Russia finds itself in a ‘war economy’ weakened by a lack of manpower and the huge costs of the conflict with Ukraine.
Even before Ukraine will launch its surprise operation in the Russian Kursk region, Reports from several economically developed Russian regions spoke of a large salary increase for soldiers recruited to the front.
In this particular warRussia has opted for a mixed mobilization model and hiring of soldiers. However, it has been introduced payment fight model for both categorieswith the only difference that the contracted part of his Army at the front voluntarily accepted the job and the mobilized part was forced into servicethey still get paid.
From July 2023 to June of this year, the Russian state paid the participants in the Ukrainian warto the wounded soldiers and the relatives of the deceased some 3 trillion rubles (30 billion euros), which is equivalent to 1.5% of Russian GDPaccording to a study by the Re:Russia project.
Economic incentives needed to recruit more soldiers
The region of Krasnodar es one of the main administrative units of Russia in regards to payment for recruiting soldiers front-line fighters, and recently increased the lump sum for joining the war to the equivalent of about 16.000 euros. This is considered a considerable sum for many poor Russians.
In comparison, the second largest city in Russia, Saint Petersburg, offers some 11,000 euros for new recruitsand the capital, Moscowincreased his reward to mercenary soldiers to about 19.000 euros.
Since the increase in payment for conscription of Russian soldiers occurred before the Ukrainian Kursk offensivethis trend cannot be attributed to this concrete change in the dynamics of war.
As Alexander Clarkson, professor at King’s College London, explained to ‘Euronews’: “Russia is running out of willing volunteersbut he does not want to repeat an unpopular mobilization. That’s why signing bonuses continue to rise.”
The shortage of volunteers for war is not the only reason for increased spending by the Russian state on recruitment of front-line soldiers.
A competition between the Armed Forces and the war industry
Ivan Kłyszcz, researcher at the International Defense and Security Center from Tallinn, told ‘Euronews’: “Competitive salaries and better conditions for the military also play an important role.”
He Russian army must now compete with russian military industry, booming and also hungry for labor. This portrays the dilemma facing Russian leaders: recruit soldiers or hire workers. Mart Kuldkepp, professor at University College London, summarizes for ‘Euronews’ the problematic bifurcation of the Russian war effort.
“He Ministry of Defense It increasingly has to compete with other employers, even in strategically important sectors. This creates not only a salary competition, but also dilemmas about which state interests to prioritize.
The question of military needs facing the needs of the industry cannot be easily resolved in the case of Russiaespecially now that the number of workers Immigrants continue to decline due to increased repression police after a series of terrorist attacks carried out in Russia by radical Islamist groups.
For example, the flow of labor migrants from Tajikistan to Russia in the first half of 2024 decreased by 16%, according to figures froml Ministry of Labor of Tajikistan.
Labor is depleted
Edward Hunter Christie, former NATO official and senior researcher at the FIIA, put into perspective for ‘Euronews’ the problem faced by Russian leaders.
“Whether workers are eliminated through conscriptionas if they are attracted with high military salaries, in both cases there is a risk that there will be shortages in the civilian economy“, he states.
ADVERTISING“Ultimately, it is possible that salaries have to increase too in certain sectors of the economy. All this will be quite expensive for the Russian stateand will also fuel inflation.”
Inflation and lack of labor
The inflationtogether with the aggravating shortage of labor, constitutes a dark cloud over the Russian economy, which has shown signs of growth after the transition to war mode.
Janis Kluge, senior associate of the German Institute for International and Security Affairstold ‘Euronews’: “The only companies that can prosper in this environment are suppliers for war.”
“The inevitable consequence is that the economy will contract and, over time, Inflation will also reduce the income of the population. The severity will depend on how sanctions evolve and the price of oil.
ADVERTISINGExodus of Russian citizens
Los Russia problems with labor are exasperated by the fact that since the start of total war against Ukraine have occurred in the country waves of mass emigration of the youngest and most qualified workforce.
Maria Snegovaya, senior researcher for Russia and Eurasia at the Center for Strategic and International Studiestold ‘Euronews’: “The total number of emigrants from 2022 is estimated at around 500,000 and one million peoples, many of whom are younger, better educated and work in key industries such as information technology sector“.
“If we add to this thes mobilized and volunteers in generaldue to the combination of coronavirusmobilization and war related casualties “Between 2020 and 2023, Russia’s labor pool has lost between 1.9 and 2.8 million people.”
The aging of the population
We must also take into account the age differential of the Russian population. According to the most recent data from Rosstat for 2024, the absolute number of pensioners in Russia is about 41 million.
ADVERTISINGIt is not surprising that almost half of Russian industrial companies already declared last year that they lack sufficient staff. as Snegovaya concludes: “The economy is overheating”
“The Central Bank of Russia the interest rate has risen even above its current unprecedented level of 18%. The Central Bank’s changes will not affect the true sources of inflation: Rising consumer spending driven by defense spending, social spending for war participants, and labor shortages.”
Even with the war economy underwayRussian GDP has increased “only 0.8% per year on average,” says Kluge. As Inflation and labor shortages increase and Ukraine brings the war to Russian territory, the Russian economy does not seem to be in good shape.
