The armistice, the last hope of the Kremlin to save the economy. Veterans, the after -war social bomb

While negotiating a possible cessation of fire, Moscow tries to hide their vulnerabilities. And the economy is the largest of them.

Lowering of oil price affects Russia's/Photo Revenue: Archive

After two and a half years of war, Russia is facing a deep economic crisis. The defense industry has become a “black hole” that absorbs huge resources, while civil production collapses. And the costs of this conflict begin to feel stronger in the pockets of ordinary Russians.

The exorbitant price of the war

Russia's military expenses exploded: from 5.9 trillion rubles in 2021 to 16.2 trillion in 2024 – almost 40% of the federal budget. For comparison, in recent years of the USSR, when the country was in a “army race” with the US, military expenses did not exceed 8-9% of GDP.

But financing sources begin to exhaust: $ 300 billion from gold and currency reserves are blocked by the West, the National Welfare Fund (FNB) has been emptied from 148 billion, oil export revenues ($ 195 billion in 2024) will decrease this year to 140-150 billion, and to lower prices, sanctions.

Emergency Plan: Printed of money and inflation

To cover the deficit, the Kremlin resorted to massive monetary emission. In the last two years, the monetary mass (M2x) has increased by 63%, while the economy has only advanced by a few percent. The result? The real inflation (estimated at 25-28% per year) devours the population economies, while the Russian central bank maintains a refinancing rate of 21%-a clear sign of hidden pressures.

Killer wages and social bomb

The war has created a new privileged class. A Contracting Soldier earns 5 million rubles per year (over 50,000 euros), including bonuses.

Instead, a teacher or doctor receives only 35,000-50,000 rubles per month (under 500 euros).

This huge discrepancy between the revenues of those involved in the war and of the other citizens create explosive social tensions. Veterans who will return from the front, accustomed to the money easily earned, risk becoming a new source of instability.

Why does the Kremlin want the armistice?

Without a break in the war, Russia cannot reduce the military expenses that suffocate it, to attract foreign investments to relaunch the economy and to eliminate some sanctions that make exports difficult.

The “Trump phenomenon” could be a rescue for Putin – if the US reduces the pressure of sanctions. But until then, time works against Russia.

This summer, the budget deficit will deepen. Inflation will continue to grow, and rubla will depreciate.

If the war continues, the Kremlin will have to resort to new austerity measures.

The armistice is not just a geopolitical problem for Putin – it is his last chance to avoid an economic collapse.

Putin's fears

Although the United States continues to urge the Kremlin to accept a cessation of fire and to sit at the negotiation table, Moscow constantly rejects the proposals. According to an analysis published by the German tabloid “Bild”, in the Western government circles there is an increasing conclusion: Vladimir Putin has more reasons to continue the war than to conclude it. A possible peace agreement would not solve anything – on the contrary, it could even destabilize the regime.

The fundamental problem is that Russia did not achieve the military objectives set at the beginning of the invasion, but in the meantime, it has developed a parasitic economy. The defense industries received an unprecedented impulse, hundreds of thousands of Russians live from military contracts, and the economic structure of the country has inevitably adjusted to a reality of prolonged conflict.

Thus, while the Russian society was ideologically educated to support an “existential struggle” with the West, at the economic level, the war became not only sustainable, but indispensable. Any sudden exit from this mechanism would mean a major economic shock, which the Kremlin seems incapable – or uninterested – to manage.

A war economy

Even so, cracks in the system begin to appear. Outside the defense industry, the rest of the economy shows signs of exhaustion. Sectors such as the food, mining, metallurgical or equipment industry slowly enter the recession, a sign that, beyond the state controlled figures, Russia loses its breath. The only area with “growths” is the military-industrial complex, which masks the general decline.

But not even the end of the war would change this paradigm. The Ministry of Defense will continue to consume huge budgets under the pretext of restoring the arsenal, and the military infrastructure, already extended, will operate in continuous maintenance regime. Moreover, NATO and the European Union increase their own defense expenses, which give Putin an external justification for maintaining investments in the army.

Alexandra Prokopenko, an expert at the Carnegie Center and former analyst at the Central Bank of Russia, warns that the myth of the collapse of the Russian military-industrial complex after the war is exaggerated. “Even if the conflicts end, the Kremlin will continue to pump money in defense, due to tensions with NATO,” she explains.

Officially, Russia spends 8% of GDP and 40% of the federal budget for the army, figures that do not reflect the real expenses, hidden under other budgetary chapters. Under these conditions, even a facade armistice would be, from the perspective of the Kremlin, only a break in preparing a future offensive – possibly, to the eastern flank of Europe.

Veterans, the after -war social bomb

Another instability factor that experts are talking about is more and more pressing is the problem of returning veterans. After years of front and high military wages, tens of thousands of fighters would return to poor regions, without economic perspectives and with untreated psychological trauma.

According to analyst Margaret Klein of the German Institute for International Relations and Security, these former soldiers risk becoming either a source of social tension or joining criminal networks. Russia is already facing a visible increase in violence, and the lack of a system of reintegration for veterans only aggravates the explosive potential.

War as a system of government

Several Western analysts point out that Vladimir Putin no longer runs a country in the classic sense, but a regime supported by a hypertrophied military-industrial system. Editorialist Bloomberg, Pierre Briançon, stresses that the Russian economy works in a permanent overload regime-a “war” economy that has nothing to do with the normality of the market. Any attempt to return to a preconfect situation is equivalent to a “forced article” that can trigger protests, instability and a possible fracture of the regime.

The cruel truth is that, in the absence of a clear victory or a complete collapse, Russia has no return. And Putin – whether he recognizes it or not – closed the door of an honorable withdrawal when he tied the state survival to the “holy cause” of the war.