This article first appeared at ntv.de.
Russia is going down the drain. This is not only German reports, but also American and even Russian reports: Last summer, the “gas station of the world” suddenly ran out of fuel. At the end of the year, eggs were scarce and expensive. Shortly after New Year’s Eve, the heating systems failed in the bitterly cold Russian winter. According to the Moscow Times, at least 43 of 85 Russian regions and republics have been affected by supply outages in recent weeks. Hundreds, sometimes thousands, of Russians were without heating, water, electricity or gas. This is what you get from your war, one would like to say to Putin: you have ruined your country.
But ntv reporter Rainer Munz warns against hasty conclusions. Russia is a huge country with extreme temperature differences, six months of winter and supply networks that in many cases date back to Soviet times, reports the correspondent in the ntv podcast “Again something learned” from Moscow. In the past few weeks, the temperatures have sometimes been minus 30, minus 40 and in some regions even minus 55 degrees – he is not surprised that heating systems give up at these temperatures.
Yes, Russia has problems, says Munz. Inflation is more than seven percent and there are rural areas with very simple infrastructure. But the country is far from empty gas stations and supermarket shelves or even angry protests on the streets – especially in the big cities: “Moscow is the pearl and the showcase of the country. Here they always make sure that everything works,” says Munz. “The people who are here also earn well. And when inflation rises, people eat out less.”
The clear message is that you shouldn’t have false hopes. Because the truth is, despite all the doomsday reports and Western sanctions: Russia is experiencing an economic boom. Russian wages rose by 8 percent last year and unemployment fell to a historic low of 2.9 percent. President Vladimir Putin was particularly pleased about an increase in industrial production: the manufacturing sector increased by 7.5 percent in 2023, primarily in weapons production.
This information can be believed, because the Russian recovery is not a fantasy of Putin’s, but is confirmed by Ukraine: the respected economic school Kyiv School of Economics, which regularly evaluates the data, came to the conclusion in December that the Russian economy last year grew by 4.9 percent in the second quarter compared to the previous year, and by as much as 5.5 percent in the third quarter. Over the year, growth was 3.5 percent – values that Germany can only dream of.
But you shouldn’t be fooled by this boom either: there are people and companies who are benefiting from the war and earning better money than before the attack on Ukraine. But the war economy is starting to run hot and is on the verge of overheating. Companies can only find new workers if they entice them with ever higher wages. For mechanics, welders and truck drivers, salaries have risen by up to 20 percent in the past, writes the business portal Bloomberg. In doing so, they further fuel inflation. This is a problem especially for the middle class, says Munz.
And the ntv correspondent points to another undesirable development: Russian industry is currently mainly producing weapons and missiles, which burst into flames shortly afterwards. “The money flows into the war industry,” says Munz. This brings economic growth, but does not create any value.
The Russian boom depends on Putin burning machine guns, tanks, rockets and Russians in Ukraine: This year alone, Russia plans to spend $100 billion on defense and the military, which is a third of the entire Russian budget. In return, investments in education, roads, housing and critical infrastructure such as supply systems are cut in order to balance the budget.
The Kyiv School of Economics puts it this way: Although Putin’s factories are currently producing at full steam, the medium and long-term prospects are bleak. As soon as the war as a growth engine ceases, old problems in the Russian economy will emerge, the Ukrainian economists write in their analysis – and will be exacerbated by new ones.
Hundreds of thousands of Russians have died or been seriously injured in Ukraine. In order to deal with this demographic change, Putin publicly appealed to women in the country in November to have more children. Ideally seven or eight to secure his vision of “eternal Russia”: Saving and multiplying people is the task for the coming decades, Putin explained to his people.
Young Russians are only partially eligible for this because many of them have left the country in the last two years: around a million Russians have fled abroad to avoid the threat of military service since the start of the war. Instead, there are more murderers and rapists walking around on Russian streets, whom Putin pardoned as a thank you for their work on the front. Opponents of the war, on the other hand, go to prison for allegedly “spreading knowingly false information about the Russian armed forces.”
“The political climate in the country has completely changed,” says ntv reporter Munz. When the war began two years ago, many people dared to protest against it, even though there was a threat of punishment. “That is no longer possible today,” says Munz. Laws are now being created in all areas that make it possible to sanction, arrest, punish, fine or imprison anyone who publicly expresses a critical opinion. “These are things that concern people massively,” says Munz.
The latest approach from the Russian leadership is a law that allows the confiscation of the property of war opponents. The innovation was passed unanimously in the second and third readings, according to the official website of the Russian parliament. “We have discussed the issue more than once – the absolute majority supports the need to punish the traitors who pour dirt on our country and our soldiers and officers involved in the special military operation from abroad, or who support the Nazi regime in Kiev and finance,” explained Duma leader Vyacheslav Volodin.
Vladimir Putin did it. The Russian economy is booming. But the price for this is high, and it is not being paid by the Kremlin leader, but by the Russian population: a few days ago, the Russian statistics agency Rosstat reported the first increase in alcohol-related illnesses in Russia since 2010.
