PATRICIA PAYS FOR WAR
Since the beginning of the war, the EU has paid Russia 35 times more than assistance it has provided to Ukraine.
As reported by Deutsche Welle, “European countries have paid €35 billion for energy carriers,” said Josep Borrell, the EU Foreign Policy Chief. According to him, the amount of financial assistance to Ukraine was 35 times less.
According to Bloomberg, in 2022, Russia could earn nearly $321 billion through energy exports and end the year with a record current payment account surplus of $240 billion if countries do not impose a full oil and gas embargo.
Experts say the increase in the price of oil in dollars will bring an additional 8.5 trillion rubles (about $103 billion) to the Russian budget this year, even despite depreciation of the Russian ruble.
The Ukrainian Ministry of Defense estimate that, during the first month of the war, Ukraine destroyed $10 billion worth of Russian military equipment. This amount is equivalent to Russia’s income from one month of oil sales, if the world is not unanimous in imposing an oil embargo on supplies from Russia.
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“BUSINESS IS ONE THING, WAR IS QUITE ANOTHER”
Based on liberal positions, the thesis that war and business are very different things may hold true – in the 18th century, when liberalism was invented. Indeed, at that time, war was a matter for professionals. Many more soldiers than civilians got involved in wars and comprised its casualties. Unfortunately, in the 20th century, the evolution of weapons have changed everything. For more than a century, civilian casualties in wars have exponentially exceeded those of the military.
Additionally, the complexity of the chain of cause and effect has significantly grown. An Iskander missile hitting a civilian house is not due solely to the individual decision of Lieutenant Ivanov who pressed the button. It differs greatly from a saber strike in the time of Adam Smith.
A missile shot is the result of the work of thousands of people - designers, chemists, machine builders, non-ferrous metallurgy workers, engineers and employees of the space industry, oil workers and refiners, employees of the RZhD (Russian railways), loaders and operators of port cranes in Novorossiysk and Sevastopol – and many of those people have made this shot possible.
Russian defense industry
According to American researcher Pavel Luzin, since the collapse of the USSR, the Russian defense industry experienced two interrelated roller coaster rides - economic and organizational. The first involved sharp cuts in government spending and unsuccessful conversion efforts followed by strong expenditure growth since 1998. The second included the collapse of Soviet-era chains of management, supply and production, followed by ersatz privatization, which benefited the new elite. Today, these processes have resulted in the state dominance in this strategic area, while the private sector is represented only nominally.
Stockholm International Peace Research Institute estimates that Russian military spending dropped from an average of just over $254 billion annually in 1988-1990 to just $15.7 billion in 1998 (figures in 2019 dollars ).
At the same time, attempts to switch to non-military production, launched in the late 1980s, had completely failed by 1993. The Russian defense industry managed to survive the crisis due to its continued weapons production and maintenance, relying on Soviet-era reserves and foreign demand, mainly from China, India, and other developing countries.
In the late 1990s and early 2000s, Western governments worked with Russia on space projects and funded disarmament programmes. This sometimes led to bizarre paradoxes. For example, with financial assistance from the West, Russia dismantled dozens of Soviet-era nuclear submarines and built 16 new ones on its own. At the same time, Russia tried to reduce its dependence on other former Soviet republics for defense production, like fully localizing the manufacturing of various types of missiles that had previously been built in Ukraine.
Russian nuclear submarine “Kursk” which sank in the Barents Sea in August 2000
Link: https://www.popularmechanics.com/military/navy-ships/a23494010/kursk-submarine-disaster/
During Putin’s rule, the defense industry turned to consolidation and restoration of formal state property amid greater consolidation of Russia’s authoritarian rule.
Today, Russia’s defense sector is an integral part of the country’s political system where allocation of state resources depends on continuous negotiations between different stakeholders, differing from the systems in the United States or China.
Under Putin, Russia has also de facto restored the Soviet-type of command economy in the defense industry, which has not helped the sector overcome challenges. One of the government measures involves restarting the conversion programme - Russian defense companies must increase their share of civil revenue to 50 % by 2030 and oblige government agencies and state-owned companies in other sectors to buy these civil goods.
Due to either procurement directives from above or government officials in key leadership positions, the Russian government remains deeply involved in the country’s defense industry. The above-mentioned mandatory purchases of civil goods exemplify the strong-hand manner of the state rule. Mixing state-owned defense corporations and private enterprises linked to senior Russian officials is another example.
Despite the economic sanctions in 2021, the Russian defense industry consisted of about 1,300 enterprises, most of them being under the auspices of state corporations: Rostec, Almaz-Antey, Roscosmos, Tactical Missile Corporation, the United Shipbuilding Corporation, and Rosatom‘s nuclear weapons division. Approximately 2 million workers in the sector make up about 2.7% of Russia’s workforce. Russian ministers, deputy ministers, and presidential administration officials are members of the boards of directors of these corporations, and FSB employees work in their management. Moreover, there is competition within each corporation: different divisions, subsidiaries, and individual plants compete for their share in production and research and development programmes.
Photo: Former KGB agent of the USSR and head of the state corporation Rostec Sergey Chemezov is one of the bright representatives of the Putin regime, whose fortune is estimated at billions of US dollars
According to the American newspaper Russia Matters, between 2014-2018, Rostec sold a 75% stake in the Kalashnikov Group to a company controlled by Alexey Krivoruchko, who became deputy defense minister in June 2018 and sold his stake to former deputy transport minister Alan Lushnikov. Meanwhile, Lushnikov is a business partner of the retired Major General Timur Gareev, who is on the board of directors of Tactical Missiles Corporation, one of the state’s defense holdings.
What weapons dangerous for mankind has Russia created over the past 20 years?
Russia’s nonstrategic (tactical) nuclear weapons development is a complicated and elusive topic, as Russia hides the number of missiles and other weapons produced for the needs of its army.
Another problem with accounting for and controlling Russia’s nonstrategic nuclear weapons is that their control is not covered by strategic arms treaties.
Russia has more missiles than the United States, and it protects them from any mechanisms of control and accountability. Analysts say that this is because, since the early 1990s, Russian leaders have considered nonstrategic nuclear missiles as a form of compensation for the weaknesses of their conventional armed forces, especially in terms of high-precision weapons.
But Russia has gone much further than the USSR. If the Soviet leadership believed that a global nuclear conflict would be an inevitable escalation in the case of a great war, modern Russian leadership has developed a concept of controlling such an escalation, through the concept of “nuclear de-escalation”/”escalation for de-escalation.” Now, Russia’s leaders believe they can control the development of a great war and win it.
In case of the threat of military defeat, the Russian concept of “nuclear de-escalation” provides for a demonstrative nuclear strike with the help of nonstrategic nuclear weapons on the enemy’s uninhabited territory or unnavigable waters in order to demoralize the enemy and persuade them to negotiate or surrender. This concept is based not on calculations claiming to achieve a logical goal, but on “religious dogma” - on the idea that the Kremlin has a strong character, and the elites and societies of a likely or real enemy are weaklings who will surely shudder.
However, it is not easy to really use nonstrategic nuclear weapons and this does not happen by pressing a button - many people are included in this system and there is more than one “foolproof” fail-safe. Besides, even if the Russian authorities perceive nonstrategic nuclear weapons as something acceptable and not particularly terrible, for all other nuclear states it is still a nuclear weapon – the use of which in any form is an existential threat and unacceptable.
Russian cruise missiles
According to American news agency ABC News, during the first month of the Russian large-scale invasion, Russia used more than 1,200 of missiles on Ukraine, mostly Kalibr and Iskander-M cruise missiles that are capable of carrying a nuclear warhead.
The 12th Main Directorate of the Ministry of Defense is responsible for all Russian nuclear weapons. Its main facilities are central storage facilities (CSF or arsenals) where warheads are stored and serviced. In total, there are 12 such CSFs in Russia: Olenegorsk-2 (Murmansk region), Vologda-20, Mozhaysk-10, Voronezh-45, Bryansk-18, Belgorod-22, Saratov-63, the closed administrative territorial formation Trekhgorny (Chelyabinsk region), the CATF Lesnoy (Sverdlovsk region), Irkutsk-45, Khabarovsk-47, and Komsomolsk-on-Amur-31.
In the first days of the war, Russians launched up to 480 missiles at Ukraine. These included 230 from Iskander-M self-propelled launchers which they brought to the territory of Ukraine, 160 from launchers on the territory of Russia, 70 from the territory of Belarus, and over 10 Kalibr-NK missiles from ships in the Black Sea Fleet of the Russian Federation, the Defense Express portal reports.
According to Robert Lee, a veteran of the U.S. Marine Corps, Kalibr cruise missiles placed on ships and submarines in the Black Sea and Iskander-M missiles stationed along the border can hit targets almost anywhere in Ukraine.
Over the past 20 years, Kalibr cruise missiles have become the Russian army’s most modern weapons, designed in the late 1970s and modernized by the Russian defense industry.
“I’m ashamed to admit, I was surprised a few years ago when Kalibr missiles took off from the Caspian Sea, striking targets in Syria,” said Lieutenant General Ben Hodges, a retired U.S. Army commander in Europe.
Link: https://uk.wikipedia.org/wiki/%D0%A4%D0%B0%D0%B9%D0%BB:3M-54E_missile_MAKS2009.jpg
Experts say that the cost of one Russian Kalibr missile is about $1.2 million.
Equally menacing weapons are Kinzhal missiles. However, due to their high cost, Russia has fired a lot fewer Kinzhals on Ukraine than Kalibrs or Iskanders, according to Bloomberg.
The Kinzhal cruise missile is a completely new development of the Russian defense industry. The Kinzhal is a modification of missiles for Iskanders which are installed on high-speed MiG-31 fighters.
Photo: MiG-31K fighter with hypersonic Kinzhal missiles at the Russian airbase in Hmeymim
Link: https://www.radiosvoboda.org/a/news-rosija-ukrajina-giperzvukovi-rakety-kyndzhal/31760794.html
The Kinzhal missile was first made known in March 2018 from Vladimir Putin’s address to the Federal Assembly of the Russian Federation. Then the Head of the Kremlin presented many samples of “fantastic” weapons which were allegedly able to overcome the latest air defense systems. In support of his words, the Russian president showed only computer graphics, which led many to compare his presentation with cartoons. Yet Western military experts took the part of his speech concerning the Kinzhal missile quite seriously.
The Kinzhal hypersonic missile system is considered to be a deep modernization of the single-stage solid fuel 9M723 missile for the Iskander complex but for launching from aircraft. The range of this missile reaches 2000 km.
According to experts, the cost, as well as the number of Kinzhals is quite difficult to calculate, but one Kinzhal missile can cost up to $6.5 million. At the same time, there are less than 100 of them in Russia.
Russia’s military losses
Over the past 10 years, Russia’s official military budget has ranged from $50 billion to $60 billion.
In recent years, annual budget military expenses can be compensated by three-month revenues from the country’s oil sales.
Source: https://infogram.com/luzin-table-1-1hzj4o3ln3zyo4p
This does not include corporate expenditures of state-owned Russian corporations of the oil and gas sector which, according to investigators, are financed by artificially created state corporations and not reflected in the state budget.
Over the past 10 years, Russia’s total budget expenditures for military needs have also fluctuated between $61 billion and $65 billion per year according to SIPRI.
According to the World Population Review, Russia is among the top 10 countries with the highest military spending in the world.
According to the 2020 results, military expenses are as follows:
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- United States – $778 billion;
- China – $252 billion;
- India – $72.9 billion;
- Russia – $61.7 billion;
- United Kingdom – $59.2 billion;
- Saudi Arabia – $57.5 billion;
- Germany – $52.8 billion;
- France – $52.7 billion.
OIL AND GAS SERVING THE RUSSIAN ARMY
At the end of 2021, Russian oil and gas accounted for nearly 35% of the country’s total budget revenues. Although Russia wants to reduce its dependence on hydrocarbons after the previous wave of sanctions, which began eight years ago after the Crimea annexation, oil and gas remain the main sources of income for the budget.
According to Bloomberg, since Russia does not publish data on its oil exports, its monthly revenues from the sale of oil abroad are difficult to estimate. Over the past few years, the country exported nearly half of its oil products, which in July and August 2022 amounted to an average of 11.04 million barrels per day.
According to Kpler analysts , as of March 9, 2022, sea exports, which are the main path of the Russian oil flow, “remained comfortable for Russia” and still amounted to about 4.9 million barrels per day.
As of mid-March 2022, Europe and China, which are the main buyers of Russian oil and oil products, have not imposed any formal restrictions on the purchase of fuel due to Russia’s invasion. However, international energy companies and traders avoided buying Russian oil because of ambiguity on how purchases might be treated, while the US and the UK said they would ban imports of Russian oil. Kpler expects Russian oil volumes exported by waterways to continue rising against uncertainty.
Russia’s oil export duty for April is based on the average Urals price recorded for one month (mid-February to mid-March). If the Brent brand discount, which is currently about $30 per barrel, remains or deepens, and the growth of oil prices weakens, this may lead to a reduction in the rate of export duty of Russia, which the state budget receives in May. Combined with a potential decline in oil exports, this could hit Russia’s budget revenues just when Russia needs money so desperately.
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Russia’s invasion of Ukraine has triggered a wave of sanctions against Russian gas and oil state corporations. While there are no signs to date that Gazprom‘s directors played any direct role in Putin’s decision, Russia’s political system is built on generously rewarding businessmen loyal to the government. In addition, Gazprom‘s substantial role in public finances has made it an obvious target for Western leaders who want to impose financial sanctions.
Before the invasion, Russia’s aggressive negotiations in Eastern Europe forced Baltic states to criticize Russia. In October 2021, Gazprom has offered the Moldovan government cheaper gas if they weaken ties with the EU. In August 2021, Gazprom excluded Ukraine from the transit agreement on gas supplies to Hungary.
Russia might profit in April 2022 from the recent rise in oil prices as its oil export tax jumps to its highest in 2022, even amid international sanctions and unprecedented discounts on Urals crude oil.
According to Bloomberg‘s calculations, based on data from the US Treasury, a barrel of Russian oil or fuel oil exported in April 2022 will bring more than $8.30 to the state treasury. This year, monthly duty has been rising steadily along with oil prices, which earlier in March jumped above $100 amid the worst energy crisis in recent decades, exacerbated by concerns over disruptions in Russian flows.
If we compare the production cost of Russian missiles with the income from oil sales, we will have the following picture:
1 barrel of Urals oil gives Russia $8.30 to the budget
1 Russian Kalibr missile costs $1.2 million
According to experts, Russia produces an average of 6 million barrels of oil in 1 day, which is equal to the production of 41 Kalibr-class cruise missiles
To launch 1 Kalibr missile , Russia must sell 144 thousand barrels of oil
In recent years, Russia has been one of the largest oil exporters in the world.
For example, according to the results from 2019 alone, Russia ranked 2nd by this indicator among such exporters of crude oil:
- Saudi Arabia ($145 billion)
- Russia ($123 billion)
- Iraq ($73.8 billion)
- Canada ($67.8 billion)
- United States ($61.9 billion)
Infographics: https://www.aljazeera.com/news/2022/3/10/infographic-how-much-of-your-countrys-oil-comes-from-russia-interactive
Aljazeera estimates that in 2019 alone, Russia sold oil to 48 countries, allowing it to keep military spending at the same level as that preceded the imposition of sanctions in 2014 for the unleashed war in Donbas (Ukraine).
China bought about a quarter (27%) of Russia’s total oil exports worth $34 billion. Among the countries most dependent on Russian oil are Belarus, Cuba, Curacao, Kazakhstan, and Latvia – each of them imports over 99 percent of their crude oil from Russia.
The graph below shows how much of each country’s total crude oil imports come from Russia.
Europeans are better off using urban transport or a bicycle sometimes than buying petrol produced from Russian oil.
As can be seen from the infographic above, European countries such as Finland, Latvia, Slovakia, Lithuania, Hungary, Poland, Serbia, Czech Republic, Estonia, the Netherlands, Romania, Germany, Sweden, Italy, Croatia and others have oil dependence on Russia, satisfying their own oil needs from 20% to 90%.
The Baltic states, Poland, the Czech Republic, and Slovenia, which are most dependent on Russian oil, have supported a full embargo on oil supplies from Russia, while Germany, the Netherlands, and France are still hesitating on whether to punish Russia with the embargo.
RUSSIAN GAS
Putin’s army is sponsored by Russian gas and oil. Ordinary citizens of democratic countries do not understand how this concerns them. But there is a direct link between Russia’s ability to fight and the availability of heating in kindergartens in Croatia, Slovakia, Germany, or Italy.
Therefore, today there is a need to sacrifice comfort in your life so that Ukraine can defend the things that Europeans also share. The Ukrainian armed forces are not only fighting for their own sake. They are fighting for Europeans as well. Europeans should also think about whether to “tighten their belts” a little so that neither they nor their children are ever bombed by Putin’s Iskander-type missiles. In order to not spill human blood, Europeans should completely refuse any drop of Russian oil, any cubic meter of Russian gas, not only for today, but also for tomorrow or the day after tomorrow. We should not think that when Putin’s Russia flees from Ukraine, leaving ruins behind, trade can be resumed immediately. No, it shouldn’t be that way. If Russia wants to pay Ukraine reparations through the sale of oil and gas, that’s when you can start a conversation about it. But this question can be asked only after the complete withdrawal of Russian troops from Ukraine. And now it is necessary to completely eliminate Russia’s ability to trade oil and gas. Without any sanction “gaps”.
It is better to live a little without Putin’s gas heating water at home than under Putin’s bombs.
Against the background of Russia’s ongoing war against Ukraine, the price of Russian natural gas in Europe has reached a new high at the TTF hub in the Netherlands. The April futures are now 345 euros per megawatt hour, or nearly $3,900 per 1,000 cubic meters.
Thus, to produce one Kalibr cruise missile worth $1.2 million, Russia should sell 307 thousand cubic meters of gas.
In 2021, the European Union imported 155 billion cubic meters of natural gas from Russia, which is about 45% of gas imports to the EU and about 40% of its total gas consumption.
At such a cost as in April, during 2022, Russia can receive gross profit from the sale of natural gas amounting to $600 billion. If a full embargo on Russian gas supplies is not imposed, any economic sanctions or trade restrictions do not look serious.
Only gas revenues in addition to oil ones allow Russia to double its own military spending from $60 billion to $100 billion a year if necessary.
HOW RUSSIAN EXPORT-ORIENTED BUSINESSES ARE CONNECTED WITH THE WAR
Link: https://www.bbc.com/news/58888451
Russia’s defense sector, like its U.S. counterpart, is a key aspect of the country’s national power. However, unlike U.S. defense companies, Russia’s defense industry is largely owned by the state, de facto if not always de jure. Accordingly, large Russian defense corporations and their subsidiaries compete not in the free market, but within the so-called administrative market, which implies constant redistribution of state resources, mainly through Moscow, between players essential to the political system and its stability.
The defense industry strengthens Russia’s modern authoritarianism not only by designing power, but also by providing much of the system’s social base — from ordinary Russians who benefit via having jobs to the political elite that runs the industry or relies on its contributions to the local treasury. This gives the state too little freedom to reform the sector plagued by economic inefficiency, leading to budget leaks, partial recovery of the command economy and economic tension.
How can I help Ukraine?
- Step 1. Share this article and talk about the importance of the embargo on oil purchases from Russia.
- Step 2. Support the embargo on buying oil from Russia by signing the petition.
