More than $300 million a day: how much does the war with Ukraine cost and what does it mean for the Russian economy

On the one hand, no one has an answer to this question, on the other, the order of assessment lies on the surface. In 2024, the Russian defense budget will grow to 11 trillion rubles, or up to $120 billion at the current exchange rate. This is 30% of all budget expenditures and 6% of GDP. At the same time, in reality, Russia will spend even more on the war with Ukraine - some expenses are hidden in other budget items. An alternative way to assess Russia's military spending was used by Ukrainian Forbes. Based on data from the General Staff of the Armed Forces of Ukraine, the publication evaluates four main items: support for military operations, military salaries, compensation to the families of the dead and wounded, and the cost of destroyed equipment. The result is the same - more than $100 billion per year, or $315 million per day. Is it a lot or a little? $100 billion is about a quarter of the average annual value of Russian exports over the past 10 years. At the same time, in 2022 and 2023, incomes were significantly higher and exceeded the average annual level by a total of about 200 billion. Thus, if we do not take into account the effect of sanctions, at current prices for raw materials, this war on today’s scale will not bankrupt the government and will not even will become a source of serious budgetary problems.

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How much does the war with Ukraine cost Russia and what does it mean for its economy? It would seem that the fog of war and secrecy are hiding the answers to these most important questions from us. At the same time, there are different data and ideas about prices and amounts of payments, as well as about the size of expenses and losses of weapons and personnel. It is unlikely that exact figures can be obtained at the moment, but it is quite possible to estimate the order of costs.

In 2024, Russian budget expenditures under the item “National Defense” will exceed 10.7 trillion rubles, as follows from the “Main Directions of Budget, Tax and Customs Tariff Policy for 2024 and the Planning Period of 2025 and 2026” just published by the Ministry of Finance. On September 29, the draft budget was submitted to the Duma. 10.7 trillion is 30% of all budget expenditures and about 6% of GDP. This share of GDP, according to the Stockholm International Peace Research Institute (SIPRI) , is not spent on defense by any of the major military powers, and the world average is 2.2% of GDP.

At the same time, in reality, Russia will spend even more on the war. Some expenses directly related to the war are covered under the heading "National Security and Law Enforcement." Some are reflected in civil articles: for example, payments to residents of occupied territories - in the article "Social Policy", construction work - in "National Economy" or "Housing and Communal Services", treatment of the wounded - in "Healthcare".

To get a more or less relevant assessment of military spending, economic commentator Boris Grozovsky suggests adding classified spending on all other items to the known defense spending, since in war conditions “the main motive for classification is the connection with defense and security.” Applying this method to the 2023 budget, Grozovsky received 8.7 trillion rubles: the open part of the “National Defense” - 2.2 trillion, all closed items - 6.5 trillion. This is the same 30% of planned budget expenditures, or almost 6% of GDP. In 2024, according to Bloomberg , which was the first to reveal the parameters of the new budget, the volume of closed expenditure items will almost double and exceed 11 trillion rubles. Grozovsky carried out his calculations for 2023 in the summer. Then he suggested that the final amount would be higher, since in the first two months the annual spending plan for “National Defense” was fulfilled by 40%: 2 out of 5 trillion rubles were spent. And so it happened.

In early September, citing a secret government document, Reuters reported that in the first six months of the year, spending on national defense alone amounted to 5.6 trillion rubles. Initially it was planned a little less than 5 trillion. The Ministry of Finance estimates annual expenditures, as of September 1, at 6.4 trillion, however, if the distribution of expenditures in 2023 is approximately the same as in 2022 (then January–June accounted for a little less than 60%), national defense will actually be 9.6 trillion rubles were spent, Grozovsky calculated . A government document from Reuters contained a similar estimate: 9.7 trillion rubles. This is only 10% less than planned for 2024.

An alternative way to assess the dynamics of Russian military spending is offered by Ukrainian Forbes . Based on data provided by the General Staff of the Armed Forces of Ukraine, the publication calculates the direct costs of combat operations, highlighting the four largest items: support for military operations, military salaries, compensation to the families of the dead and wounded, and the cost of destroyed equipment. In total, over the 18 months of the war, from February 24, 2022 to August 24, 2023, expenses on these items could amount to about $170 billion.

Forbes estimates expenses per fighter in 2023 at approximately 360 thousand rubles per month. The amount consists of salary and additional payments. Compensation to the family of the deceased - 7.4 million. Compensation for injuries - 3 million. According to the Armed Forces of Ukraine, on which journalists rely, the level of losses in 2023 (especially in the first months) is higher than in 2022, so Russia had to spend on more compensation. At the end of last year, summing up the results of the first nine months of the invasion , journalists estimated the cost of salaries at $15.6 billion, at the end of 18 months - at $35 billion. The total amount of compensation to the families of the killed increased from $9.4 billion to $25.6 billion, to the wounded - from $7.7 to $21 billion. Expenses for providing the army with shells, missiles, ammunition, fuel, medicines, etc. according to the results of nine months, Forbes estimated it at $28.7 billion, at the end of 18 months - at $51.3 billion. The most money was spent on missiles: $21 billion. In second place are artillery shells: $9.1 billion. The cost of destroyed equipment according to the results Forbes estimated the first nine months of the war at $20.8 billion, and at the end of 18 months - at $34 billion.

If Forbes' calculations are close to reality, despite the change in the structure of expenses, in dollars they are more or less stable: every day of war, both in the past and this year, costs Russia a little more than $300 million, which in annual terms amounts to $100 billion. Another thing is that that in 2022 a dollar was worth an average of 60 rubles, and in September 2023 - 96. That is, in rubles, direct military spending in 2023 could increase by a third compared to the first year of the war. This does not contradict other estimates. The nearly 11 trillion rubles of national defense spending planned for 2024 is $120 billion at the rate of 90 rubles to the dollar.

$100–120 billion is about a quarter of the average annual value of Russian exports over the past 10 years ($425 billion). At the same time, last year export revenues amounted to a record $590 billion, and this year they are projected to fall to $460 billion. Thus, the additional price rent (exceeding the average income) over two years will amount to $200 billion and will more than cover the direct costs of war during this period.

These calculations, of course, do not take into account the indirect costs and losses of the Russian economy from Western sanctions, which, contrary to popular belief, are very significant and are expressed in the outflow of capital , increased costs of imports and logistics , unproductive costs for duplicate infrastructure , and a decrease in productivity due to technological degradation . However, at current commodity prices, such scales of spending certainly will not become a source of significant budgetary problems.