Cost of war taking a toll on Russian economy

 ISW:

Russian force generation efforts combined with Western sanctions are having long-term damaging effects on the Russian economy, as ISW has previously forecasted. Financial experts told Reuters that the Kremlin will face a budget deficit that will “drain Moscow’s reserves to their lowest level in years” due to projected decreases in energy revenue, sanctions, and the cost of Russian mobilization.[1] One expert predicted that payouts to mobilized men including social benefits may cost the Kremlin between 900 billion rubles and three trillion rubles (around $14.6-$32.4 billion) in the next six months. The number does not account for payouts to other categories of servicemen within the Russian forces such as BARS (Combat Army Reserve), volunteer battalions, and the long-term commitment to veterans' payments to contract servicemen, volunteers, non-military specialists who moved to occupied territories, and proxy fighters.[2] ISW previously estimated that one volunteer battalion of 400 servicemen costs Russia at least $1.2 million per month excluding enlistment bonuses and special payments for military achievements.[3]

The Kremlin is continuing to rely heavily on financially incentivizing Russians to fight in Ukraine, which will likely continue to strain the Russian economy for decades. Russian officials have been promising salaries to volunteers and mobilized men that are more than twice the average Russian civilian salary before and during Russia’s full-scale invasion of Ukraine.[4] The Kremlin has been attempting to deflect part of the cost of the force generation effort onto Russian federal subjects but will likely need to tap into the federal budget more heavily soon. United Russia Party Secretary Andrey Turchak, for example, stated that Russian servicemen from all regions must receive uniform benefits and noted that the federal government must cover the difference if the federal subject is unable to fully compensate all participants of the “special military operation.”[5] Donetsk People’s Republic (DNR) Head Denis Pushilin even acknowledged that there are insufficient measures in place to support mobilized personnel and their families in occupied Donetsk Oblast during a United Russia meeting.[6]

The Kremlin is already facing challenges in delivering promised compensation, challenges that are increasing social tensions within Russian society. Russian Telegram channels released footage of mobilized men in Ulyanovsk protesting payment issues.[7] Other footage from the Chuvashia Republic shows a presumably Russian local official yelling at protesting mobilized men that she had not promised them a payment of 300,000 rubles (about $4,860).[8] Families of mobilized men publicly complained to Voronezh Oblast Governor Alexander Guseyev that they have not received promised compensation of 120,000 rubles (about $1,945).[9] The Kremlin will need to continue to pay what it has promised to maintain societal control and some resemblance of morale among Russia’s ad hoc collection of forces. ISW has also reported that the Kremlin is igniting conflict within Russian military formations amalgamated from different sources by offering different payments, benefits, and treatment.[10] Social media footage from October 31, for example, showed a physical fight between contract servicemen and mobilized men reportedly over personal belongings and military equipment.[11]

Russian President Vladimir Putin’s calls for a competitive Russian military industry are divorced from the reality of Russian supply chain and defense industrial base issues. Putin stressed on November 2 during a meeting of the Coordinating Council for the Russian Armed Forces that it is important that the Russian government ensures active competition between Russian military arms manufacturers.[12] Putin’s calls contrast with recent reporting that Russia has purchased weapons systems from Iran and North Korea to support its war effort in Ukraine.[13] US National Security Council spokesman John Kirby announced on November 2 that the American intelligence community believes that North Korea is covertly supplying Russia with artillery shells.[14] ISW previously reported that Iranian shipments of drones and possible ballistic missiles to Russia will likely further increase Russian reliance on Iranian-made weapons systems.[15] Russia has likely negotiated the weapon shipments with Iran and North Korea because it has significantly depleted its stock of munitions in air, missile, and artillery strikes over the course of the war in Ukraine and cannot readily restock them. Russia’s reliance on isolated and heavily sanctioned states for critical weapons systems does not support Putin’s demand that the Russian military industry becomes highly competitive and meets the needs of the Russian Armed Forces in any short period of time.
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This appears to be another miscalculation by Putin on the cost of making war in Ukraine.  He has already wasted the windfall he got from Biden's absurd energy policies which initially helped him finance the war.  He made the same failed assumption that many in the Pentagon made that he could complete the capture of Ukraine in a matter of days.  He also underestimated the resolve of NATO countries in helping Ukraine resist Russian aggression.  Russia has blown through much of its original arsenal and is now having to acquire weapons from secondary sources like Iran and North Korea.  It is becoming weaker by the day.

The US and NATO countries are also expending much of their weapon supplies in supporting Ukraine.  Biden has created an inflationary spiral in an effort to buy votes while wasting money on green energy projects at the same time he has been cutting US production of fossil fuel production.  However, the US economy is so far surviving his policies.