Russian President Vladimir Putin is preparing the country’s economy for a long war in Ukraine.
Military spending and war-related expenditures have already fueled much of Russia’s economic growth this year, helping the country weather the impact of Western sanctions.
Next year, the government plans to increase military spending even more. Outlays will rise by more than two-thirds to a post-Soviet record of over $100 billion, according to data from Russia’s Ministry of Finance. Military spending will hover at more than twice prewar levels until at least 2026, the current budget-planning horizon.
Putin has placed a long-term bet that focusing the economy more squarely on the war will allow Russia to withstand a protracted conflict better than Kyiv and its Western backers.
Wars through history, though fought on the battlefield, have often been won or lost based on which side can muster the money and materials over the long haul. Doubts about financial support for Ukraine grew this week after a congressional budget deal didn’t include a fresh slug of money.
On Thursday, Putin prepared the nation for the shift in production with remarks on the economy. Speaking of military output, he said, “We are increasing production many times over, not by some percent, but by several times.”
The militarization of the economy has propped up industrial production, provided jobs and helped raise wages. The growth it generates, coupled with ample revenues from high global oil prices, means that Moscow can continue to fund the war for now, economists say.
At the same time, the ramped-up defense outlays have fueled imbalances. The country has grappled with surging inflation and a labor shortage. The military spending will do little to raise long-term productivity, economists say.
The government will also need to borrow more to cover the growing war bill. High military spending is diverting resources away from fields such as education and healthcare, which are essential for long-term growth.
“The longer the war lasts, the more addicted the economy will become to military spending, raising the risk of stagnation or even outright crisis once the conflict is over,” said Vasily Astrov, an economist at the Vienna Institute for International Economic Studies.
A Kremlin spokesperson didn’t immediately respond to a request for comment.
The war’s growing footprint in the Russian economy is a sign that the Kremlin expects that it won’t end soon. Both Kyiv and Moscow have shown little willingness to negotiate and Ukraine’s counteroffensive this year has yielded only halting progress.
The Russian budget figures suggest that “Russia is preparing for multiple further years of fighting in Ukraine,” the U.K. Ministry of Defense said earlier this month. “It is highly likely that Russia can support this level of defense spending through 2024, but only at the expense of the wider economy.”