Free Russia Foundation Launches #NoToWar Campaign
Vladimir Milov

Free Russia Foundation Vice President for International Advocacy

Oct 04, 2022
There’s no money, but you keep on fighting. Vladimir Milov on how Putin is running out of money for war effort

Originally published at The Insider

“There’s no money, but you hold on” is a phrase uttered in May 2016 by then-Russian Prime Minister Dmitry Medvedev during a visit to Crimea in response to a pensioner’s complaint about her small pension.

As for the economic aspect of Putin’s mobilization, most commentators focus on the disastrous consequences for the skilled labor market and the loss of jobs by companies. This is all true: for example, back in July Putin admitted at a meeting with his ministers that a shortage of a million skilled workers is expected in the IT industry alone over the next two years, and now it is clear that this shortage will only get worse.

According to a Rosstat survey of entrepreneurs, the lack of qualified workers is one of the top 5 factors limiting industrial production growth, and the importance of this problem in 2022 has increased. Mobilization poses the most unexpected threats, particularly with regard to the attempts to circumvent Western sanctions: for example, it affects small companies that specialize in complex schemes of parallel imports.

But the magnitude of the impact of mobilization on the skilled labor market has yet to be assessed; for now, we can only guess. But what has now become abundantly clear is that Putin will not have sufficient budget to maintain, equip, and supply the newly mobilized troops.

This is clear from the document titled, “Basic Trends in Budget, Taxation, and Customs Tariff Policy for 2023-2025,” obtained by Vedomosti. This document, for the first time, allows us to see the scale of the increase in military spending in connection with Putin’s aggression against Ukraine. Its main conclusion is hard-hitting: Putin will not have enough money for further financing of the war and mobilization. All of his efforts are doomed, primarily financially.

What does the document say? That military spending in 2022-2024 (the government does not have plans for a later period, and we want to believe that a different government will be deciding this question in the future) is supposed to increase from the previously approved about 3 trillion rubles per year to about 5 trillion rubles per year (by a total of 3.4 trillion over three years, from 2022 to 2024 inclusive).

This is absolutely insufficient even to finance the current war – not to mention the cost of mobilizing a few hundred thousand additional manpower. We don’t know how many Russians will be ultimately drafted as part of the mobilization – maybe the declared 300,000, maybe more or less. But relatively speaking, this is a force comparable to the current number of contract servicemen announced by Shoigu (the Russian Defense Ministry talked about 400,000 contract servicemen).

To put it simply, according to the peacetime military budget approved earlier, of the 3.5 trillion rubles approximately 1.2-1.5 trillion rubles was spent on maintaining the army itself (salaries and supplies) (the rest was spent on military industrial complex and armament procurements, mainly via the “classified” items of the military budget). It’s way too little for the second largest army in the world. For example, in December, at the board meeting of the Defense Ministry Putin admitted that the average salary of an army Lieutenant was only 81,000 rubles.

It is clear that with such a large-scale war effort the amount of money spent on salaries including combat pay must increase dramatically. By these items alone, the maintenance costs of the troops deployed in Ukraine today should be increased by at least 3-4 trillion rubles a year, according to my estimates, but not by the planned 1-2 trillion rubles in any event.

However, in addition to the active troops Putin wants to mobilize a second army, comparable in size, officially equating the newly mobilized with contract servicemen. It is obvious that even the increased 5 trillion-ruble annual military budget will not be enough for these purposes. It seems that Putin and the Ministry of Finance are preparing for “cheating” military servicemen out of their salaries en masse (show these figures to your relatives and friends and warn them about it) – there is no other explanation in sight (in the case of deaths, large compensation will still have to be paid to the families).

The situation is very bad with the supply of the army in general. The current military budget allocates only 436 billion rubles for these purposes for the entire army (the data are taken from the materials for the federal budget approved in December 2021). We can see this miserable “supply” on the battlefield in all its glory. In order to ensure a normal supply of the army, Putin would have to allocate funds for this purpose of a completely different order of magnitude: several trillion rubles per year. No one is going to do that. Apparently, the government counts on the military obtaining food and uniforms “by themselves.”

Besides the fact that it will not be possible to finance the newly recruited troops and their supplies from the newly proposed 4.5-5 trillion-ruble annual budget, there is a more serious problem. In the previous years, about two-thirds of the military budget was spent not on the army itself but on the production and purchase of weapons, the military-industrial complex. This amount equaled approximately 2 trillion out of the total 3 trillion spent on the military. Arms expenditures were mostly classified (the disclosed one third of the military budget was used to maintain the army itself, which appeared to be a sort of unloved Cinderella in comparison with the main recipient of military spending, the military-industrial complex, favored by Putin).

Although we do not know exactly how the items of the increased military budget will be distributed, we can say with certainty that amid the enormous losses of arms in Ukraine and the depletion of ammunition reserves, the share of MIC spending in the 2022-2024 military budget will certainly not decrease and may even increase. Therefore, most likely no additional money will go to the army itself.

It turns out that nobody is going to finance or supply this enormous newly recruited 300,000-strong (or whatever) force. Leaving aside other aspects, we shall make only a single point – the army which is not paid and which is not provided with any supplies will not be able to fight. The fact is that the newly mobilized troops are being literally marched to certain death, because insufficient money has been allocated for their gear and supplies. Given the current scale of the war effort, one would expect Putin to increase the military budget to, say, 9-10 trillion rubles a year – but nothing of the kind has been observed.

One may ask: is it possible that there are some secret expenditures that we don’t know about? No, there are not. The above figures for total military spending include classified items and are reflected in the generalized figures of the Ministry of Finance. If there were anything else, it could be reckoned. Any conclusions as to why Putin has been throwing the newly mobilized into battle without allocating money for such basic things as salaries and army supplies are for you to draw – it seems we are witnessing one of the most glaring examples of a complete breakdown of the Russian system of governance, which is not capable of adequately assessing reality. If true, Putin’s catastrophic defeat is just around the corner.