As Russia prepares for a long war with Ukraine, state orders to arm, fuel, feed and clothe its military are pumping huge sums of money into the economy, the Financial Times reported.
This has led to a boom. At a time when many expected Western sanctions to deal a painful blow to Russia, its economy is expected to grow by 3% this year, higher than the United States and most European countries.
The newspaper said in a report by writer Polina Ivanova that the impact of the war is more evident in the old industrial areas where Soviet factories have been revived and are now operating around the clock to supply the Russian army.
“Some regions with poor economic performance have suddenly started to grow, especially manufacturing regions where there are a lot of defense and related industries,” the newspaper quoted political scientist Ekaterina Kurbangalieva as saying.
“The most backward areas and the low-income segments of the population are the winners, that’s where the money goes,” she added.
The British newspaper also quoted analysts as saying that understanding the experience of regions such as Chuvashia is crucial to predicting Russia’s long-term ability to continue the war of attrition against Ukraine, economically and politically.
turning point
“This timing was a clear turning point,” says Laura Solanko of the Bank of Finland’s Institute for Economies in Transition, who has studied the impact of the war on household incomes. “Russia realized that the war would not be short.”
Factories across Russia began shifting production to military needs. In Chuvashia, seven factories were meeting orders for the armed forces before the war, and by October 2022 the number had risen to 36, according to the local governor.
Local data showed Chuvashia recorded the second highest rate, with its factories producing 27% more than the previous year.
Improved labor market
The newspaper reports that throughout Russia, the defense sector has rushed to hire new workers in a labor market that is experiencing a shortage of workers.
By August last year, Chuvashia’s unemployment rate had fallen to 2.2%, while companies raised wages to retain staff.
To meet demand, some are returning to jobs they last did in the 1990s when the Soviet Union collapsed, the newspaper quoted economist Natalia Zubarevich as saying, adding that “they are in their 60s but they are returning because it is really profitable.”
Scholars have suggested that the improving labor market is likely to have an impact on the political views of large segments of the Russian population, boosting support for the war, at a time when Western policymakers had hoped that the impact of sanctions and inflation would help turn Russian public opinion against the war.
While about 2.5 million people in Russia work in the defense sector, a larger number of them work in other industries that have been boosted by the war, such as textiles, according to the newspaper.
The families of about a million men sent to the front lines also benefit from their higher salaries and compensation for the dead and wounded.
However, economist Zubarevich calls for not overestimating the impact of defense spending in regions such as Chuvashia, expecting the impact of the war to be temporary.
