The war in Ukraine is straining Russia’s economy and society
In early November, on the anniversary of the Bolshevik revolution, Vladimir Putin gave a speech meditating on the patterns of history. The communist takeover of Russia, he said, was one of the “milestones…that determined the course of history, the nature of politics, diplomacy, economies and social structure”. The war he started in 2022 by invading Ukraine, he implied, was another such moment.
“We are witnessing the formation of a completely new world order, nothing like we have had in the past, such as the Westphalian or Yalta systems,” he claimed. Attempts to isolate and contain Russia have failed spectacularly, he argued. “Our opponents assumed that they would inflict a crushing defeat, dealing a knockout blow to Russia from which it would never recover.” Instead, “Chaos, a systemic crisis, is already escalating in the very nations that attempt to implement such strategies.” The insinuation that America’s and Europe’s problems are bigger than Russia’s is wild hyperbole—but the idea that the war has reshaped Russia’s economy and social structure is no exaggeration.
A recent study by the Public Sociology Laboratory, an independent research group, gives a sense of the alienation ordinary Russians feel about the war. It examined three provincial towns, each in a different region: Buryatia in eastern Russia, Ural in the centre and Krasnodar in the south. Over several weeks ethnographers conducted interviews and observed everyday life, providing first-hand reporting on the mood in Mr Putin’s political heartland.
The study found that Russians in such places are neither indoctrinated militarists nor passive automatons, as is often assumed. Instead they appear to be equally alienated from the state, from jingoistic patriots and from pro-Western exiles. In all three towns pro-war propaganda has all but disappeared. People have taken down the “Z” stickers they had put on their cars in the first weeks of the “special military operation”. In Cheremushkin (an invented name for a real place in the Urals), a black- and orange-striped flag (another military symbol) still hangs outside a hotel, but has faded. Residents struggle to recall any patriotic events held in the town in recent months. A free screening of a propaganda film attracted almost no one.
But there is no open criticism of the war, not only because of government repression, but also because people in small towns fear being ostracised. When a researcher in Buryatia asked a woman what was stopping people from speaking out against the war, she explained, “People just want to be with everyone else and don’t want to splinter from the majority or to fall out from the norm.”
People largely pretend the war is not happening. “Had it not been for the periodic news of someone’s death and for the funerals, people would not remember that there is a war going on,” says a resident of Cheremushkin. “It is as though we don’t have war,” echoes someone in Buryatia.
The big payouts for those who enlist are a topic of conversation: a neighbour who has earned a fortune, for example, or the wife of a dead soldier who bought a car with the compensation and then took up with another man. “Fuck your money, why do I need it?” scoffs a woman at the idea that her husband would sign up to improve the family’s finances. “I’ll earn those 200,000 myself and I’ll know that I have everything and my family is healthy. I’ll buy myself those earrings and I’ll have a man by my side. I would never send my man to certain death!” The fact that people earn so much by signing up means that casualties are seen not as victims of the state so much as free agents making a risky but rational effort to improve their lives.
Many people seem to mistrust official statements about the war and yet to parrot the narrative that the West is to blame. “They are sending kids to fight the war!” a woman in Cheremushkin laments. “I don’t understand these politics. What are they trying to achieve?” Yet, the same woman, a few minutes later, complains, “The US is hitting ordinary people. They are killing civilians and blaming Russia for it.”
People do not like to associate themselves with the war, the research suggests. An estate agent in Krasnodar gripes that her relatives in Ukraine have stopped talking to her. “What do I have to do with it? Did I want this war or did I start this war?” she asks. The report notes, “In general, everyone is ready to agree that war is ‘bad’ and ‘scary’; some interlocutors, in particular, admitted that they cannot understand the meaning of the war.” What people crave is not victory, since they have no clear idea what that means, but for things to return to how they were before the war.
The silent majority
Public polling, such as it is, bears out these findings. Roughly half of Russians, a recent survey found, would support the withdrawal of Russian troops from Ukraine without achieving Mr Putin’s stated goals. The proportion is higher among women and the young. As Kirill Rogov, an exile who runs Re:Russia, a policy-analysis network, explains, “There is no pro-war majority in Russia. There is a militant pro-war minority and an anti-war minority.”
The majority are broadly patriotic, but not at any cost. In 2014, after Russia seized Crimea from Ukraine and was subjected to Western sanctions as a result, respondents were equally divided over whether it was better for Russia to be a great power, respected and feared by other countries, or to have a higher standard of living. By 2021, with the economy stagnating, prosperity trumped great-power status, 60% to 30%. Half of Russians want closer economic ties with the West, twice the share that advocates autarky. In a poll just after the war began in 2022, only 25% expressed enthusiasm for annexing more Ukrainian territory.
Even some strident, militarist bloggers are unhappy with the war, despite Russian forces’ continuing advances. One of them, Maksim Kalashnikov, published a Russian soldier’s account of a front-line medical post: “Corpses, corpses, corpses of our fighters. You can see them everywhere… They are already lying in two or three layers close to the wounded. A persistent smell of cadavers and the stink of rotting meat from wounds filled the basement.”
In October Russian forces are thought to have suffered some 1,500 casualties a day, counting both dead and injured. “We take territories, but at an exorbitant price,” Mr Kalashnikov complains. It is “only a matter of time”, he thinks, before Russia’s offensive peters out, without doing any serious harm to Ukraine’s supply lines and command systems. He blames the timidity of the elite and fears that Donald Trump will force Russia to freeze the conflict along the current front lines—an abject failure, in his view.
At the same time, the economic boom sparked by lavish government spending on the war and wage growth owing to a manpower shortage is beginning to run out of steam. Next year the central bank is forecasting GDP growth of between 0.5% and 1.5%, well below this year’s 3% and last year’s 3.5%. The official inflation rate, meanwhile, is 9.5%, even though the central bank has raised its main interest rate to 21%. That may be an understatement: Romir, an independent research firm that tracks the spending of 40,000 Russians in 240 towns, believes the average bill for everyday goods and services is going up by more than 22% a year (see chart).
The exchange rate of the rouble is sliding, both because of inflation and because of fresh American sanctions on Russian banks that are making it harder for them to obtain dollars. This week it fell well below 100 roubles to the dollar for the first time since the immediate aftermath of the invasion of Ukraine in 2022.
State-owned enterprises, especially in the defence industry, are sucking in huge amounts of capital, leaving the private sector struggling to borrow, even at high rates. Few have the confidence to do so, anyway. As a businessman put it in an interview with the Russian edition of Forbes magazine, “There is no vision for the future. Thinking about long-term plans mostly leads to depression. It’s difficult to come up with a business idea that could compete with a deposit in Sberbank.”
Worse is to come. Oleg Vyugin, a former deputy head of the central bank, explains that, to pay for the war without cutting other spending, the government scrapped a rule that had obliged it to stash in its rainy-day fund all its extra income when the oil price rose above $45 a barrel. Instead, it began spending its savings. But the fund is dwindling fast, so the government has had to raise corporate- and personal-income taxes from next year. It has also included in projected revenue for next year 600bn roubles ($5.3bn) in fines for offences that have yet to be committed.
Storing up trouble
None of this is about to bring the economy to its knees, but neither is it sustainable indefinitely. Mr Vyugin argues that the government faces a choice between cutting back military spending, which would induce a recession, or spurring inflation yet higher by continuing to spend lavishly, which would necessitate even harsher medicine later. Starving the armed forces of cash is all but inconceivable, argues the Bell, an independent business-news outlet: “Even acknowledging that the war and sanctions have triggered this cycle of overheating and decline is impossible.”
Elvira Nabiullina, the governor of the central bank, has defended high interest rates in parliament. The Russian economy, she argued, is operating at full capacity. “Now, for the first time, we are in a situation where almost all resources in the economy are used,” she said. The unemployment rate is at a record low of 2.4%. “The Kremlin does not have sufficient human resources both to continue the war and sustain economic growth,” writes Alexandra Prokopenko of the Carnegie Russia and Eurasia Centre, a think-tank.
The irony, of course, is that the war is not just creating demand for labour, but also reducing supply, both by prompting many people of working age to flee and by killing or maiming many others. Mr Putin has been fixated with reversing Russia’s demographic decline since he came to power. He has spent trillions of roubles on various schemes to boost birth rates. Indeed, argues Ivan Krastev of the Institute for Human Sciences, an academic institution in Austria, Mr Putin’s expansionism is partly driven by the idea of making Russia a more populous country. His annexation of Crimea added 2.2m inhabitants. But his attempt to conquer Ukraine has had a devastating effect on Russia’s population.
The number of people in Russia—roughly 144m—was shrinking even before the war, as was the workforce, of around 75m. Perhaps 200,000 Russians have been killed and half a million wounded in the fighting, according to Western estimates. Some 700,000 men are on the front lines. To sustain recruitment at its current rate of perhaps 30,000 a month, the army has had to raise its signing bonus more than fivefold, from 200,000 roubles at the start of the war to 1.2m on average now. In addition, at least 650,000 Russians, and perhaps as many as 1m, have fled the country to avoid being sucked into the war machine. Although this is only around 1% of the pre-war workforce, they are disproportionately young and educated.
At the same time, the birth rate has fallen to levels not seen since the 1990s, at the nadir of Russia’s economic collapse after the fall of the Soviet Union. The typical Russian woman is expected to have 1.4 children in her lifetime, far below the 2.1 needed to keep the population stable. In June there were fewer than 100,000 births for the first time ever. Even were the war to end tomorrow, it has altered Russia’s demographic trajectory, a “catastrophe” in the words of Mr Putin’s spokesman.
Another indication of the social dislocation brought about by the war is the rise in serious crime. Russia’s Interior Ministry says offences including murder, rape, grievous bodily harm, sabotage, property violations and interethnic violence are at their highest in at least 15 years. Convicts who have been released from prison to join the war and return home as “heroes” may be partly responsible. Verstka, an independent Russian news organisation, reckons that at least 242 Russians have been killed by soldiers returning from Ukraine and another 227 seriously injured.
The return to normality that ordinary people crave is impossible, Mr Rogov argues. Any cessation of hostilities will inevitably prompt questions about what the war was for and whether it was worth the cost. In the meantime, Russia may have the upper hand on the battlefield and, despite frequent predictions to the contrary, its economy does not appear to be on the verge of collapse. But the war, which had not previously had a huge impact on most people’s lives, is beginning to cause disruption. The upheaval within Russia is not yet as severe at that initiated by the Bolshevik revolution. But Mr Putin is correct to argue that he has set Russia on a dramatically different path. ■