inflation uncontrollably eats away all the profits. This year, prices in Russia have risen for literally everything. Which is symptomatic, not only of imported goods under sanctions, but of what Russia seems to have plenty of. For example, with the constant reporting of record harvests (mainly due to looting of agricultural products in the occupied territories), flour for bakers in Russia has suddenly risen in price by 30 percent. This means that the price of bread is also rising.
Despite the effect of the gasoline embargo, which was supposed to stifle the domestic gasoline market, the prices of "purely Russian" gasoline continue to rise, and the problem of gasoline shortages has not been solved. Now, instead of lifting the embargo at the beginning of autumn (the temporary ban on gasoline exports was introduced from March 1 to August 31), the Russian Ministry of Energy is proposing to extend it until the end of the year. And instead of the growth of foreign exchange income from the sale of petroleum products, Russia received a constant increase in the price of gasoline within the country. Both stock and consumer prices again broke last year's record, which was held since October 2023 and, according to the authorities, was of a temporary (seasonal) speculative nature. Ukrainian drones and the incompetence of the Russian authorities turned the problem from seasonal to permanent.
As for imported goods, the problem is even more pronounced. Of what else can be bought in Russia, prices have risen for everything. The "cheap Chinese auto industry", which was supposed to replace high-quality car brands, not only finished off the relevant Russian industry, but, as it turned out, did not become cheap at all. In just half a year, car prices increased by 14 percent and their growth continues. At the same time, the payment crisis with China does not allow the market to be saturated with the necessary service and spare parts. Therefore, Chinese cars are not cheap now and are often disposable.
Electronics prices are rising rapidly. After a record price increase since the introduction of sanctions, it has risen again by 10 to 15 percent, and quality brands, such as Apple, by 40 percent. It is the same with any imported product whose price has increased from 10 to 50 percent in a year. Sanctions force suppliers to build increasingly complex and expensive supply chains. The rise of the key rate and the depreciation of the ruble also have an impact. Friends of the Houthis are also actively helping, disrupting logistics in the Red Sea and increasing the price of imported goods.
Economic growth fueled by military spending may briefly extend the false stability, but Russia has a catastrophic labor shortage. The witch-hunt against illegal migrants and the slaughter of the able-bodied population with frontal slaughter attacks on the battlefield caused a crisis in both civilian industry and the military. The depth of the problem is also evidenced by the so-called "canopy of vacancies", when there are several vacancies for one unemployed person. Now there are an average of 2.5-4.5 vacancies per unemployed person. In addition, wage stagnation was observed in most industries except the military.
And you can't make up for the shortfall quickly with almost anyone. Anti-migrant hysteria, legal decisions banning migrants from working in certain sectors, constant mobilization raids only deepen the problem. On the other hand, the scourge of war requires more and more human victims. In the conditions when the Russian army has technologically degraded to a primitive communal one, fighting with numbers, not with skill, remained the only method. Therefore the slave market of disposable people from regional contracts is driving up prices again. Thus, for example, the southern regions began to go beyond the borders of the entities in order to attract recruits.
Thus, a one-time payment of 1.6 million rubles was established in the Krasnodar region, which is more than double the payment in the neighboring Rostov region, from where potential contractors can arrive in three hours. However, the lure of payouts doesn't work as effectively. Russia's losses in the war in Ukraine already exceed those of the Soviet Army during World War II. And so the temptation to carry out another mobilization, which Putin dreams of, will, apart from the negative and unforeseeable social consequences, also affect the industry.
The commodity supply crisis and the labor force crisis were significantly aggravated by the monetary crisis. Despite the fact that Russia receives billions of petrodollars every month, it has become a problem to get this money personally. India, for example, is settled in illiquid rupees, and the main trade partner (it is more correct to say the metropolis) - China, actually stopped making direct payments with Russia, even in yuan. So, the disastrous monopolistic yuanization of the Russian financial system did not increase the amount of money in the economy, but, on the contrary, closed the faucet of foreign exchange earnings.
Under these conditions, Russia stops responding to the simplest challenges. The winter freezing of entire cities in 2023 threatens to turn into a real apocalypse in 2024. After the big floods, by the way, predicted in the spring of 2024, Russia helplessly watches huge fires, for example, in Yakutia and Buryatia, which destroy the already fragile ecosystem. Put out fires with nobody and nothing. Because everything and everyone went to war.
Russia, which dreamed of leaving Ukraine without light and heat, faced a cascade of man-made disasters that turned off the lights in entire regions. In Krasnodar, due to accidents at 235 substations, electricity supply to hundreds of streets was interrupted. In Buryatia, hundreds of thousands of residents, including the capital, were left without electricity due to the accident at Gusinoozerska GRES. In Čistopolje (Republic of Tatarstan), as a result of the accident, the residents found themselves without drinking water, which they decided to bring to them by cars in order to pump out septic tanks and sewage drains. More than 80 percent of the inhabitants of Kalmykia live without access to drinking water.
Logistics is experiencing a real collapse. Hardly a day goes by without an aviation emergency. Russia, which decided to independently manufacture sanctioned
spare parts for imported planes, turned air transport into a real and expensive Russian roulette. Congested medieval railways cut off entire regions from the supply of basic products. Yakutia and the Far East suffer from the impossibility of timely delivery of already paid for goods by rail, for which tariffs have increased significantly. This causes a wave of regional shortages, and therefore a rapid speculative growth in prices.
A bleak future pushes the country into a sharp rise in crime. The number of crimes committed by organized criminal groups has almost doubled compared to the pre-war period (by 76 percent according to official statistics) and continues to grow rapidly every year, the so-called SVO. In Russia, there is an increase in criminal incidents involving the illegal arms trade. Thus, for example, the number of robberies and murders with the use of firearms increased from five to 17 times by December 2023 compared to 2021. And not all "SVO heroes" have returned home yet. At the end of 2023, such statistics are simply closed.
All these factors overlap and trigger each other. And since there is neither the possibility nor the desire to stop the negative trends, Putin's locomotive flies forward. And it looks like the next stop is in hell...