Russia‘s military buildup efforts combined with Western sanctions are having long-term negative effects on the Russian economy, the Institute for the Study of War (ISW) wrote in a new daily analysis, adding that this is exactly what it had previously predicted.
ISW notes that financial experts have told that the Kremlin will face a budget deficit that will “deplete Moscow’s reserves to the lowest level in years” due to projected reductions in energy revenues, as well as sanctions and the cost of Russian mobilization.
One financial expert predicted that payments to mobilized Russians, including social benefits, could cost the Kremlin between 900 billion rubles and three trillion (between $14.6 and $32.2 billion) over the next six months.
This figure does not include payments to other soldiers such as BARS (reservists), volunteer battalions and the long-term obligation to pay contract soldiers, volunteers and non-military specialists who have moved to occupied territories, as well as mercenaries fighting for Russia.
IS previously estimated that a volunteer battalion of 400 soldiers costs Russia at least $1.2 million a month, excluding recruitment bonuses and special payments for military achievements.
The Kremlin continues to rely heavily on financial incentives for Russians to fight in Ukraine, which will likely continue to weigh on the Russian economy for decades, the Institute for the Study of War writes, among others.
Russian officials promised salaries for volunteers and conscripts that were more than double the average salary of Russian civilians before the six-year Russian occupation of Ukraine.
The Kremlin has tried to transfer some military spending to Russia’s federal entities, but it is likely that more will soon have to reach the federal budget.
The Kremlin, according to ISW, is already facing challenges in delivering the promised compensation and challenges that are increasing social tensions within Russian society.