The Drug of War. Putin is hooked on it.
The incoming US president has famously promised the world that 24 hours is all he’ll need to end the war in Ukraine. Given Trump’s avowed friendship with the Russian President, some have taken that to mean he’ll simply stop US arms shipments, believing this will force Kyiv to yield and acknowledge that the territory currently occupied by Russian forces now belongs to his friend, Putin.
If it’s just Trump assuming this is what his buddy in the Kremlin wants, it won’t fly. That’s because a closer look at the current economic situation inside Russia, together with the recent strategic movements in the Middle East, suggests that an end to the war in Ukraine is actually the last thing Putin will want. Why? Because withdrawal from Ukraine for Russia could trigger financial suicide.
On the face of it, however, ending the war as soon as possible would seem the only reasonable course of action. While it’s true that the territory gained by Russian forces from October through November has been significant and probably heartening to Putin, these advances have come at a terrible cost.
Russian troop and equipment losses from October through to November have set new records. The Kyiv Independent reported that on November 28, Russia finally broke through the one-day record of 2000 dead-or-wounded soldiers, with 2030 casualties. The previous record was set on November 12th when Russia suffered 1950 casualties. The record before that stood at 1770 casualties set on November 10th. For just the month of November, the Ukraine Defense Ministry reported 45,720 Russian battlefield casualties. September and October held the previous records.
As for the material losses… Ukraine destroyed 307 Russian tanks in November, on top of 279 tanks lost in October and 291 in September. Total Russian tank losses prior to these three particularly gruesome months were 9500. Around 2000 armored personnel carriers and artillery pieces (self-propelled and towed) were also destroyed in this three-month period. The New Voice of Ukraine, a well-respected news source on the war, estimates the cost of the losses of these assets in November alone at US$3bn.
Yes, Russia has won more territory, but the cost has been gargantuan. It’s also unsustainable
So, yes, Russia has won more territory (which it completely obliterates and therefore renders useless in its wake), but the cost has been gargantuan. It’s also unsustainable.
Manpower has become a significant issue. Indeed, Putin’s apparent lack of concern over the destruction of Russia’s youth is about to change, not because the president has suddenly grown a heart or discovered his conscience, but because it’s now limiting his aspirations for the “special military operation.”
If troop numbers weren’t an issue, Putin would never have gone cap in hand to North Korea for soldiers, which he is deploying to expel Ukrainian forces from the Kursk region, because there aren’t enough Russian troops on the contact line in Ukraine to hold it if those forces are redeployed elsewhere. In fact, Russian troop losses have become impossible to replenish more generally, short of another general mobilization, something the Russian president clearly wants to avoid at all costs for political reasons. The financial costs here, too, are equally staggering. Some regions in Russia will now pay new recruits volunteering to fight in Ukraine a sign-on bonus of up to US$30,000. That’s a fortune in a country where the average yearly wage is around US$26,000. It’s also significantly more than a US Army private soldier will earn in an entire year (around US$24,000).
Of course, given that the lifespan of the average Russian soldier on the front lines in Ukraine is between two weeks and a month, the annual salary is academic, which is why the bonus is still not enough to help recruiters hit their enlistment targets.
On top of the cost of recruiting these contract soldiers comes the cost of paying the families when they’re killed in the fighting. The Russian government will provide a compensation payment of around US$84,000 for a dead soldier — a fortune in some poorer regions of the Russian Federation where most of the recruitment and mobilization is happening and, therefore, most of the compensation. But if the death toll as of December 2024 could be the number claimed by the Ukrainian General Staff — 640,000 — the hit to the national budget is, in itself, a killer: US$54.6bn and growing.
As a side note, Russian Deputy Defense Minister Anna Tsivilyova, Putin’s cousin (once removed), let slip recently that 48,000 relatives had submitted DNA samples of men missing in action in an attempt to have their remains identified. Until the claims over those MIAs are resolved, the compensation payments are stalled. Perhaps, even,
for years. Could this sleight-of-hand employed by the Kremlin be a cynical ploy to amortize the compensation imposition on the budget?
Considering all this death and the sheer financial burden of it, why wouldn’t Putin want the war to end? Well, this is where it gets interesting.
To begin with, in order to keep the tanks, guns, bullets, rockets, artillery shells, and drones flowing to the boys at the front, Putin has set the entire Russian economy to work satisfying the demand (which it’s failing to do, but that’s another story). Now, wholly 40% of the entire Russian budget for the coming year is to be spent on the war, or around 6.3% of the nation’s GDP (most NATO countries struggle to hit 3%).
Given that the lifespan of the average Russian soldier on the front lines in Ukraine is between two weeks and a month, the annual salary is academic, which is why the bonus is still not enough to help recruiters hit their enlistment targets
Russian factories that were making consumer goods are now retooled to make things painted a drab green for the nation’s biggest consumer.
Factories need a workforce, but that’s hard to find when a large percentage of the labor pool has been shipped off to Ukraine or has returned maimed or in a body bag. And the labor left behind in Russia is demanding higher salaries, competing with the state’s sign-on bounty and high wages for a stint in Ukraine. All these additional rubles sloshing around the Russian economy have triggered inflation, which is currently running at (a technical) 8.9%. However, the lived inflation experienced by the average Russian at the supermarket is believed to be closer to 26%. And general interest rates are at a scary 21%. Those figures are high, but people are earning more money so it’s doable, just — at least for now.
If all that wasn’t bad enough, a new round of US sanctions has just tanked the ruble. That makes anything imported into Russia cost more, which will add to inflation going forward. It also makes exports made by Russia cheaper, the usual silver lining. Unfortunately, though, at this time not many countries want to buy Russian, not even its big earner, military hardware, sales of which have sunk like its Black Sea fleet. And the stuff it can sell, oil and gas? That has suddenly got dirt cheap with China and India driving even harder bargains.
On the subject of oil, despite Western sanctions, up until October this year, Russia was making around US$1bn a day from sales. However, sales have since dropped to around US$700 million a day. That’s a shortfall of around US$300 million a day, a lusty shortfall that quickly adds up to a big hole in the finances.
There’s more, but you get the picture. And it’s not pretty. Putin is now riding atop a flaming war-time economic juggernaut self-sustained by close to a million men in the field.
And so now, if Trump comes along and pulls the plug on the war. What happens? That flaming juggernaut will fly apart at the seams.
To begin with, a large chunk of that juggernaut, those million men fighting Ukraine, will come home. They’ll want jobs. But when the war is over, Russia’s only industry, the industry of war, won’t need a workforce, because there won’t be a war hungry for exploding iron. No jobs for the boys coming home will spell trouble.
These returning servicemen will have plenty of saved money to spend, though, and spend it they will, sending inflation through the roof. This will require a strong hand on monetary policy to rein in, but when the interest rate set by the Bank of Russia is already that stratospheric 21%, how high will they have to go?
These veterans will also bring skyrocketing rates of alcoholism, drug-related crime, and PTSD with them, causing all kinds of social unrest. And many thousands of them will be so badly physically and/or mentally mauled that they probably won’t ever be able to work again, so the state will have no choice but to support them. Ker-ching.
And there are strategic geopolitical movements that also go into this economic IED. The recent fall of the al-Assad regime in Syria that took the world by surprise, also caught Putin napping. The survival of Bashar al-Assad’s government was a Putin pet project, one that cost billions of rubles with the Russian air force and Yevgeny Prigozin’s (remember him?) Wagner mercenaries conducting all kinds of nasty campaigns against Syria’s anti-government forces, including the rebels that ultimately made the winning breakthrough, Hayat Tahrir al-Sham (HTS).
Right up until the fall of Damascus, the Russians were calling HTS terrorists. That changed when the reality of al-Assad’s downfall became apparent. Now, listening to the Kremlin, you’d think they were all pals who’d had a minor misunderstanding
HTS, elements of which were aligned with al-Qaida prior to a split, claims to be a more moderate brand of Islamist — time will tell whether that’s true. But what’s undeniable is that Putin has been bombing Syrians relentlessly on behalf of al-Assad for 9 years and the leaders of HTS probably aren’t too well disposed toward him.
A critical issue for Putin is that Russia has had the pleasure of commanding the large Tartus naval facility in Syria, the home port for its Mediterranean surface and submarine fleet. This is, or was, Russia’s only base in the Med, one it has had the use of since 1971.
Tartus is the staging post from which Russia has projected its power into Africa and the Middle East. Satellite images taken over the last couple of days show Russians hurriedly packing up and leaving.
Russia has also operated a large air base in Syria since 2015 — Khmeimim Air Base — which it expanded and modernized, but it’s beating a hasty retreat from this facility also.
Right up until the fall of Damascus, the Russians were calling HTS terrorists. That changed when the reality of al-Assad’s downfall became apparent. Now, listening to the Kremlin, you’d think they were all pals who’d had a minor misunderstanding.
The West is now courting the new power in Syria, led by US Secretary of State Anthony Blinkin. The Allies, too, have made mistakes in Syria, but nothing like Putin in the eyes of Syria’s freedom fighters. Whichever way these cards fall, what’s most likely is that Russia’s key military outposts will be forever lost to it.
All of this is enormously embarrassing to Putin. Al-Assad’s fall says Russia doesn’t have the ability to sustain allies in need when the chips are down.
And then there’s Iran, which has become a key supplier to Russia in its Ukraine excursion. Tehran’s nose has been seriously bloodied by Israel over the past 12 months with Axis of Resistance partners, Hamas in Gaza, Hezbollah in Lebanon, the Houthis in Yemen, and numerous militia groups in Iraq and Syria all severely mauled, even de-fanged. Iran, too, was a key supporter of Al-Assad and his regime. And Russia, being a friend of Iran, thoroughly enjoyed watching all the sand the theocracy was kicking in the West’s face through its proxy activities. But those days are clearly over, at least for a while.
So, where does all this leave Putin? At the very least, his dreams of rebuilding the glory days of Soviet power are stalled in Ukraine, shredded abroad, and they’re sending him broke at home. The only area in which he does have a modicum of control — Ukraine. If he loses here, too, what’s left? At the very least, the Putin-as-Strongman Brand he treasures will be irrevocably tarnished. He really only has two choices: end the war slowly and give the Russian economy time to restructure itself, or fight on for the win and absorb what he can of Ukraine’s vast agricultural, mineral, and fossil fuel wealth.
So, when Trump comes knocking with his proposal to end the fighting overnight, expect the Russian leader to play hardball with a set of ugly conditions Ukrainian President Zelensky will refuse to swallow. It will be a Putin ploy to keep the war going. Russia’s well-being, along with his own, depends on it. The Russian president is desperate. And addicts can get quite unpleasant when you threaten their supply.
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A fascinating read, as usual. It’ll be really interesting to see what Trump will actually do re Ukraine. Either way, it won’t be pretty.