The Russian president's smugness is at an end. After denying for months that Western sanctions were marring his economy and inhibiting his war effort, Vladimir Putin has established an economic coordination council as a "necessary" measure to enhance production, he conceded Thursday.
His principal challenge is that of gearing up for an anticipated — indeed, essential — spring offensive in Ukraine. He's "concerned he needs to interfere to make sure supplies will be available," said Sergei Guriev of France's Sciences Po, a research university, to The Washington Post. "He is concerned that sanctions have really hit the ability to produce goods."
Added Nikolai Petrov, a senior research fellow at the London think tank Chatham House, "The main problem ahead of the Kremlin is the question of when the army will be ready to begin new military action in Ukraine, and the preparation of arms and ammunition and so on will determine these plans." Should his newfound economic council falter, so shall his spring offensive.
Ukrainian, British and U.S. intelligence have speculated that were it not for missiles and drones supplied by Iran and North Korea, even Russia's current, war-crime assaults on Ukrainian civilians and their energy structures would have been hampered — its own arsenal has shrunk that low. In desperation, Putin is also using air defense missiles offensively to compensate for domestic shortages.
But from a larger economic perspective, Putin is trapped in even more trouble. "All objective indicators show there is a very strong drop in economic activity," said Vladimir Milov, a former Russian deputy energy minister now in exile. "The spiral is escalating, and there is no way out of this now."
After a relatively painless summer, "the situation has worsened considerably," reports the Post. Russia's finance ministry revealed last week that "a key economic indicator — tax revenue from the non-oil and gas sector — fell 20 percent [over a year] ... while the Russian state statistics agency Rosstat reported that retail sales fell 10 percent."
Putin's gas revenues have taken a self-imposed hit through his retaliatory restrictions on European supplies. Added to that economic harm will be Europe's price cap on Russian oil. Further squeezing Putin's economy are sanctions on technology imports, whose effects reverberate throughout Russian industry. Putin has also exacerbated labor shortages by conscripting more than 300,000 Russian men to die in Ukraine, while an equal number have fled the country to avoid that fate.
Warned Russia's central bank this month, GDP — as best it can be gauged in such a chaotic environment, it should be noted — will contract by more than 7 percent in the fourth quarter, after falling for two preceding quarters. The Russian economy has dropped into recession, said the bank's chairwoman, Elvira Nabiullina. What's more, the gloom is just beginning. "We really need to look at the situation very soberly and with our eyes open. Things may get worse," she said.
Affecting Russian industry as well is its tradition of pervasive corruption. As the Atlantic Council observed earlier this month, "Ever since the fall of the USSR, Western commentators have noted the debilitating impact of corruption at every level of the modern Russian state. In recent decades, some have branded the Putin regime a 'mafia state,' where the boundaries between the authorities and organized crime are blurred. Corruption has flourished under Putin amid a climate of stagnation inherited from the late Soviet era."
Russian businessmen are not pleased by Putin's creation of a coordination council. One confided to the Post that "many entrepreneurs" have been coerced into producing supplies for the Russian military at heavily discounted prices; understandably, they're afraid to raise objections. Even though a "quiet mobilization" has been in place for some time, said the businessman, the Russian press has complained about severe equipment shortages for new draftees.
In October, the Russian daily Kommersant reported "huge shortages in ammunition and uniform supplies for conscripts with manufacturers citing difficulties securing the necessary materials due to sanctions." Businessmen at large are saying that Putin’s catastrophic Ukrainian adventure has at last "exposed the huge inefficiencies and corruption in Russia’s military industrial complex." Said one banker, "There are huge questions over where all the trillions of rubles of the past decade have been spent."
Nevertheless, come spring this train wreck of an army is what Putin intends to deploy — mere cannon fodder, more cannon fodder. Realistically he has no options but one: the radioactive, whether a genuine nuclear weapon or a barrage of dirty bombs. Ukraine isn't about to yield, no matter how many innocent civilians he murders — and neither shall Putin retreat in disgrace.
Russia may be a chaotic amalgam of corruption, inefficiency, internal resistance and insolvency, but in its morbid disarray there still lies the nuclear. We must ask ourselves: Given the empirical horrors of Ukraine, is there yet any barbarity for which Vladimir Putin will not reach?