Meet “Russian disease,” the centuries-old corruption plaguing Ukraine invasion
The invasion of Ukraine has plunged Russia’s economy into a case of “Dutch disease,” an economic paradox where a country’s income from a specific sector—in this case, oil—becomes disproportionately high, damaging other industries. The global surge in oil prices, driven partly by the war, led to a significant increase in the ruble’s value against other currencies (a phenomenon known as currency appreciation) in 2022.
This strengthening of the ruble, while seemingly positive, actually slowed down other economic sectors by making Russian exports more expensive and less competitive in global markets.
It is widely recognized that Russia has been propping up its overall economy through substantial cash injections from the country’s reserves. Key investments are now directed towards military production and other war-related expenses.
In an extraordinary transformation unthinkable in democratic countries, Russia now allocates nearly half of its state budget to expenditures related to the invasion.
The influx of funds for military purposes may create another paradox that is uniquely characteristic of Russia. This phenomenon, which we might term the “Russian disease,” stems from the ruling elite’s misplaced confidence in their ability to win any war due to their resource advantage.
Paradoxically, this overconfidence often leads to failure, even in smaller local conflicts, due to corruption and inefficiencies fueled by this misguided assurance.
Selective historical memory: Existential wars vs. regime-driven conflicts
This paradox arises from the Russian ruling regimes’ overwhelming belief in their country’s invincibility and the notion that simply investing resources will ensure victory. A narrative of Russia’s historical military prowess, though historically inaccurate, bolsters this confidence.
The Russian elite’s belief in their military superiority is based on a few notable experiences: large defensive wars like the Napoleonic Wars and World War II, and conflicts against minor military powers. However, this selective memory ignores numerous instances of military failure.
In smaller offensive local wars, the Russian elite often view these conflicts primarily as opportunities for personal gain. This mindset leads to inefficiency, overconfidence, and endemic corruption, resulting in poor military performance and often total losses in these smaller conflicts.
The large existential victories in Russian history, including the Napoleonic Wars and World War II, were achieved through the complete mobilization of national resources and significant efforts from allies—a fact that Russia tends to downplay. These wars were considered existential for the nation’s survival and were defensive in nature.
In contrast, other wars were either non-existential or existential only for the regime leaders. The elite viewed these conflicts as opportunities to advance their careers and profit, often disregarding the ultimate outcome. Consequently, these conflicts were largely lost despite Russia’s initial resource superiority. Notable examples include:
- Crimean War (1853-56)
- Russo-Japanese War (1904-05)
- World War I (1914-1918)
- Soviet-Afghan War (1979-1989)
Each of these campaigns began with high confidence but ended in significant complications for the ruling regime.
Endemic corruption: The rot within Russia’s military
The ongoing full-scale invasion of Ukraine echoes these past conflicts, revealing striking similarities. Following the Soviet-Afghan War and the dissolution of the Soviet Union, Russia engaged in local conflicts in Chechnya, Georgia, and Syria, where the opponents’ military capabilities were negligible compared to Russia’s.
Expecting a swift “three-day” campaign in Ukraine, Russia has, for the first time in decades, encountered a determined opponent that offers unprecedented resistance.
In all these cases, endemic corruption has been a dominant factor in Russia’s losses. The Russian military’s exclusive reporting structure to the head of state, with little or no external oversight, enables widespread corruption. The army and navy operate with an untouchable status, enjoying almost uncontrolled budget spending. During peacetime, internal military affairs rarely face external scrutiny. It is only when conflict arises that the extent of corruption becomes apparent, as the military often appears to be decaying from within.
Former Russian Defence Minister Andrei Kozyrev claimed that about a fifth of the budget allocated for military improvements and upgrades has been embezzled. Past scandals highlighting the scale of corruption include:
- The Peter the Great warship scandal (2010)
- The Oboronservis scandal (2012)
Both cases involved substantial theft of funds, dramatically impacting Russia’s military capabilities.
Russia’s naval forces have been particularly plagued by corruption, with devastating consequences for their operational capabilities.
Russia’s largest ship, the Admiral Kuznetsov—its sole aircraft carrier and flagship of the Russian navy—has been a focal point of a whole chain of embezzlement cases. Funds intended for its repairs have been stolen numerous times, leading to repeated fires and engine failures. The vessel is still in docks unable to be completed.
In March 2022, a Russian naval officer and two independent contractors were arrested for corruption after stealing nearly 700 million rubles ($9.6 million) intended for missile upgrades on one occasion, and another billion rubles ($13.7 million) for similar purposes on another.
One of the ships affected by these missing upgrades happened to be the flagship of the Russian Black Sea Fleet, Moskva, was subsequently hit and sunk by two Ukrainian Neptune missiles just weeks later.j
Logistical failures exposed in Ukraine invasion
The full-scale invasion of Ukraine in 2022 unveiled significant logistical shortcomings in the Russian military. These included substandard uniforms, expired rations, and outdated military equipment. Operation commanders at various levels were implicated in both large-scale and petty corruption, including selling fuel and supplies for personal gain.
While corruption in the Russian military isn’t new, these issues have gained more prominence since the invasion began.