A Russian military recruiter tries to persuade workers to sign up to fight in Ukraine. Source: @ChrisO_wiki

Throughout Russia's 18-month long campaign to occupy Ukraine, the mass expenditure of Russian manpower and money has raised several critical questions about the sustainability of its military endeavours while avoiding a full-scale war economy and complete mobilisation of its population. In this article, Prevail Partners analysts explore the complex dynamics at play, shedding light on Russia's strategies to balance its accounts, maintain its military capability, and manage the demographic divide growing within the nation.

Russia’s ability to sustain its military capability, without resorting to a full-scale war economy, is a delicate balance. The war in Ukraine, which commenced in February 2022, has carried significant, enduring financial and human costs for both Russia and Ukraine. While Ukraine has recognised the wartime state and channelled all available resources to defend against occupation, the Kremlin has skilfully downplayed the significance of the conflict, avoiding a formal declaration of full-scale war economy and mass mobilisation. But how long can Russia really sustain this tempo before they are forced to draw on the Moscow and St Petersburg regions, and their predominantly middle and upper-class populations, for support?

Initially, international sanctions were the primary tool employed by the international community to increase the economic, societal, and technological cost to Russia; and while they may have inflicted variable short and long-term consequences on Russia’s economy, they are yet to force Russia into full-scale war economy and mobilisation, nor compel their withdrawal from Ukrainian territory. The recently published Forbes articles estimated that Russia has spent approximately $167.3 billion (USD) on the war in Ukraine from February 2022 to August 2023 – these expenses include materiel, military salaries, compensation for families of servicemen, and equipment replacement – reportedly costing Russia $300 million per day.

Further to this, Russia’s tech industry has faced a mass exodus and significant brain drain since the start of the invasion of Ukraine – in 2022 alone over 10 percent of their entire tech workforce reportedly left Russia to avoid military conscription and pursue higher paying (and safer) job opportunities abroad. When the Russian government announced their initial mobilisation efforts at the beginning of the war, estimates suggested that between 300,000 and 700,000 Russian men fled from urban centres in hope of avoiding draft notices. The mass departure and continued decline of Russia’s tech industry highly likely carries grave consequences for the country’s economy, and recent government incentives for IT sector workers and allowing them to avoid conscription confirm this is a concern for the Kremlin.

A faltering economy characterised by inflation, unemployment and a depreciating rouble in any normal circumstance indicates a high likelihood of the Kremlin requiring the implementation of a full war economy as a desperate measure to stabilise its finances. However, during the course of this conflict, Russia has developed new trading relationships and found a lifeline in its relationship with countries like China which has doubled its exports to Russia since 2019. Similar relationships, and access to seemingly never-ending natural resources, mean Russia is pretty resilient to economic pressures alone – perhaps they really can economically endure the conflict in Ukraine without the help of a country-wide war effort?

But the cost of war isn’t just monetary – there’s a significant human cost to war too. Recruitment and mobilisation of fighting-aged males is the lifeblood of any war effort. Russia’s ongoing efforts to recruit both reservists and contract soldiers (and the quality and quantity of these troops) is pivotal in any future Russian success on the battlefield. However, as the conflict continues, a deepening schism between rural and urban regions has emerged. The majority of Russian casualties originate from rural areas like Dagestan, Buryatia, and the Jewish Autonomous Region, whereas wealthier urban centres like Moscow and St Petersburg have been relatively insulated from the realities of mobilisation efforts. But why are Moscow and St Petersburg so reluctant to join the fight?

Russia is expected to call another large-scale forced mobilisation due to the substantial losses faced on the front line. Source: @Flash_news_ua

If we consider the financial incentives for joining the military (statistically the primary motivator amongst Russian’s for signing up) - numerous Russian junior officers reported earning 200,000 Rubles per month, a salary 2.7 times the Russian national average. When you take into consideration the vast differences in average salaries between urban conurbations (Moscow’s average monthly salary is 124,000 Rubles) and rural regions (Dagestan’s average monthly salary is 29,000 Rubles) you start to see why poorer regions are easier to target.

Ultimately Russia’s ability to avoid declaring a full-scale war economy and complete mobilisation hinges on its ability to maintain its current war outputs whilst managing economic stability and the public’s perception. As the conflict continues and the demographic divide becomes more pronounced, the government’s ability to balance these factors long-term will determine Russia’s path forward. While it is unlikely Russia can maintain its current war tempo without drawing on its hundreds of thousands of urban-dwelling reserves, it is a realistic possibility ever improving relationships with anti-West trading partners will go some way to mitigate the financial burden of funding a full-scale war.