Can Russia afford to win the war in Ukraine?

Renaud Foucart, a senior lecturer in economics at Lancaster University, thinks the Russian economy will struggle to pay the price of invading Ukraine.

The invasion of Ukraine put Russia on the brink of bankruptcy. Interest rates have doubled, the stock market has closed and the ruble has dropped to an all-time low.

Military expenses of war has been aggravated by an unprecedented degree international sanctions, maintained by a large coalition of nations. Russian citizens, currently unable to spend at IKEA, McDonald’s or Starbucksare not allowed to convert any funds they have into currency.

Generous estimate showed that the Russian economy could shrink by 7% next year, instead of the 2% growth that had been forecast before the invasion. Others say the reduction can be as much as 15%.

Such collapse would be greater In 1998 the accident of the Russian stock market – a huge shock to an economy with hardly see any growth in the previous decade, and failure to diversify oil and gas export. Meanwhile, the European Union is planning significantly reduce energy dependence on Russiawhile the United States and the United Kingdom have begun to phase out more restrictive, import.

The long-term prospects are dire. If sanctions are maintained, Russia will be excluded from the its main trading partners except China and Belarus. Rating agencies now predict Russia will soon not be able to return it to its creditors, again with huge long-term implications for the economy. Its reputation as a reliable borrower will make it difficult for the country to attract foreign investments without major guarantees, potentially leaving it completely dependent on China.

The economic scenario actually looks even worse if Putin reaches a point where he declares victory in Ukraine. Occupy the country and establish a puppet government inevitably involves taking on the responsibility of rebuilding destroyed infrastructure. And with Ukrainian citizens increasingly support Europemaintaining the peace in such a hostile environment would force Putin to divert large amounts of resources from the Russian budget.

To understand what that would involve, we can look at what happened before. After two wars and the destruction of GroznyChechnya, in 1999–2000, Russia spent up to US$3.8 billion (£2.9 billion) a year maintain its mode in the water. Any drop in remittances puts Russia at risk of further uprisings and Crimea costs Russia a comparable amount.

Ukraine’s population is about 40 million 40 times bigger than Chechnya and 20 times more than Crimean peninsula. As the second largest country in Europe by area (after Russia), it would be a very expensive place to maintain an occupation.

Today, though Russian damage As a military secret, Ukrainian estimates give Putin the material cost of destroying tanks, planes and weapons. about 5 billion US dollars only in the first two days of the war.

Last price

But it is not only military equipment that has a price. It may sound strange, even unpleasant, but governments and economists really place monetary value on every human’s life. It is such calculations that determine which drug or medical treatment provided by the NHS with its limited budget.

To date in Ukraine, it is estimated that there are many 12,000 won Russian soldiers were killed. Meanwhile, about 15,000 soldiers died during the Soviet invasion of Afghanistan, 8,000 during the First Chechen war and slightly larger (but the number is uncertain) in the second.

ONE rough estimate based longevity and Per capita GDP shows that the death toll of 10,000 Russian soldiers would equate to a cost of more than $4 billion. For this one will need additional big money on mental health about their families, and about all the soldiers who took part in an active war.

Even so, these costs are not directly related to the government budget. So also Gentle compensation announced Putin’s donation to the families of the dead soldiers, the amount will be paid in local currency, meaning its real value could soon be close to zero. Most physical and human damages can effectively be listed under the “existing property” description, and the cost of replacing them will only be incurred in the future.

In the days and weeks ahead, whether the cost of war is too high for Putin will depend on two factors. Russian defense and military industry can surviving wave without importing technology like industrial and electronic robots Western ancestry?

And will the impact of sanctions and casualties be enough to change public opinion in that way threaten the Kremlin? The rest of the very dismal economic warning clouds gathering over Russian soil will only matter to a leader concerned about the long-term impact of the war on his compatriots.

Renaud FoucartSenior Lecturer in Economics, Lancaster University School of Management, Lancaster University.

This article was republished from Conversation under a Creative Commons license. Read original article. Can Russia afford to win the war in Ukraine?

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