• Fri. Mar 1st, 2024

Putin’s Next-Gen War Economy: How Russia Defied Sanctions and Outpaced Forecasts through Military Investment and Emerging Market Trade


Feb 10, 2024
Russia: The Future of a “War Economy”

The International Monetary Fund (IMF) has forecast that Russia’s economy will grow at a rate of 2.6% in 2024, more than double the prediction made in October 2021. This comes as Russia has faced more than 500 trade sanctions from the US and the European Union (EU) since its annexation of the Crimean Peninsula in 2014, and after its invasion of Ukraine on February 24, 2022.

One of the most significant factors contributing to Russia’s economic growth is the construction of a “Military-Industrial Complex” with advanced technology from the 21st century. This complex has enabled Russia to become a next-generation war economy, with much of its production contracts being paid for in advance by the government, subject to conditions of efficiency and precision typical of an advanced army.

The success of this approach has resulted in a notable increase in productivity, which was previously lacking under the Soviet regime. In fact, Putin’s government pays up to 80% of production contracts to the Military-Industrial Complex in advance, with approximately half of these large conglomerates being part of this complex.

Russia’s defense spending has also increased significantly in recent years, reaching 4% of GDP in the last three years. However, this has not led to an inflationary explosion as expected due to Putin’s ability to maintain high levels of productivity through his Military-Industrial Complex.

Putin’s strategy for economic growth has been focused on increasing trade with China and India, two rapidly growing economies. He began using Chinese currency (yuan or renminbi) more frequently in international transactions and now uses it for almost half of his international trade. As a result, Russia’s international trade with China has doubled in the past two years and tripled with India over that same time period. Most transactions are processed using yuan or renminbi currency.

The trade sanctions imposed by the United States and EU on Russia were intended to isolate it from the world economy and slow down its momentum during the Ukrainian War until it was forced to lose its status as a great military power. However, events have shown that even a country as large as Russia cannot be isolated from global markets due to technological integration across borders since 2008/2009 – international financial crisis – . The idea that any country can be surrounded and expelled from global markets is no longer relevant today due to technological advancements that have made it impossible for one country or group to control all aspects of global commerce.

In conclusion, Putin’s strategic approach towards economic growth through military investment and increased trade with emerging economies such as China and India is proving successful despite facing severe sanctions from major global powers such as USA and EU

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