December 31, 2017 Special Dispatch No. 7255

Russian Academician Inozemtsev: Why The Kremlin Talks About A War Economy

December 31, 2017
Russia | Special Dispatch No. 7255

In his article, titled "Sham Mobilization: Why the Kremlin Talks about a War Economy," Russian academician Vladislav Inozemtsev stressed that Russia has no real plans to place the industry on a war footing. The authorities are employing a politically convenient militarist rhetoric to conceal inefficiencies and budgetary distortions. In the process they can inflict substantial damage upon the Russian economy by accelerating the brain drain and capital flight.

Below are excerpts from Inozemtsev's article, published by the Russian media outlet[1]

Vladislav Inozemtsev (Image:

Many Have Accused The President Of All But Preparing A Large War

"Vladimir Putin's recent address in a meeting in Sochi dedicated to issues of development of the military industrial complex, where he called on Russian industry to be constantly ready for mobilization, sparked a wave of comments. Putin remarked that 'the ability of the economy to quickly increase the volume of defense products and services at the right moment constituted one of the prime conditions for ensuring the state's military security; all strategic and large-scale industrial facilities must be prepared for this, regardless of their form of ownership'.

"Many have accused the president of all but preparing a major war. But I think that we are dealing with totally different situation, where psychological and ideological factors play a major role – and it looks like they are the only ones that the Russian authorities are concerned about today. The Kremlin and the government are currently discussing the State Armaments Program for 2018–2025, which will cost approximately 19 trillion rubles. A country-wide 'mobilization mood' will help suppress the public's natural desire to know what the money – sufficient to dramatically increase the transfers from the center into regional budgets or federal health expenses – will be spent for. Therefore, saying that even private companies will, if necessary, have to work for the Motherland without asking superfluous questions, seems most opportune appropriate in a propagandistic context.

"But if one leaves propaganda aside, two questions arise.

Defense Industry Capabilities

"The first question concerns the defense industry itself; after all, it is clear – if it cannot respond to wartime requirements in a timely fashion, what can one expect from the civilian sector? Currently, the military-industrial complex is a huge part of Russian economy, which employs about 2 million people. But how effective is the defense industry and how quickly will it be able to respond to emergencies? An answer can be provided based on certain indirect indicators.

"In 2016, 69 combat planes and about 60 helicopters entered operational service. This means that the industry produced no more than 15 per month, if we take into account that one third of the produced machines were exported. Even though this sort of comparison is always somewhat artificial, let us remind you that during the attack of the coalition forces in Iraq in January-February 1991, the air force of this country lost 259 planes and helicopters in three weeks. The same is true about the navy: the production of the recently launched nuclear submarine started back in 2009, while the average production time for a nuclear submarine in the Soviet Union was about one and a half years, and 91 of them were built between 1967 and 1991.

"It is obvious, of course, that putting the economy on a war-footing will be necessitated not in case of a conflict in Moldova or Kazakhstan, but in the context of a confrontation with NATO. But today's Russia is so far behind our Western 'partners' in conventional armaments that no mobilization of civilian industrial facilities could remedy the situation. For example, in the early 2010s, according to the Institute for Strategic Evaluations the Russian Joint Strategic Command West had 750 tanks, while the NATO contingent in Europe, in its Eastern part (without Greece and Turkey) had 8.5 thousand tanks; Russia had 120 bombers, 300 fighter planes, 150 attack helicopters and 130 transport helicopters, whereas NATO had 2.9 thousand planes and 1.1 thousand attack helicopters. Are we aware of the fact that even if military expenses [remain] on the scale of 4.7% GDP this will not allow us to catch up with our 'potential adversary' in the foreseeable future, then any war-games are out of the question?

Fear Management

"The second question concerns the objective of all the talks about the external threat that are ever more frequently held by Russian parliamentarians, officials and security chiefs. Each time they generate discussion about Russia being dragged into new conflicts, and I think this is the reason why these talks are mostly started in the first place. In recent months it is becoming ever more evident that the economy is stagnating, 'growth' is extremely precarious, the population's real earnings are declining at an accelerated rate; investments are supported mostly from the federal budget or from the funds of state-owned companies. In this situation, discussions of an external threat and, correspondingly, the need to finance the resistance to it, lower civilian expectations about a growth in prosperity. In my opinion, the agenda for a new presidential term is being formulated: 'Let our motherland live on', and all the rest can be put off for later – for 2024, and if that fails, definitely for 2030. And, naturally, nothing contributes to this idea more than a sense by the citizenry that an external threat exists.

"But this is precisely why one cannot view what is currently transpiring as a real mobilization it is closer to the very opposite. In the current situation, mobilization is precisely what our authorities do not need; they need the population's sense of resignation and its concentration of questions of survival. It is worth mentioning that Russian military operations in Georgia and Ukraine did not begin in the context of war hysteria, but in the context of talks about modernization and rapprochement with the West (in 2008) and the Olympic peace in the world (in 2014). This only strengthens the feeling that the current "mobilization" is bogus, I would even say, imaginary. The more they talk about placing the economy on a war-footing, the less likely such plans will be implemented. Putin likes to play at being a wartime leader more than to actually be one. And rightly so, all things considered, because in fact, our business – large or small, private or state-owned – does not and cannot have any military or mobilization potential.

"This intimidation of the population undertaken by the authorities, however, can have some undesirable consequences for the Kremlin. First of all, the feeling of the inevitable 'end of the world' is a powerful disincentive to investment activity, since it hints that the government will support primarily the demand for military products made by the industry. For private businessmen, all that is happening is a signal to withdraw funds from promising projects. Any tension is also an impetus to stop spending and start saving for a rainy day, even if people are limiting themselves in everything as it is – i. e. don't get your hopes up for growth in consumer spending. Finally, a significant part of society understands that the authorities lie when they speak about the aggressive intentions of the West, and use this rhetoric to attack political and economic freedoms, which means that it's time to leave before they have been completely restricted. To sum up, the militarist rhetoric slashes a much larger percentage of growth than the increase in military expenses with their insignificant multipliers adds to the economy.

"It is difficult to say whether the Kremlin is aware of all this, but it is almost beyond doubt that no real mobilization will be achieved by turning up the heat of military rhetoric. Dreams about economic mobilization will remain dreams, and the public will watch the renewal of the economic downturn with increasing indifference. This indifference will probably seem a comfort to the authorities. But I am not sure that the new wave of crisis will be perceived -with the same sentiment."


[1], November 28, 2017.

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