Economies of War: Russia and Ukraine- Who has enough money to win the war?
Every war requires funding. The main concern for government officials who are in a war is: ‘How long can we fund the war effort?’ Nations end up spending more of their national budget on their military, and this money runs out fast, being used on anything from paying soldiers to developing new weaponry. Along with this, sanctions that are placed on nations can affect them too, similar to the many sanctions placed on Russia due to its invasion of Ukraine.
Russia is telling the world its economy and people are strong, but in reality, both are under pressure. Inflation in the country is at its worst, hitting an all-time high since 2002 of 17.3%. Sergey Sobyanin, Moscow’s Mayor, has said due to foreign companies closing down in the city, there will be a job loss of around 200,000. This does not include the Russian companies that have had to close down. Sanctions can take time to damage a nation's economy. In order to examine how effective sanctions are, economists look at the changing price and quality of goods over time. Prices of goods like sugar and vegetables have risen exponentially in Russia. The copious amount of sanctions and all the foreign companies pulling out of the nation will most likely make the effects appear sooner. Russia has already requested military and economic assistance from its ally, China, displaying how in need of help they are. Putin has also said that the Kremlin will seize assets of companies pulling out of the country. The ruble seems to be rebounding. However that is only due to Russia’s Central Bank that “curtailed the ability of locals to sell the ruble and buy foreign currencies”. The Kremlin will be unable to keep the high interest rates and strict rules on selling the ruble for long. Eventually citizens will grow weary.
On the other hand, Ukraine’s economy has been heavily damaged due to the invasion, with the Finance Minister believing the country’s economy could halve by the end of this year. This is due to many reasons, but the main three are: people being displaced by war, infrastructure being damaged or destroyed, and both of those causing a major disruption to trade. However, the nation does not exactly need to gather their own funding for this war. How? With the help of other nations. The United States has asked Congress for $33 billion in aid, on top of the $13 billion in aid already provided to Ukraine. Nations such as the United Kingdom, Turkey, Canada, Germany, and others have also provided military funding and weaponry to Ukraine. Citizens of Ukraine are even donating to their country’s causes in order to support its survival. As of early April, the government of Ukraine has gathered over $1 billion of war bonds from its citizens. But despite all of this, the war could cost over $500 billion, possibly more, all depending on how long it goes on for and what is damaged.
Does Ukraine have enough money to withstand a long-term Russian invasion? Does Russia have enough money to fund a long-term invasion?
Some economists have guessed that the first few days of the war may have cost Russia over $7 billion. Russia will still be able to export its goods to its allies. It may no longer have the West, but there are other nations willing to buy Russian goods and services, such as Pakistan stating it will import more Russian natural gas and wheat. It is likely that Russia will be able to continue this invasion long-term when it comes to economics, devastating itself – but the will of the citizens may change that. If nations continue to fund Ukraine, it should have enough to survive, despite the hardship the people will endure. However, if allies slowly get tired of the aid packages required every month, the money may stop flowing, and Ukraine’s military could collapse without donated funds and weaponry. It will become more clear who can survive as time passes.