Despite a whiff of 1938 defeatism in Munich, nobody should be fooled by Putin’s fantasies
20 February 2024 •
Russia is running a ‘hot’ war economy.
Defence spending in all forms has tripled since the invasion of Ukraine and is approaching 8pc of national output, roughly what it was under the Soviet Union.
Military Keynesianism flatters GDP figures, never reliable anywhere, but particularly useless in Russia where data is manipulated.
An estimated 800,000 of the young and the brightest have left the country. Another 300,000 have been slaughtered or maimed in the meat grinder. The mobilisation net keeps widening, in a society already facing a demographic crisis.
Yet the alchemy of statistics has turned Russia into the macro-superstar of Europe. The International Monetary Fund has pencilled in growth of 3pc in 2023 and 2.6pc in 2024. “Our economy, unlike the others, is growing and has become the largest in Europe,” said Vladimir Putin at the ‘Everything For Victory’ forum in Tula.
This apparent resilience has confused many, leading to a pervasive sense of despair at the Munich Security Conference over the weekend.
In reality, Putin is losing the economic war, and he is not winning the military war fast enough to compensate. The fall of the Avdiivka salient changes nothing. He is wasting his armies, and two thirds of his tanks, on microscopic gains.
“The limits of growth have already been reached,” said Professor Pavel Baev from the Peace Research Institute in Oslo. “Industrial production is stagnating. The Russian energy sector suffers from declining revenues and delayed projects. Sanctions loopholes are being closed.”
Rosstat data shows that the rearmament boom stalled last summer, plateauing at levels far short of what the Kremlin would need to prevail against even a fraction of the West’s technological might.
“Ukraine is not a success story for Putin. We are two years from the invasion and it’s a disaster from his perspective. We should not talk ourselves into the illusion that our alliance is about to break,” said Norway’s unflappable premier, Jonas Gahr Støre.
is in for very tough times,” she said.
Three of five of the most-read stories in the Russian version of the Moscow Times last Friday were about shortages. One quoted Mobius Technologies and others flagging an acute lack of spare parts for hard drives, controllers, motherboards, and data storage.
The reserve of spares built up at the beginning of the war is exhausted. Components are trading at prohibitive prices.
A second story was about the lack of engines for shipbuilding. A third was about “empty shelves” in supermarkets, partly because Turkish and Chinese banks have been blocking payments from Russia.
A Vedomosti article quoted Russian businessmen lamenting that they can no longer clear transactions in yuan through Chinese banks – including the Big Four state banks – due to stringent audits to comply with tighter US sanctions.
Payments were stopped regardless of whether or not they were in dollars, and even when using the Russian SPFS and Chinese CIPS systems, intended to circumvent Western control of the SWIFT nexus. The Sino-Russian treaty of “friendship without limits” does in fact have limits.
Banks in Dubai are closing the accounts of Russians with “opaque” sources of funding, fearing the long arm of the US Treasury.
The EU is drawing up plans to sanction companies in China, India, Turkey, Sri Linka, Serbia, Thailand, and Kazakhstan for helping the Kremlin to circumvent curbs on dual use technology.
Russia will find ways to evade the latest curbs. But it cannot switch easily to semiconductors from China because its systems are configured for US chips, which must be bought at a stiff premium on the black market.
discount to Brent.
The noose is tightening on Putin’s shadow fleet. The US Treasury has targeted 50 tankers for violating the cap. Bloomberg reports that half have not yet dared to leave port, and 14 tankers carrying crude to India have been stranded at anchor.
An oil price spike may yet rescue the Kremlin but the IEA has just lowered its forecast for global oil demand for the third month in a row. Surging supply from US shale keeps overwhelming OPEC cuts.
None of this changes the fact that Russia can produce enough artillery shells to rain down 3,000 a day on Ukraine – with help from North Korea – while the West cannot do so, and has depleted most of its safely available stocks.
“You win wars with weapons, and the West doesn’t make enough weapons,” said Republican Senator JD Vance, laying out the ‘Trump view’ in Munich.
They invoke an existential threat yet struggle to reach the very minimalist defence target of 2pc of GDP. “Those ideas are very much in tension.”
Indeed. Europe thought that transferring old stocks of weapons, on the cheap and at a glacial pace, would be enough. It has not mobilised its military-industrial base a full two years into what is already a shadow Third World War with the autocracies.
But Mr Vance slips into his own self-deception, or evasion, and confirms what is in store under a Trump administration. “I think Russia has an incentive to come to the table right now… This will end in a negotiated peace,” he said. What he means is letting Putin have the four annexed territories, which he does not yet control.
Mr Vance has the logic backwards. Putin has no incentive to talk as long as he thinks he can outlast a faint-hearted West.
Furthermore, if the greater imperative is dealing with Xi Jinping, as the senator says, then the first critical line of defence is on the Dnipro River.
Military guru François Heisbourg said it was the most depressing Munich conference in 60 years. One might almost say it had a whiff of 1938.
No doubt the pendulum of war psychology has swung in Putin’s favour lately – and he assiduously propagates the narrative of an invincible Russia – but he has not in fact made a major breakthrough and nobody should be fooled by his GDP fantasies.
Russia is moving ineluctably towards economic exhaustion. It would be a monumental error for the West to lose its nerve now.
This article is an extract from The Telegraph’s Economic Intelligence newsletter. Sign up here to get exclusive insight from two of the UK’s leading economic commentators – Ambrose Evans-Pritchard and Jeremy Warner – delivered direct to your inbox every Tuesday.
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“But Mr Vance slips into his own self-deception, or evasion, and confirms what is in store under a Trump administration. “I think Russia has an incentive to come to the table right now… This will end in a negotiated peace,” he said. What he means is letting Putin have the four annexed territories, which he does not yet control.”
JDV is pitching for a senior position in the next Trumpkov administration. Only the American people can prevent this Putin-loving maggot from getting it. Of all the magaputler shitheads, possibly only the vile MTG is worse.
“Mr Vance has the logic backwards. Putin has no incentive to talk as long as he thinks he can outlast a faint-hearted West.”
After suffering genocide, no Ukrainian leader can accept a land for piece deal.
Selected comments from DT readers :
Telme Nolies:
The USA has a vast Intelligence Network.It is aided by most Western Countries.
So why are the likes of India and China ‘buying’ so much from Russia?
Could it be our wonderful EU colleagues are secretly doing the same,either through the front door,or the back door.
Not saying it is’nt pragmatic,but it won’t lead to a conclusion.
Having destroyed the very area they want to ‘occupy’, Ukraine joining NATO is the price Russia may have to agree to.
Kevin Turvey
Can’t anybody see? Vladimir Putin has staked everything on Russifying the territories in Ukraine, the Russian armed forces set out to take exactly two years ago. And now, the ‘West’ has staked everything on defeating him too; the one that backs down will lose all they set out for and now Putin has put his own life, not just his political ‘career’ on the line.
Wim Kotze
I hope the analysis is right.
But I have heard of Russia’s imminent collapse before. I heard from many experts before the invasion, that Putin was bluffing, it was economically impossible for him to fund such an operation (that was before we knew of the intensity of the fight Ukraine would put up).
That said loosing so much of the workforce, that factor alone, must have an effect.
So yes I have mixed feelings about whether it will be time to celebrate soon, but I hope the analysis is right.
Ch Du
Excellent article and conclusion – my sentiments exactly.
To add to the doom & gloom for Russia, Google the latest article in the FT about Gazprom’s catastrophic loss of European revenues, only 5-10% of which have been made up by sales to Turkey and China.
We’re winning – we mustn’t stop defending democracy now.
Kremtroll alert:
John Fogarty
Putin is a stout hearted man and Russia will prevail.
Jonathan Karmi
Reply to John Fogarty
Good honest Putin-worship from St Petersburg. Most Brits think he’s a vicious, tyrannical and corrupt piece of slime
jonathan steel
Sad fact is Putin is in this to the finish. They also have almost limitless natural resources. Our leaders are clueless and should all have gone onto a war footing in response to Russia. Biden has been far too frit. He should have declared or at least warned Russia of a no fly zone if they invaded.
Churchill had been Navy Minister in WW1 so he knew more or less what he was doing.
The war was won by Lloyd George who ramped up armaments production to levels one can only wonder at today.
Crowd fund a shell case factory in UK and Massive rearmament 10% GDP before it’s too late.
Action This Day.
Martin Whapshott
The west has to make nations that deal with Russia to make the choice of binary trade, Russia or the West, not both.
Two years have been wasted when our defence industries should have been put on a war footing. This is now beyond necessary, it is our moral imperative justified in protecting ourselves let alone the poor suffering Ukrainians.
Defeat and more defeat will do for Putin but that must be achieved by a massive uplift in arms supplied to Ukraine so they can answer Russias missiles 10:1. That will either bring him to the negotiating table or he will suffer a fitting end to his tenure. Some worry that Putin would go nuclear. That of course is a risk but why swap a small part of a country where nobody likes you for your whole country and all your people yet still have the same issue at the end.
Telma Noilies or whatever the stupid name is, is a closet moskali shill,
‘Ukraine joining NATO is the price Russia may have to agree to.’
Who joins NATO is fuck all to do with moskovia you dumb cunt.
Giving your word of honour to a lying, murdering, shithole nazi failed state who have reneged on every deal they ever made, and then you reneging is perfectly acceptable.
If Ukraine promised to not join NATO but later did, nobody would give a fuck what the shithole formerly known as putinia whined about.
He’s actually offering something; feeble as it is, that is not even under consideration at present, because Nato is crawling with shit countries that rather like putler.
I don’t necessarily only put comments that I agree with. However, I usually preface a kremtroll with a health warning. This guy is not one.
No kremtroll would say :
“Ukraine joining NATO is the price Russia may have to agree to.”
A Trumpkov administration will give most or all the occupied territories to putler. I doubt if he’d offer anything to Ukraine in return.
A re-elected Biden might be slightly more generous; some Ukrainian land goes to puker and Nato protects the rest.
But that is not acceptable either. Only the return of Ukraine’s legal borders is acceptable.
But putler calculates that his genocide campaign will force the Ukrainians to the table.
I can’t stand AEP, that pompous, self-righteous EU-hater, but in this instance, he’s right: In the medium and long run, Ukraine will win, IF the West doesn’t cut down on support now! That’s in the European community’s own best interest, since the consequences of letting Russia increase it’s territory by military might are too dangerous to accept. No European with any reason left in the brain can want to encourage such brutal imperialism, which wouldn’t stop until all of Europe is under Putin’s control. The facts cited by Evans-Pritchard show clearly that this doesn’t have to be accepted and that Russia will lose if Ukraine is enabled to successfully defend itself. To safeguard peace and security in Europe, it’s of utmost importance for all democracies to show solidarity with the attacked nation. United we stand!
I wish I had a dollar for every time we’ve read or heard warnings about a possible collapse of Western resolve. It’s not the warnings themselves that’s tiring, but the fact that the West is so wobbly that such warnings must exist.
It’s another of those “putler’s finished” articles. Call me a sucker, but when I see one from a respected financial journalist I want it to be true!
Of course, so do I. I think there is some truth in all those reports about mafia land’s economy, but its economic demise is going so damned slow.