The Kremlin has made the war the central organizing principle of social and economic life, and the Russian state has been transformed by the war in turn. The country’s shadow economy, labor markets, regional budgets, social hierarchies, and political incentives have all been reordered around the conflict. In the process, the war has produced a self-sustaining institutional and economic order that constrains even Putin. Russia’s fiscal and industrial base has become structurally dependent on military spending, so much so that entire regions and sectors cannot survive without it. Combat pay and expanded defense wages have given millions of Russians in depressed regions their first real income gains in years. [my emphasis] (1)That particular construction seems to be hinting that Russia’s survival depends on sustaining the current level of military spending. The article by Michael Krätke that I cited in the previous post implied that the current level of military spending is damaging the Russian economy because it is diverting so many resources from the civilian economy.
Gunitsky and Morris emphasize a very different claim:
Russia’s fiscal and industrial base has become structurally dependent on military spending, so much so that entire regions and sectors cannot survive without it. Combat pay and expanded defense wages have given millions of Russians in depressed regions their first real income gains in years. [my emphasis]A big emphasis of the neoconservative anti-Russia fixation has been on the idea that keeping Russia in a long war would severely damage Russia and help unseat the Putin government. This argument builds on the background of the common but very flawed assumption that the Soviet Union’s war in Afghanistan caused the collapse of the USSR, or at least contributed mightily too it: an assumption that relies considerably on imagination.
They elaborate on the argument this way:
Contrary to popular belief, most Russians have not benefited from the invasion. It is true that as the defense budget tripled over the first two years of conflict, the Russian economy grew and wages rose. But what looks like wartime prosperity is what the geographer Natalia Zubarevich calls the “law of small numbers”: percentage gains that seem impressive only because the starting point is so low.The argument seems to be that the Russian economy has become incredibly dependent on high military spending that raised wages and stimulated the economy – but this apparently benefitted approximately nobody except Russian plutocrats.
They also make a head-scratcher argument that Russia has been quite successful in evading external sanctions on importing consumer goods during the war by relying on smuggling networks. Apparently quite successfully, according to them. “The Russian government also tolerates outright smuggling in order to help the economy fill gaps that domestic production cannot meet. Entire sectors of retail have gone gray with the state’s tacit blessing, since the alternative is empty shelves and political trouble,” they write. They frame this as though it shows how badly Russia manages its economy. How successfully evading foreign sanctions is a bad thing from Russians’ viewpoint is, well, hard to understand!
The following argument makes sense if we accept the lazy assumption that the war in Afghanistan destroyed the USSR’s economy:
But for the latter, the focus seems to be on polemics, based on shaky assumptions going back to the idea that the Afghanistan War destroyed the Soviet Union.
This discussion from British Channel 4 from November deals with Russia’s war economy: (2)
Notes:
(1) Gunitsky, Seva & Morris, Jeremy (2026): The Inertia of Russia’s War: Why Putin Can’t End the Conflict. Foreign Affairs 06/03/2026. <https://www.foreignaffairs.com/russia/inertia-russias-war> (Accessed: 2026-05-06).
(2) Booming or breaking? The truth about Russia’s war economy. Channel 4 News YouTube channel 11/207/2025. <https://youtu.be/qg5PWLfvlJw?si=HqLxpsYNnNt1Kcy1> (Accessed: 2026-05-06).
The following argument makes sense if we accept the lazy assumption that the war in Afghanistan destroyed the USSR’s economy:
The wartime economy is difficult to structurally dismantle in other ways, as well. Defense and security spending now accounts for around 40 percent of all federal expenditure, an unprecedented level in Russian history and likely higher than even during Soviet-era militarization in the 1970s and 1980s. The number of enterprises in Russia’s military-industrial complex has roughly tripled since the invasion, and these firms now employ around four and a half million people. War-related manufacturing grew by 20 percent in 2025 alone.Michael Krätke rightly pointed to the fact that an equivalent amount of government stimulus channeled into civilian spending would be more effective in boosting the economy than the military spending. Gunitsky and Morris are so focused on the concept that the Russian economy is doomed to disaster no matter what that it sounds more like cheerleading for Russian failure than a realistic analysis of its war economy.
But for the latter, the focus seems to be on polemics, based on shaky assumptions going back to the idea that the Afghanistan War destroyed the Soviet Union.
This discussion from British Channel 4 from November deals with Russia’s war economy: (2)
Notes:
(1) Gunitsky, Seva & Morris, Jeremy (2026): The Inertia of Russia’s War: Why Putin Can’t End the Conflict. Foreign Affairs 06/03/2026. <https://www.foreignaffairs.com/russia/inertia-russias-war> (Accessed: 2026-05-06).
(2) Booming or breaking? The truth about Russia’s war economy. Channel 4 News YouTube channel 11/207/2025. <https://youtu.be/qg5PWLfvlJw?si=HqLxpsYNnNt1Kcy1> (Accessed: 2026-05-06).

