Putin’s wars already costing Russia ~100 billion US dollars a year, Illarionov says

Russians invade Ukraine

 

2015/10/11 • Analysis & Opinion, Russia, War in the Donbas

Estimating the real costs, direct and indirect, of a military conflict is always difficult because so many factors need to be considered, but Moscow economist Andrey Illarionov says that even if one ignores direct human and property losses, Vladimir Putin’s wars are currently costing Russia approximately 94 billion US dollars every year.

One widely cited estimate of the costs of the Ukrainian war for Russia is provided in the report “Putin. War.” It put the price tag of Putin’s actions at 18 billion US dollars. But that figure leaves out four major factors which mean that the real cost has been and remains far higher, Illarionov says.

  • First, he notes, “all military expenditures in the war against Ukraine have been much larger than the direct costs of carrying out military actions directly on the territory of Ukraine.
  • Second, “spending on the preparation and conduct of the war with Ukraine began long before the start of military operations against Ukraine.”
  • Third, Illarionov continues, “the current war begun by the Kremlin is a war not only with Ukraine.” And fourth, “additional costs in connection with the preparation and conduct of military operations are born not only by the state budget but also by the private sector.” Consequently, one must include costs which “Putin.War” does not.
Andrey Illarionov (Image: kasparov.ru)

Andrey Illarionov (Image: kasparov.ru)

Illarionov says that his accounting is based on the following assumptions: that the costs of the war must include all increases in military spending in the period of preparing and conducting the war compared to the levels in previous years, that spending for war is greater than spending on the war in Ukraine because Ukraine is only one front in the Kremlin’s war, that the costs of Russian rearmament which began in 2011 must be included, that the base line of military spending is 2.7 percent of GDP, that increased capital outflow during the conflict must be included, and that the average capital outflow against which that is measured is about two percent of GDP from 2000 to 2011.

“Thus,” the Moscow economist says, “the total cost of the current war can be defined as the sum of the direct cost for the state budget… and the costs for the preparation and conduct of military operations for the private sector” as measured against pre-war preparation levels in both cases.”

Using these as the basis for a calculation, Illarionov says that Russian government spending on the military rose from 25 billion US dollars a year before the buildup to 61 billion US dollars a year from 2012 through 2015. That alone means that the Ukrainian war has been costing Moscow 36 billion US dollars a year – or 144 billion US dollars for the four years.

The cost of the war for the Russian private sector, he says, is reflected in the increase of capital outflow from the 19 billion US dollars it averaged annually from 2000 to 2011 to 93 billion US dollars a year from 2012 to 2015. That means that there has been an excess in capital outflow over the past four years totaling 232 billion US dollars.

Of course, Illarionov continues, his calculations do not take into account the human losses, the destruction of property and infrastructure, the costs of supporting refugees, as well as “certain other expenses.” And they do not take into account the new additional costs imposed by Putin’s actions in Syria.

The last, he says, “means an inevitable increase in the price of the current war for the Russian state budget, the Russian private sector, all of Russian society as well as for the residents of states in the Middle East. And those costs will all go up significantly and for even more people if Putin’s intervention in Syria leads to an increase in the price of oil.

  • Putin's military aggression in Donbas devastated Ukrainian territories under the Russian occupation (Image: Novosti Segodnia)
    Putin's military aggression in Donbas devastated Ukrainian territories under the Russian occupation (Image: Novosti Segodnia)
  • Devastation in the Donbas - the product of Putin's military aggression into peaceful Ukraine. (Image: Slavyansk Delovoy)
    Devastation in the Donbas - the product of Putin's military aggression into peaceful Ukraine. (Image: Slavyansk Delovoy)
  • A Russian mercenary in the Donbas with heavily bleeding leg wounds being evacuated in the rear (Image: censor.net.ua)
    A Russian mercenary in the Donbas with heavily bleeding leg wounds being evacuated in the rear (Image: censor.net.ua)
  • Russian Federation servicemen from Chechnia arriving in Donbas in 2014 (Image: AFP)
    Russian Federation servicemen from Chechnia arriving in Donbas in 2014 (Image: AFP)
  • One of the groups of Russian special forces and mercenaries that started the Russian invasion in Donbas, Ukraine
    One of the groups of Russian special forces and mercenaries that started the Russian invasion in Donbas, Ukraine
  • Russian mercenary at the devasted Donetsk airport in Donbas, Ukraine (Image: LB.ua)
    Russian mercenary at the devasted Donetsk airport in Donbas, Ukraine (Image: LB.ua)
  • Russian Cossack mercenaries in Donbas, Ukraine posing for camera (Image: nr2.com.ua)
    Russian Cossack mercenaries in Donbas, Ukraine posing for camera (Image: nr2.com.ua)
  • Russian mercenaries in Donbas, Ukraine (Image: uainfo.org)
    Russian mercenaries in Donbas, Ukraine (Image: uainfo.org)
  • An armed personnel carrier with Russian mercenaries in Donbas, Ukraine (Image: inforesist.org)
    An armed personnel carrier with Russian mercenaries in Donbas, Ukraine (Image: inforesist.org)
  • Russian mercenaries from Chechnya in Donbas, Ukraine (Image: inforesist.org)
    Russian mercenaries from Chechnya region in Donbas, Ukraine (Image: inforesist.org)
  • Russian mercenaries in Ukraine
    Russian mercenaries in Donbas, Ukraine
  • Russian "green men" occupation force surrounding a Ukrainian military base in Perevalne, Crimea, in March 2014.
    Russian "green men" occupation force surrounding a Ukrainian military base in Perevalne, Crimea, in March 2014.
  • Russian marines march along the embankment of Sevastopol, Crimea, during a celebration of the Navy Day on Sunday, July 26, 2015. (Image: AP Photo/ Alexander Polegenko)
    Russian marines march along the embankment of Sevastopol, Crimea, during a celebration of the Navy Day on Sunday, July 26, 2015. (Image: AP Photo/ Alexander Polegenko)
  • A view of the Russian entry point into the Ukrainian peninsula of Crimea occupied by Russia in March 2014 (Image: Kommersant.ru)
    A view of the Russian entry point into the Ukrainian peninsula of Crimea occupied by Russia in March 2014 (Image: Kommersant.ru)
  • Putin speaking in occupied Sevastopol on the anniversary of the WW2 Victory Day to celebrate the annexation of the Crimean peninsula from Ukraine conducted by his military and special services two months earlier. May 9, 2014 (Image: kremlin.ru)
    Putin speaking in occupied Sevastopol on the anniversary of the WW2 Victory Day to celebrate the annexation of the Crimean peninsula from Ukraine conducted by his military and special services two months earlier. May 9, 2014 (Image: kremlin.ru)
  • Armed guards block the entrance to a naval border guard base in Sevastopol, in the Crimea region of Ukraine March 2014. New York Times
    Armed guards block the entranc
  • In a hybrid war operation, Russian "little green men", heavily armed soldiers without insignia, annexed Crimea from Ukraine
    In a hybrid war operation, Russian "little green men", heavily armed soldiers without insignia, annexed Crimea from Ukraine
  • A Ukrainian base in Crimea surrounded by the "little green men," heavily armed troops wearing no ensignia to hide the fact that the troops were Russian special forces. February 2014
    A Ukrainian base in Crimea surrounded by the "little green men," heavily armed troops wearing no ensignia to hide the fact that the troops were Russian special forces. February 2014
  • Russian army invading Crimea, Ukraine
    Russian army invading Crimea, Ukraine
  • Angeblicher russischer Soldat vor dem ukrainischen Militärstützpunkt Perewalnoje bei Simferopol auf der Krim - Foto: Daniel Van Moll/Nur/Photoshot
    Angeblicher russischer Soldat vor dem ukrainischen Militärstützpunkt Perewalnoje bei Simferopol auf der Krim - Foto: Daniel Van Moll/Nur/Photoshot
  • Trucks with the "little green men" - Russian soldiers hiding their identities and without insignia while annexing the Ukrainian peninsula of Crimea
    Trucks with the "little green men" - Russian soldiers hiding their identities and without insignia while annexing the Ukrainian peninsula of Crimea
  • A soldier of the Russian annexation force flashes a victory sign while marching near a Ukrainian army base in Perevalne, Crimea. March 2014
    A soldier of the Russian annexation force flashes a victory sign while marching near a Ukrainian army base in Perevalne, Crimea. March 2014
  • Armed Russian soldiers block the entrance to a Ukrainian naval border guard base in Sevastopol during the annexation of the Crimea region of Ukraine. March 2014. (Image: New York Times)
    Armed Russian soldiers block the entrance to a Ukrainian naval border guard base in Sevastopol during the annexation of the Crimea region of Ukraine. March 2014. (Image: New York Times)

Edited by: A. N.

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  • Vlad Pufagtinenko

    Another good news story….Glory to Ukraine.

  • Murf

    A 100 Billion?
    That’s conservative.
    They lost 151 B due to capitol flight in 2014, 100 Billion in 2015.
    Sanctions cost them 22 billion in 14. 76 billion so far in 2015.
    Stabilizing the Ruble another 138 Billion.
    The PM said there was a 100 in lost trade six months ago.

    Then there is devaluation of the Ruble.
    Loss of market share in the EU gas market.
    The Collapse in oil prices which would not been as sever absent Putin’s dirty little war.
    A loss of 500 billion as a result of Putin’s failed foreign policy is not over stating things.