Thursday, 15 June 2017 08:28

The Price of Russia's "Might"

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The Soviet Union had been a generous and gratuitous sponsor of fraternal communist parties, liberation movements, developing countries, and international progressive organisations, etc. You know how it all ended. Russia, the successor to the USSR, has also been very generous in financing various actions worldwide to show its citizens the greatness and might of the country that has finally risen from its knees.

And this might is very expensive indeed, especially for the Russians themselves.

A five-day war with Georgia in 2008, placed Russia financially responsible for two breakaway enclaves Abkhazia and South Ossetia, whose budgets are now formed from Russian subsidies, totalling more than $200 million annually. E.g., since the recognition of its independence by Russia only, in 2008, “little” South Ossetia (with 53 thousand residents) received about $1 billion from Russia.

Transnistria has been enjoying similar financial assistance. Besides, the "humanitarian" gas for Tiraspol during the years of its “independence”, cost Moscow about $6 billion.

According to the National Security and Defenсe Council of Ukraine, on war in Donbas, Russia annually spends around $6 billion (i.e. $3 billion for managing self-proclaimed republics and $3 billion for military expenditures). Undoubtedly, this is an approximate, but quite real figure (if we take into account the financial support for more than 3.7 million inhabitants of the occupied regions of Donbas (ORDLO), and the provision of 40,000 military contingent and daily conduct of military operations. By the way, the population of ORDLO is five times larger than that of Abkhazia, South Ossetia and Transnistria combined). By the way, only the power supply to "LNR" costs Russian taxpayers $35-44 million annually. However, war costs are classified information, as well as the death and injury rates of Russian soldiers. (According to the Committee of Soldiers' Mothers of Russia, about 1,500 Russian servicemen died in the war in Donbas).

Obviously, all these unrecognized republics that are financed by Russian taxpayers would not last long without it.

The annexed Crimea places another financial burden on the Russian Federation. In 2017, subsidies from the federal budget make up $ 1.4 billion – in other words, Moscow finances about 73% of all Crimea's annual budget expenditures! The Crimea is a chronically subsidised region, draining the resources of ordinary Russian citizens, and making the slogan "Crimea is ours!" an expensive business (and this does not include the covert budget items such as military spending). By the way, federal costs for Crimea are similar to annual budgets of the neighbouring Bryansk and Belgorod regions.


According to RBC's estimates, only the year of war in Syria (September 2015-September 2016) cost Russia about $900 million (contingent maintenance, combat sorties, missile launches, etc.). And this war is not over for Russia – it will continue spending budgetary money for supporting Assad troops. How much? That is a military secret. Because the Kremlin's classified expenses account for about a fifth of the total Russian budget.


The above costs for wars in Syria and Ukraine, and financial support to Crimea and Donbas are not that critical for the Russian Federation, since they constitute about 3-4% of the budget expenditure in 2017. But bear in mind this is only a visible part of the iceberg of an expansionary foreign policy. What about the propaganda costs? And secret cyberwar? Secret special operations? And the support for agents of influence in Europe and worldwide? (According to some estimates, only managing a Ukrainian branch of the CIS Countries Institute cost Russia $2 million).

Russian economy, however, has been hit hard by western sanctions introduced after the Crimea annexation and the war in Donbas. According to the Russian Institute for Strategic Analysis, for the entire sanction period, the total loss of Russian GDP is approximately 2-2.5 trillion rubbles, about $30 billion.

The Russian Academy of National Economy estimated that Russian food counter-sanctions (almost 11 thousand tons of sanction products had been destroyed) annually cost Russia 600 billion rubbles, i.e. about $9 billion.

Western sanctions, limiting investment, loans and technology, coupled with falling oil prices, have already had a noticeable effect on the Russian stagnant economy. These unfavourable external factors have "dried up" the Reserve Fund fourfold to almost $16 billion. Statements that Western sanctions are the drivers for the Russian economy, that import substitution programme is successfully moving forward have been nothing more than political cunning. Western sanctions are a tangible factor that restrains Russian foreign expansion.

Meanwhile, poverty is steadily growing in Russia, social well-being of citizens is deteriorating, social spending is decreasing, the gap between the rich and the poor is growing, the raw material economy is stagnating, corruption is rampant, and capital is flowing abroad.

Against this background, the militarisation of the country and of public consciousness is unravelling. Russia is now the third world's largest military spender, but in terms of GDP, the country does not even enter the top ten.

"Middle class in epaulettes" is growing by leaps and bounds. According to expert estimates, the number of siloviki in the country already exceeds 4 million personnel (the army – 1.9 million, the police – 1 million, the National Guard – 400,000, the Ministry for Emergency Situations and the Ministry of Justice - more than 600,000). I would also add here special services such as FSB, SVR, GRU, FSO.


In other words, the number of militarised structures in present-day Russia is comparable to the number of people «in epaulettes» in the former USSR. Only the population in Russia is half as much. And for the collapsed Union, the cost of defence once used to be an unbearable burden.

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Mykhailo Pashkov

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Co-director, Foreign relations and international security programmes

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Born in 1958 in Roslavl, Smolensk oblast, Russia.

Education:

Smolensk Institute of Pedagogy, Faculty of the Russian Language and Literature (1979);
Moscow Institute of Youth, Faculty of Journalism (1986);
Kyiv Institute of Political Science and Public Administration (1991).
Ph. D. in Philosophy; the author of more than 50 publications.

1979–1989 — worked at different positions in district, regional and republican newspapers in Russia and Moldova;
1991–1994 — worked in scientific institutions of the National Academy of Sciences of Ukraine;
1994–1998 — diplomatic service at the Embassy of Ukraine in the Russian Federation;
Since December 1999 — Razumkov Centre Leading Expert.
Diplomatic rank: First Secretary. Most recent position in state structures — Chief Consultant, Analytical Service of Ukraine's NSDC Staff.


Telephone: (+380-44) 206-85-08
E-mail: pashkov@razumkov.org.ua