By Matt Underwood Ukraine’s GenStaff says its deep strikes have erased 4% of Russia’s GDP this year, and that figure certainly grabs your attention. Four percent might not seem like a colossal figure at first glance, but when you’re talking about the entire economic output of a country, it represents a significant dent, a real punch to the gut. It’s a substantial sum of money, and you have to wonder, just how much damage needs to be inflicted before it becomes truly unsustainable for Russia to keep up the fight?
This brings up the million-dollar question: What percentage point of economic damage would it take to make the war unfeasible for Russia to continue? It’s a really tough one to answer. The prevailing thought seems to be that Russia’s superpower has always been its ability to endure hardship. Their leadership, historically, has demonstrated a tolerance for the suffering of the population that is, frankly, rather impressive. This is a crucial factor because economic pain doesn’t always translate directly into political collapse.
Interestingly, a substantial portion, 42%, of these attacks have targeted oil refineries. This is a strategic move because, well, let’s be honest, oil is the lifeblood of the Russian economy, fueling their war machine, quite literally. The idea of targeting assets that are essential for their ongoing aggression is a sound military strategy, which in turn is also a sound economic strategy. The attacks on oil refineries are hitting directly at resources that are critical for funding the illegal invasion.
Now, the immediate impact of these strikes might be visible, the initial explosions and damage, but the real effects extend far beyond that initial headline. It’s a bit like a slow burn. The media often focuses on the initial impact, but the oil industry itself provides a more detailed picture of the consequences for production. And it appears that Russia is adept at quickly repairing much of the initial damage, such as tank depots, though repairing critical technologies, especially those found in some parts of refineries, can take much longer.
One thing to consider is Russia’s status as a major oil producer. If these strikes were causing truly massive, permanent damage, we would see a noticeable spike in global oil prices. But we’re not seeing that. That’s the most critical gauge, at least economically.
It’s tough to predict how long it will take for the cumulative economic effects to reach a breaking point. It seems likely to take some time for the 4% loss to begin to significantly hurt. However, Russia is facing difficulties with its war economy.
Furthermore, the economic woes are already starting to impact battlefield performance. The use of reserves will only go so far, and the longer that the war goes on, the more critical it will become for those reserves to hold. The key to ending the war will depend on a progressive scale of problems that could potentially arise.
We’ve seen that Russia is willing to pay huge recruitment bonuses to keep the supply of soldiers flowing, which suggests that Putin is prioritizing keeping the middle classes away from the frontlines over maintaining government finances. That’s a revealing indicator, really.
The breaking points in previous Russian revolutions have often been when the paychecks stopped coming, when the soldiers turned on their officers and came home armed and angry. We are seeing warning signs of cash shortages in the form of reduced pay and reduced work hours. Putin is even resorting to cannibalizing the assets of his oligarchs for funds. All of this points to time not being on Putin’s side.
Ultimately, there is no single event that can be considered a breaking point. It’s a gradual process. The pain felt by the Russian population, the impact on government revenues, and the tough choices that the government is forced to make on what to fund will all contribute to a tipping point.
Russia is not necessarily in danger of running out of options. They could resort to conscription and choose not to pay their soldiers. They might even consider a radical move, such as trading territory, like Vladivostok, to China for essential war materials, but there’s always a limit to those options.
It really is a case of how economies collapse: slowly, and then all at once. The years leading up to the 2008 financial crisis serve as a stark reminder that economic decline can simmer for a long time before the collapse happens. We don’t know if we are at that stage with Russia.
In the meantime, there are some key pieces of infrastructure that could be targeted. Distillation columns should be high on the priority list, along with the lead time for electrical substations and transformers.