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Russia

Russia's War in Chechnya: A Boon for the Economy, Despite International Pressure

Strategic Insights

— 2 min read

Russia's ongoing conflict in Chechnya has not only displaced hundreds of thousands of people and killed an unknown number of civilians, but it has also become a crucial factor in the country's economic fortunes. Despite international pressure, Russia appears to be willing to continue funding the war, which has already cost an estimated $1.5 billion. The government's decision to prioritize the war effort over pressing domestic issues, such as unpaid teachers and crumbling roads, has raised eyebrows among Western creditors and human rights groups.

Key Takeaways:

  • Russia's oil-export revenues have surged unexpectedly, enabling the government to maintain a budget surplus and fund its military campaign in Chechnya.
  • The war has revived the country's military-industrial complex, with Russia discussing several weapons export deals in recent months.
  • Despite economic growth, millions of Russians continue to live in poverty, with 147 million people relying on barter and subsistence farming to survive.
  • The Ministry of Defense has received an additional $2 billion in expenses for 1999, with most of the funds allocated to the military.
  • Russia's tax revenue has increased due to rising oil prices, with the country now experiencing a surplus of up to $3 billion per month in its trade account.
  • International pressure is mounting, with the IMF postponing a $640 million loan to Moscow and Western creditors threatening economic sanctions.
  • The US Republican presidential candidates have called for cutting off aid to Russia while the Chechnya conflict continues.

Statistics:

  • Estimated cost of the war in Chechnya: $1.5 billion to $3.6 billion (Mr. Waller, IISS economist)
  • Number of people displaced by the war: around 250,000
  • Number of civilians and rebels killed: unknown
  • Russia's budget surplus: 1st in 9 years
  • Extra expenses for the Ministry of Defense in 1999: $2 billion
  • Oil prices: doubled in recent months
  • Import prices: nearly halved, with luxury restaurants and stores increasingly using Russian foodstuffs
  • Industrial production growth: 20%
  • Russia's GDP growth: up to a real 2% this year
  • Trade account surplus: up to $3 billion per month
  • IMF loan to Moscow: $640 million, postponed due to concerns over the war

Sources:

  • "Russia will find the money somewhere," says Digby Waller, an economist at the International Institute for Strategic Studies (IISS), a military research group in London.
  • Mikhail Delyagin, director of the Institute of Global Issues, citing the war as a boon for the economy by reviving the military-industrial complex.
  • The Christian Science Publishing Society, 1999.

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