Russia's economy sees surge amid conflict despite sanctions
6:31 PM EST, March 9, 2024
Recent disclosures from the Russian Finance Ministry highlight the budgetary performance for the initial two months of 2024. The Putin administration is becoming notably inventive in its accounting practices, presenting increasingly implausible figures.
Budget revenues in the Kremlin climbed by 59 percent, reaching 5 million rubles, alongside a 17 percent year-over-year increase in spending, primarily for military engagements. This led to a budget deficit of 1.47 trillion rubles, representing 0.8 percent of GDP, according to a report by the Russian newspaper Kommersant, citing the ministry's statement.
The figures raise eyebrows, given the ongoing conflict. Sanctions from the European Union, the USA, and the G7 have targeted Russia, compounded by losses in the European gas and oil markets and challenges in international trade payments.
Oil and gas revenue for the same period soared by 71.2 percent to 1.6 million rubles. Income from other sources, notably food and agricultural products, amounted to 3.4 million rubles, marking a 53.5 percent increase. These figures seem to overlook Gazprom's reduced grip on the gas market and the drop in Russian oil orders from India.
On the expenditure front, the Russian Finance Ministry reports a mere 17.2 percent increase. Given the substantial costs associated with the conflict, such a figure seems far-fetched. The anticipated budget deficit for 2023 stands at 3.2 trillion rubles, or 1.9 percent of GDP.
"War propels the Russian economy forward"
According to a special report by Lithuanian intelligence, Russia possesses the financial, human, material, and technical resources to sustain the conflict in Ukraine for at least another two years.
Russia's spending has far exceeded budgetary allocations. In just the first half of 2023, military expenditures surpassed the total expected for the year. For 2024, about one-third of the military budget has already been expended—over 10 trillion rubles or approximately 137 billion dollars.
The conflict and the military industry have become the linchpins of the Russian economy, drawing significantly on the nation’s financial, material, and human resources at the detriment of other economic sectors, as highlighted by Lithuanian intelligence.
