ISW analyses how Russia hides “economic difficulties” due to war in Ukraine
Pravda Ukraine
Analysts at the Institute for the Study of War (ISW) believe that the Russian government is conducting an information operation to create the false impression that the Russian economy is doing well, although numerous indicators, including the cost of the war against Ukraine, show the opposite.
Source: ISW
Quote: “The Kremlin has launched an information operation that seeks to create the false impression that the Russian economy is performing well despite numerous continued indicators of macroeconomic distress.”
Details: Russian leader Vladimir Putin said during a meeting on economic issues on 22 January that 2024 was a “strong year” for the Russian economy.
Putin said that Russia had a controlled budget deficit of 1.7% and achieved a 26% increase in non-oil and gas revenues to 25.6 trillion roubles (approximately US$257.9 billion) in 2024, and announced a 9.5% increase in insurance and military pensions to tackle Russia’s rising inflation.
Earlier, Bloomberg reported that the Russian Ministry of Finance had released a report forecasting economic growth and suggesting that Russian budget revenues in December 2024 would reach a record high of more than 4 trillion roubles ( approximately US$40 billion) – 28% than in December 2023, and the highest level recorded since 2011.
However, the analysts note that these figures do not take into account the unsustainable level of Russian defence spending, rampant inflation, growing deficits and the depletion of Russia’s national welfare fund.
Quote: “ISW continues to observe macroeconomic data that directly contradict the Kremlin’s claims that the Russian economy is performing well.”
Details: The assessment states that the Kremlin has recently introduced policies to increase defence spending while Russian society faces labour shortages, broader demographic issues, declining savings and growing welfare dependency as the Russian economy faces rising interest rates, inflated wages and deteriorating production capacity.
Quote: “These economic realities suggest that the Kremlin’s efforts to posture economic strength are largely an information operation aimed at reassuring domestic audiences and posturing Russian strength abroad while masking the true challenges Russia’s economy is facing, particularly heightened due to its war against Ukraine.”
To quote the ISW’s Key Takeaways on 22 January:
- The Kremlin has launched an information operation aimed at creating the false impression that the Russian economy is performing well, despite numerous ongoing indicators of macroeconomic distress.
- Russia continues its long-term efforts to expand its manpower reserve with organisations from the All-Russian Cossack Society, aiming to create a willing and well-trained prioritised pool to buffer the Kremlin against potential backlash in the event of a possible future partial call-up of Russian reservists.
- North Korea will reportedly deploy new military personnel to Russia by mid-March 2025, likely to maintain the current pace and intensity of attritional, infantry-led assaults in Kursk Oblast.
- These fresh North Korean forces are unlikely to decisively improve Russian operations and will likely face similarly high casualty rates and operational complications when working with Russian forces, assuming the Russian command continues to employ North Korean forces in the same manner as it has thus far.
- Russian milbloggers have expressed concern over recent claims that the Hayat Tahrir al-Sham (HTS)-led interim government in Syria has suspended Russian investment and financial involvement in the port of Tartus, raising questions about the future of Russia’s long-term military presence in Syria.
- A Russian state media outlet has reported that Russia may resume direct gas deliveries to Transnistria, despite recent discussions about sourcing non-Russian gas for the region.
- Ukrainian forces have recently recaptured lost positions near Toretsk.
- Russian forces have recently advanced near Chasiv Yar, Toretsk, Pokrovsk, Kurakhove, and Velyka Novosilka.
- Russia and Uzbekistan are deepening their military cooperation.
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