Russia's Economy: Dependent on the Ukraine War

Russia's Economy: Dependent on the Ukraine War

Russia's economy is experiencing growth despite the Ukraine conflict and the existing sanctions. According to the Kremlin, gross domestic product rose by 5.5 percent in the third quarter of 2023 compared to the previous year and is expected to rise by 2.8 percent in 2024. Experts attribute this development to the fact that Russia's economy both benefits from and is dependent on the war in Ukraine. Researchers such as economist Renaud Foucart emphasize that the war contributes significantly to the country's economic growth and that an end to the conflict could have devastating economic consequences for Russia.

The change that the Russian economy underwent as a result of the war is clearly visible. The state invests around 40 percent of its budget in the conflict in Ukraine. Soldiers' salaries, weapons purchases and compensation for those injured or killed in action also contribute to the gross domestic product. Despite this support for the war sector, other sectors of the Russian economy are suffering. There is a significant shortage of skilled workers as many young talents leave the country or are drafted. In addition, direct investments in the country are declining.

Oil and gas exports continue to be significant sources of revenue for Russia. Trade through third countries, circumventing sanctions and regulating foreign companies contribute to the resilience of the economy. Despite these circumstances, Renaud Foucart sees no incentive for Russia to end the conflict. Neither a victory nor a defeat in the Ukraine war would benefit the country in the long term. A lasting stalemate could ultimately save Russia from total economic collapse, the expert concluded.