One Trillion Dollars In 2023: How Russia's Military Came To Outspend The United States Part 2
What's a Ruble really worth? Part 2
III. Maskirovka
Well, let's invert the question: why did NATO determine it would suffer acceptable blowback from its Ukraine operation? NATO believes its military-industrial capacity far exceeds Russia's. However, as the war has progressed, we've seen that it is NATO that is being outproduced by Russia and it is NATO losing the war of attrition. Evidence can be seen in the way Ukraine keeps begging for more arms and losing territory, despite having more manpower and supposedly mauling the Russian army. Douglas MacGregor (https://en.wikipedia.org/wiki/Douglas_Macgregor) has asserted that Ukraine has lost two armies already and that the current one in the field is unlikely to survive for longer than the prior two. (https://rumble.com/v2amai2-col.-douglas-macgregor-ukrainian-casualties-have-gone-through-the-roof.html). This stands in sharp contrast to the media fantasies and depictions of Russia's army collapsing (https://foreignpolicy.com/2022/12/08/ukraine-russia-war-escalation-collapse-victory-baltic-poland-putin-imperialism/). The West has a fantasy of dismembering Russia that exists on Wikipedia (https://en.wikipedia.org/wiki/Hypothetical_dissolution_of_Russia), and of course there is no comparable counterpart Wikipedia page for the USA (https://en.wikipedia.org/wiki/Hypothetical_dissolution_of_America). We see the illogical casualty figures, such as Russia losing more troops (165.6k KIA, 499.7k Wounded)(https://www.minusrus.com/en) than it attacked with (100k - 190k)(https://www.euronews.com/2022/05/21/live-sievierodonetsk-shelling-brutal-and-pointless-zelenskyy-says-as-russia-continues-offe). Despite Russia having a 10:1 artillery advantage against Ukraine. It is quite possible that the majority of people killed were Donbass and Luhansk regulars, as well as Wagner mercenaries, and volunteers, since publicly available sources show a drastically lower casualty count, even by media organizations hostile to Russia (16,774 killed)(https://zona.media/casualties) (17,375 killed)(https://www.bbc.com/russian/features-64984414). Given how horribly distorted all other Russian salient figures are, we should expect these figures to be distorted as well. Ukraine is behind Minusrus and it's obvious they need to lie in order to continue 'public' support (MSM lies for NPC (https://www.urbandictionary.com/define.php?term=NPC) consumption) for the war. Ukraine seems to perfectly use the attacker/defender casualty ratio when reporting uncorroborated figures. Their figures all come from 'authorities' that have repeatedly lied and refuse to show their work and how they arrived at their figures. Even if we accept that every single missing soldier from Russia is dead, that gets us nowhere close to purported Russian casualties, as reported by Ukraine.
Ukraine has been the most corrupt country in Europe since before the war and it has a culture of corruption that has deindustrialized the country since the USSR collapsed. Considering Ukraine was the wealthiest, most industrial region in the USSR, and given that its per capita 2013 GDP was less than half of Russia's, we have an actual stat to use to quantify Ukrainian corruption, not some nebulous, spy-run group like 'Transparency International.' Ukraine had 1/5 Russia's economy in 1992 (https://tradingeconomics.com/ukraine/gdp) (https://tradingeconomics.com/russia/gdp) and 1/11 in 2013, just before the 2014 coup.
"Corruption just doesn’t seem to worry Mr. Zelensky much — at least when those implicated are close to him. In March 2020, when his chief of staff’s brother was caught offering government posts for money, Mr. Zelensky did nothing. More recently, a top lawmaker was caught on camera drunkenly offering a bribe to a police officer at the site of a car crash he might have caused. The public was outraged, but Mr. Zelensky mumbled a disapproving comment and moved on. Even the president’s beautiful newly built roads are mired in controversy. The procurement process is thought to be rigged and the prices too high...
"Mr. Zelensky has turned into a version of the politician he campaigned against: insular, closed off, surrounded by yes men. In normal circumstances, that would be bad enough. But now, when Ukraine is menaced by Russia, it may be affecting Mr. Zelensky’s judgment."
- Olga Rudenko, Chief Editor, The Kyiv Independent, February 21, 2022 The New York Times
(https://www.nytimes.com/2022/02/21/opinion/ukraine-russia-zelensky-putin.html)(https://archive.is/W505t)
Zelensky made the monsterous lie of denying that Russia was even going to attack (https://archive.is/OPsjF) and that Ukrainians were "... prone to panic" a month before Russia actually did attack. He then complained that the West should not "create panic" as Western intelligence warned of an imminent Russian attack. (https://www.bbc.com/news/world-europe-60174684). Later Zelensky admitted he lied (https://archive.is/BXf7X), saying if he didn't, "... when the Russians did attack, they would have taken us in three days." Given the devestation of the war, this shows how little the welfare of the Ukrainian people mattered to Zelensky and his ruling clique. The point here is to show that Ukraine's government was not a little corrupt, it was willing to kill .666% of the population, and lose 50% of the remaining population to emigration, just so 'the Russians wouldn't win.' Given what else we know about the material circumstances of the war, (which we will cover in greater detail below) we know there is no way the Ukrainians have inflicted the kinds of damage on Russia that is purported here (https://www.jpost.com/international/article-732548). As of this week (March 20-25, 2023) this is a less controversial claim than it had been a couple of months back.
The map of the battlefield shows Russia steadily moving into Ukraine: hardly the macro stat a 'losing' army would generate.
Part of Russian grand strategy has been to entangle and outproduce NATO in a war that NATO could not afford to lose. Since NATO believed itself to be superior in every way possible to Russia, Russia's decision to invade Ukraine has been seen as a blunder. Yet, as we just surveyed, it is NATO that committed the blunder. How could NATO have had such a massive intelligence failure? It could only have happened if NATO overestimated its strength and underestimated Russia's. A trading regime that valued the Yukos oil company in the hundreds of millions of Dollars when Mikhail Khodorkovsky bought the state asset worth hundreds of billions of Dollars in order to pillage it and make it available to Western consumers, is the same trading regime that intelligence analysts refer to when evaluating the economy of a country. The incentive to undervalue Russian assets creates a second order effect which is to underestimate Russian strength. First devalue assets. Refuse to buy them at an international par rate. Now denounce the poverty stricken nation as weak, ie: drink own Kool-Aid.
I once read that institutional founders know that institutional myths are lies. When all the institutional founders leave, their successors believe the myths and then the institution declines as its memory is lost. This principle seems applicable to analyses of the Russian economy. Cold-Warriors knew what was up, but their Millennial successors thought Google knew everything. And so they saw the 'tiny' Russian economy and decided that they could beat it in a conventional war.
The second order effect from this mistake is significant: there seems to be no ability in mainstream intelligence analysis to understand the Russian military-industrial economy, except in terms of its absolute inferiority. Claims to the contrary are quickly denounced as propaganda.
If exchange rates say Russia is weak and The Economist says that we can correct for this discrepancy by calculating the Purchasing Power Parity of a Big Mac, then Russia will be measured in terms of Big Macs. What happens if we create munitions index instead? What happens to the exchange rate when we do that?
IV. Russian Military Budget, 2020 - 2023
To calculate Russian military spending in order to estimate Russian military production and procurement, one first needs to know how many Rubles are spent on the military, and then one needs to know what the Rubles purchase. We need to calculate the Russian defense industry by procurement and export and segment it as much as we are able. We need to survey munitions production and costs. Ship, aircraft, and armored vehicle production. Munitions production. The problem is that this is notoriously impossible to do accurately (https://www.jstor.org/stable/10.7249/mg515osd.14?seq=1). The Russian Ministry of Finance in 2022 even said it would stop disclosing government spending data (https://www.bloomberg.com/news/articles/2022-06-14/russia-hides-budget-spending-but-shows-how-ruble-hit-oil-revenue?leadSource=uverify%20wall).
SIPRI's October 2022 “Implementation of the Russian federal budget during January-July 2022”
(https://www.sipri.org/sites/default/files/2022-10/bp_2210_russianmilex.pdf) is a key document that helps us to understand the Russian budget process.
The Stockholm International Peace Research Institute (SIPRI) is one of the world's foremost war researchers. It has, among other things, a copy of the Russian federal budget through July 2022, sourced from the Russian government itself. This gives us an excellent reference document with which to compare our other findings. The official Russian military spending budget was revised upward to 4.543 trillion Rubles by the end of July 2022 and budgetary trends showed it was going up. Furthermore, SIPRI claims that the Russian government diverts funds from other parts of the Russian budget to fund the war. Finally, we can see that the Russian federal budget went up from January through July.
SIPRI says Russian military spending was 4.1% in 2021 or $65.9 billion (https://www.sipri.org/sites/default/files/2022-04/fs_2204_milex_2021_0.pdf)which means they calculated the Russian economy to be worth $1.607 trillion, which at about 75 Rubles to the Dollar means it was about 120.525 trillion Rubles in 2021. This is based off the published budget, which I would trust over Rostat (https://tradingeconomics.com/russia/gdp-constant-prices; https://rosstat.gov.ru), a Soviet legacy... and remember, we've proved these Rostat figures are unreliable. This means the Russian military budget in 2021 was possibly up to 4.94 trillion Rubles (4.1% of 120.525 trillion Rubles).
The Russian Ministry of Defense in January 2021 (https://web.archive.org/web/20210101153832/http://itogi2019.mil.ru/eng.html) lists Russian procurement from 2020. This is a good pre-war proxy for actual procurement calculations. We can calculate cost of known units and infer budget for unknown budget items, including munitions. This will be useful to us later when we try to determine what the actual spending increases mean. Since pre-war spending was stable we can match procurement to spending. We can also infer that the Russian government did not expect the setbacks that occurred on the battlefield, or else we would have seen a greater buildup of spending prior to the war. We also have older data on military production, surveyed on Simplicius76's blog (
).
SIPRI cites The Moscow Times (https://web.archive.org/web/20220519043525/https://www.themoscowtimes.com/2022/05/18/russian-defense-spending-surges-to-300m-per-day-amid-ukraine-war-a77712) which claims Russia was spending 20 billion Rubles a day on the war as of May 18, 2022 and had doubled its spending compared to the previous year. SIPRI also cited The Asia Times, which claimed that Russia spent $1k/day to keep a soldier in the field, put the cost at $200 million/day (https://asiatimes.com/2022/03/russias-low-cost-war-can-endure-western-sanctions/). These figures used the 75 Ruble/$ exchange rate, so it costs 75,000 Rubles per day per soldier, or 15 billion Rubles a day for a 200k army. That adds up to 5.475 trillion Rubles a year on the low side. 7.3 trillion on the high side. We should expect the differential between 15 billion and 20 billion to be some combination of arms procurement, increase in mobilized manpower, payments to families of dead soldiers. Except that we see these expenditures covered elsewhere in the Russian budget. So we will use the lower figure.
The Russian budget shows that National Defense went up 27% through July, which would suggest a 46% annualized increase (1.61 trillion) from 3.5 trillion Rubles to 5.11 trillion.
But the SIPRI report also points out that in line item 1 of the General Fund, there is a slush fund to pay for budget items the Russian government would rather keep hidden. Like payments to the families of dead soldiers, or paying for mercenaries. But notably for the year, it had spent 0 of its slush fund budget through July. One should consider the unspent slush fund sub-item a source of war funding. If we see the slush fund hasn't been spent yet, but the general fund spent a trillion so far, then we can infer that the general fund will get another 1.23 trillion Rubles in 2022, which it could spend for war funding.
The total 2022 budget increase from the planned 23.694 trillion Rubles to the 27.379 trillion Rubles updated budget in July shows a 16% increase, which at the annual rate at the end of 2022 should be 30.193 trillion Rubles. The differential is 6.499 trillion Rubles in increased spending. Subtracting the additional military spending already mentioned, we get 4.999 trillion in additional budgetary allocations. Since Russia is at war, this would be a reasonable conjecture, especially given that military pensions and social support saw a drop in spending.
Estimated Annual Russian Cost of War: 5.475 trillion Rubles to supply in the field 200,000 soldiers.
TABLE 4
Estimated 2022 Russian Military Spending (Rubles):
'National Defense': 4.543 trillion
General Slush Fund: 1.23 trillion
Budget Increase Differential: 4.999 trillion
Total Spending: 10.772 trillion
War Operations Costs: 5.475 trillion
Remainder: 5.297 trillion Rubles
It's not a big jump to expect the remainder to go into arms and capital investments for arms production. What was the baseline arms spending based off the original budget? Vasily Kashin claimed 50% of National Defense spending. (https://www.vedomosti.ru/economics/articles/2022/09/23/942188-rashodi-na-natsionalnuyu-oboronu) Half of baseline National Defense's budget (4.543 trillion) is 2.715 trillion Rubles. That plus extra spending means Russia could have spent up to 7.5685 trillion Rubles in arms in 2022.
Meduza claims (https://meduza.io/en/news/2022/11/30/russian-defense-purchasing-set-to-increase-by-50-percent-in-2023) Russian defense purchasing will increase 50% in 2023. If that figure stays stable, then that means Russia will spend 11.35275 trillion Rubles in arms in 2023. Assuming offensive operations use another 300,000 soldiers, that would mean fielding 500,000 soldiers and paying 13.687 trillion Rubles. Therefore, we can project that the 2023 Russian military budget will be something close to 25.039 trillion Rubles.
2021: Military Spending @ 4.11% of Russian GDP.: 4.94 trillion Rubles, Military Spending, 2.715 trillion Rubles, Procurement, GDP: 120 trillion Rubles
2022: Military Spending @ 8.1% of Russian GDP: 10.772 trillion Rubles, Procurement: 7.568 trillion Rubles, GDP: 133 trillion Rubles.
2023: Military Spending @ 18.144% of Russian GDP: 25.039 trillion Rubles, Procurement: 11.352 trillion Rubles. Assuming 4% growth (the projection of FY 2022), that means a 138 trillion Ruble GDP.
Now the interesting thing is that the Meduza article sticks to the Orwellian new figures the Ministry of Finance issued. This article which appears at the end of November 2022 cites the Russian ministry of finance's figure that Russian defense spending was a mere 4.7 trillion Rubles for 2022 (https://storage.consultant.ru/ondb/attachments/202209/28/ONNP_73J.pdf). This doesn't match any of the other numbers we have calculated, so one ought deduce this is maskirovka. This would jibe with the Western dismissal of an upcoming Russian offensive. Should one really believe Russia is only spending 4% of its GDP on a total war? A war described as an existential threat to Russia? It's absurd on its face and reveals the gullibility and bad methodology of Western journalists. Should one depend on the Russian ministry of finance to publish reliable military spending figures so NATO can obtain valuable military intelligence? No. We have already been able to determine so much with the existing budget, like that Russia suffered about 17,000 KIA by July 2022. We would be able to determine the exact size of the planned Russian offensive if we had access to their budget. There is a public blockchain of economic data preceding the war that no single actor can manipulate, and if journalists and the general public have bad memories, then wouldn't it be simple for the Russians to just publish a lying figure that Western journalists will cite as 'proof' of Russian weakness? And wouldn't that help ensure that NATO is caught off-guard when the Russian offensive actually starts? We have totally discredited any figures that are close to a 4% GDP figure, or based of a 4.7 trillion Ruble spending rate for 2022.
Photo by By Chad Nagle - https://www.flickr.com/photos/16936128@N06/15558584665/, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=117163769
Part 3: