Just a few bits of info on the Russian economy. Yes, it SEEMS to be humming along in spite of sanctions, but that’s mainly because the country has changed to a wartime economy, where Russia is spending huge amounts supporting companies cranking out war materiel, at the expense of infrastructure maintenance and social services, creating an artificial bubble. It will be difficult to Russia to reverse that bubble once the war ends. At present, about 1/3 of all government spending is military spending.
Russia is facing significant labor shortages. At present, 85% of Russian companies are suffering from varying degrees of labor shortage. This is despite wages rising rapidly, even outpacing the offered military pay to enlist to go fight be in a meat assault or blown up by a drone in Ukraine.
The pay increase presents a problem for Putin’s recruitment of more “meat.” Who wants to go fight and very possibly die in Ukraine if you can get a job back home for more pay? I’m sure plenty of Russians know or are related to Russian soldiers who’ve died, disappeared, or come back badly wounded from Ukraine. The average Russian might be willing to cheerlead Putin’s war, but it’s another matter to volunteer to be a future casualty statistic.
Meanwhile, as of April 2024, Russian inflation was sitting around 7.8% and interest rates as of June were 16%, with the Bank of Russia saying those interest rates are going to hold there for at least the next year.
So, with Russia needing manpower to send to Ukraine, plus so many companies back home being short employees, many of which are military contractors, there’s a tightrope Russia needs to walk. Does it conscript more men from the workforce to fight, exacerbating the labor shortage? Or does it reduce the number, and suffer manpower shortages in Ukraine? How does the Russian military compete with rapidly rising wages at home? In the meantime, how does it deal with high inflation and high interest rates while still dealing with it’s employment issues?
Just some things to think about. None of this means the Russian economy is tanking in the next few months, but the employment issue is not going to improve anytime soon, especially with the high casualty rates in Ukraine.