The Russian Economy Two Years into the Ukraine War

An S-300 anti-aircraft system missile launcher in a Russian military parade. , modified, cc SLonoed,

Western sanctions were meant to tank the Russian economy and destroy Moscow’s ability to keep fighting the war in Ukraine. So far, the sanctions have had mixed results. Russia is still fighting, and the economy is still holding on. Yet analysts maintain that sanctions will produce their intended effect eventually, albeit under a longer horizon that may mean the conflict drags on.

Wars are expensive. Governments must allocate funds toward manufacturing military equipment, diverting resources from civilian production, which often inevitably leads to inflation. The conscription of healthy, able-bodied men creates labor shortages, filled by less qualified individuals like mothers, retirees, or those otherwise unfit for regular employment. Additionally, military-focused production reduces export earnings, resulting in increased government spending and decreased revenue. Consequently, most countries finance wars through exponentially increasing government debt.

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