• Sat. Mar 2nd, 2024

Putin’s War Economy: Sustainable in the Short Term, Unsustainable in the Long

ByEditor

Feb 12, 2024
BBC predicts Russia’s economic growth may be short-lived despite recent success

In 2023, Russia’s economy experienced growth thanks to its shift towards a mobilized war economy under Putin’s leadership. However, BBC economics editor Faisal Islam has warned that the Kremlin will ultimately face a systemic collapse in the long term.

The Russian state has significantly increased its spending, particularly in military and security sectors, reminiscent of the late-Soviet era. This has come at the expense of support for other areas of the population, as funding has been redirected towards the production of tanks, missile systems, and defenses in occupied Ukraine.

Despite facing oil sanctions, Russia has managed to sustain its economy by using a “shadow fleet” to transport oil to India and China. Effectively circumventing the sanctions, resource extraction levels remain almost unchanged from the pre-war period.

Although Western leaders have expressed skepticism about the sustainability of Russia’s current economic situation, Russia’s petroleum taxes have exceeded pre-war levels and ongoing foreign exchange flow from oil, gas and diamonds has helped alleviate pressure on rouble value.

Looking ahead, demand for oil and gas is expected to peak and competitors will increase production posing a challenge to Russian economy. Additionally, producing tanks and munitions is seen as an unproductive aspect of economy. Nonetheless while a long-term collapse is predicted by Islam but not likely to happen by end of year.

Leave a Reply