May 8, 2025:
The Ukraine war disrupted Russian manufacturing activity as production shifted to military needs. The large number of Russian men mobilized for the war caused labor shortages. Then there were over a million Russian men lost, killed, disabled, deserted or fled the country to avoid military service.
The labor shortage is made worse by the lack of high school and university graduates with technical training. Too many of those grads concentrated on the humanities rather than industrial and software engineering. As a result, firms manufacturing requiring a lot of people with technical skills cut production. The government has responded by proposing laws limiting enrollment for humanities students. Bonuses and other benefits would be offered to students studying technical subjects.
Most of these measures can be attributed to the Ukraine War. This conflict caused enormous economic damage to both countries. The Ukrainian GDP declined 30 percent in 2022 while Russia’s declined about three percent. Russia was hit hard by economic sanctions in 2014 for taking Crimea and parts of eastern Ukraine, and sanctions for its 2022 invasion made it even more isolated from the global economy. Russia’s only arms imports now come from equally poor North Korean artillery shells and rockets and cheap Iranian missiles. Payment is by barter. North Korea gets badly needed food and oil supplies while Iran receives modern jet fighters and other military tech. China and India help with the funding by purchasing heavily discounted Russian oil and natural gas.
Two years ago Western sanctions were expanded, blocking Russia from obtaining a lot of industrial equipment for factories or establishing new ones. Russia now has a more difficult time obtaining machine tools and components needed to build weapons. These include motors and other components for drones, including lithium-ion batteries that power most drones. Many of these banned components for weapons are also used in non-military items. These are called dual use items, and the new sanctions ban them as well because this is how you guarantee no supplies of items that can be used to build weapons. This includes complex systems like missiles, which require specific chemicals needed to fabricate the solid-fuel motors used.
There are alternative sources for sanctioned items, but the cost is higher, delivery takes longer, and regular deliveries are not guaranteed. Using smugglers to deal with sanctions is expensive but Russia must pay more to keep essential war-time industries going.
Dealing with sanctions also requires lots of money and Russian government debt is more expensive to raise because of higher interest rates for what lenders call high risk of default debt. That forces Russia to be selective in what military equipment it purchased. For example, the government won’t buy many new rifles for their combat troops because there are still lots of older weapons in storage. That does not always work as it should because many of these old rifles were so poorly maintained that they were often obviously rusty and barely operational. The newly mobilized troops complained but the federal government recognizes that most of these poorly trained and equipped soldiers won’t last long in combat. Local governments of places where many of the new troops come from suffered most of the blowback for this and often organized efforts to raise money locally to buy new weapons and other equipment for locals now in the army.
Foreign suppliers were few and provided low quality weapons. This includes Iranian propeller-driven small drones armed to perform as slow-moving cruise missiles. Then there were cheap and often elderly North Korean 152mm artillery shells needed to keep the fighting going. The Iranian missiles were not as useful as predicted because the Ukrainians shot down most of them. There is still some damage from the debris from intercepted missiles that often exploded when they crashed to the ground. When Russia used a lot of cruise missiles in an attack, most crashed in urban areas, where the wreckage damaged Ukrainian infrastructure.
By early 2024 Russia’s enormous pre-war artillery munitions stocks were depleted, while its production facilities were unable to expand. Before 1991 a lot of Soviet era 122mm and 152mm ammunition was produced outside post-1991 Russia. That includes Ukraine, Belarus and other countries that have halted production and dismantled production facilities. Russia was not expecting a long war in Ukraine and did not have the artillery munitions available to supply all the artillery sent to Ukraine in the past three years. On the front lines Ukrainian troops have noted much fewer Russian shells fired at them. Ukrainian artillery, a combination of old 152mm and new 155mm guns, also used more effective tactics than the Russians.
Russia has used up its own supplies of ballistic and cruise missiles; the few remaining were not enough to reverse the progress Ukraine was making in rebuilding its production capabilities. Ukrainian reconstruction was concentrating on keeping the lights on, along with other utilities like water, sewage disposal and heating. Because so much housing was damaged or destroyed, twenty percent of Ukrainians had temporarily left the country, leaving enough unoccupied housing for those needing temporary shelter until their bombed-out homes were repaired or rebuilt. Some of the foreign aid consisted of building supplies to speed the restoration of war damaged housing. Russia suffered a smaller exodus of population. Most of these are military-age men avoiding mobilization or unemployed Russians with skills who can get jobs anywhere. These refugees were sufficiently numerous to cause labor shortages inside Russia, forcing the government to import North Korean workers to deal with the problem.
Neighboring Belarus was technically an ally, but the relationship was more like Belarus being an unwilling donor of resources to a Russia that makes no secret of the plan to absorb Belarus once Ukraine is conquered. Most Belarussians are pro-Ukraine and want to maintain independence from Russia. The pro-Russia Belarus leaders and their security forces, reinforced with some Russians, keep Belarus from more actively supporting Ukraine.
Central Asian nations that also became independent of Russia in 1991 see themselves as on the Russian acquisition list too, and adopted wary neutrality towards the Russia-Ukraine war while supporting Ukraine. This limited Russian economic opportunities in Central Asia. China sped up its efforts to replace Russia as the major foreign trading partner with the Central Asian states.
China has generally avoided increasing its pre-war trade with Russia because of all the sanctions, but has quietly increased its trade with North Korea and Iran. China does not give things away but is willing to sell to anyone who can pay. Iran has oil and North Korea has coal and minerals plus whatever its hackers can steal. China allowed these hackers to work from China as long as they paid their own way and did not hack Chinese. The North Korean hackers have become quite good at stealing cryptocurrency, which China or Russia accepted as payment.
The more desperate the Russian economic situation got, the more they had to improvise to survive. That’s an old Russian tradition that must be relied on more often than most Russians want.