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Why the war will end: Ukraine

At the end of 2023, Ukrainian author Yan Valetov wrote. ‘This war cannot be ended, because the Russians will not have the strength to destroy us completely, and we will not have the strength to destroy them completely. We will fight for the liberation of the occupied territories, and they will fight to keep them… And I don’t see here any possibility for a compromise, a truce or a peace agreement.’ ‘If Putin has to kill ten million Russians,’ he added, ‘he will kill them without thinking. He won’t even blink.’

Valetov’s pessimism is understandable, yet the war will end. It may not be possible to say how, as President Zelenksy has remarked, but perhaps it is possible to offer why.

Economic reasons

The federal budget: Russia, uniquely in the world, is a country now spending almost nine times as much on defence and security (14.2 trillion roubles)1 as on the healthcare of its citizens (1.6 trillion roubles).2 (This in a country where according to ROSSTAT’s own data, 20% of households are not connected to a centralized sewerage system 3 and 12% share communal toilets). If a British government spent this ratio on defence instead of on the health of its citizens, the MOD’s budget would be just over one trillion pounds.  Putin can, of course, continue to drain the public purse on his special operation. But this imbalance is not sustainable in the long term.

In 2024, 39% of Russian central government spend will be on defence and security (14.2 trillion roubles), far in excess of health (1.6 trl) and education (1.6 trl). The projected downward trend in 2025-2026 is questionable. The likelihood is increased defence spend – as long as Ukraine resists the Russian invasion. Source: Izvestia

The National Welfare Fund: The Russian government manages a sovereign wealth fund known as the National Welfare Fund (NWF).  The purpose of the fund – mainly funded by hydrocarbon revenues – is to finance so-called ‘national projects’.  It is not a national warfare fund but it has become so (or to support ‘anti-crisis measures’ in the euphemism).  On the eve of the invasion the NWF stood at 13.57 trillion roubles or $182.59 billion. On 1 January 2024 it stood at 11.97 trillion roubles or $133.4 billion.  Almost one third of the NWF has been drained in two years of war (roughly $50 billion).

Inflation:  The official inflation rate is running at 7.5% but this is almost certainly an understatement. The Moscow Times, citing Romir Research Holding, reports cumulative inflation for Russian consumers has reached 47% since the invasion. The root cause is the increase in M2 money supply. In January 2023, money supply growth accelerated to 24% – the highest rate in 25 years – provoked by the pumping of money into the imbalanced war economy. Galloping wage inflation has contributed to the pro-inflationary pressures.  The Russian labour market has an estimated shortfall of 4.4 million workers, described by Central Bank governor Elvira Nabiullina as Russia’s biggest problem. Workers have bid up wages by an average 17% compared to 2022, according to ROSSTAT data. As examples, construction worker incomes have increased by 69%, waiters by 43%, nannies by 42% and mechanics by 34%.  In Western countries strong wage growth is associated with WWI and the 1970s but never reached these astronomic levels.

Interest rates: The Russian Central Bank has been forced to maintain interest rates at an artificially high 16% since the middle of 2023 to bear down on inflation and defend the rouble.  Government, commercial and private debt servicing has become expensive.  The top 13 Russian banks are charging businesses 20%-25% interest rates. This is crippling businesses that find it impossible to take out new loans.  The secondary housing market 4 has collapsed with financial institutions demanding 17% repayment rates on mortgages (British mortgage-holders currently labouring with higher mortgage repayments may reflect how they would survive under such a regime). Russians actually took out a record 34.8 billion roubles in loans in 2023 in a rush to beat the rate rises. Average consumer loan repayment rates are now at 26% with every third Russian citizen holding an overdue debt on at least one loan, according to Russian credit rating agency Compare.  Perhaps unsurprisingly, at the end of 2023, the courts declared 350,800 individuals, including individual entrepreneurs, insolvent, a 26% rise on the previous year.

Average consumer loan repayment rates in Russia are now at 26% (blue line). The red line is the Central Bank base rate. Source: Izvestia

The rouble-dollar exchange rate: The Russian federal budget for 2024 assumes a national currency exchange rate at 80–85 roubles per dollar.  This is unlikely to be achieved. Majority opinion suggests 90-95 roubles per dollar is more realistic. Through 2024 the rouble will continue to be put under pressure by the high budget expenditures, continued or growing imports, and lower hydrocarbon revenues.

Oil and gas revenues

In 2022, the Kremlin enjoyed strong oil and gas revenues boosted by high prices and the fact that sanctions did not kick in until December.  These advantages are over.  GAZPROM – Russia’s star company – posted a 40% decline in revenues in 2023, announcing just $24.3 billion in earnings before tax (for comparison, BP revenue to the 12 months ending September 2023 were $230 billion, or ten times as much). Lukoil reported revenues of just $32.6 billion in 2023 (Exxon handed this much back in cash to shareholders over the same period). These numbers matter because one third of the federal budget – and the financing of the war – is accounted by hydrocarbons.5

Industrial carnage: There were 21 car factories in Russia in February 2022 (encouraged by policies promoted by Putin). Ten remain idle.6 The other 11 are working but at reduced levels and making cars Russians do not want.  Chinese car sales have boomed from 3% (pre-war) to over 60% of the total Russian market and growing, but Chinese automakers are refusing to take over the idle factories. They are acting rationally, charging high prices, and exploiting an oligopolistic market. In 2023, new foreign (Chinese) cars increased in price by 27% and are expected to jump another 20-40% in 2024. Russians who bought cars through parallel imports now find they cannot service the vehicles because they have no warranty and the diagnostic servers of Russian garages do not contain data on cars produced in China. The civil airlines and aircraft manufacturers are struggling (the indigenous Tu-214, MS-21 and SJ-100 programmes are all delayed and will not meet announced schedules for serial production).  Roughly a third of existing fleets are being used for spares.7 and the Russian government was forced to extend $12 billion in loans last year to keep the industry afloat.8  Eleven regional airports in the south remain closed representing a loss in revenue of billions of dollars to the airline and tourism industries.  Russia’s warship builder – the conglomerate USC – was declared insolvent in 2023 and has been placed under the stewardship of VTB Bank for five years.

Imbalanced Russo-Chinese trade: The Kremlin boasted Russo-Chinese trade would reach $200 billion in 2023, replacing lost EU trade – in fact it reached $240 billion in 2023.  These gross numbers do not tell the story of an imbalanced relationship.  Russia is becoming a commodities colony to the great Chinese manufacturing machine. Oil, gas and coal on cheap terms travel in one direction and China floods Russia with cars, domestic appliances, electronics and other ‘white goods’.9  Chinese exports to Russia grew by 46.9% last year, but Russian exports to China only increased by 12.7%. Service culture is poor; dealerships are few or non-existent; and spares are hard to obtain. China is in no hurry to deepen cooperation because it does not wish to share its technologies with Russia. Ironically, given President Putin’s obsession with notions of ‘independence’ and ‘sovereignty’, Russians are being turned into vassal consumers of finished Chinese products. Russian hopes that the proposed Power of Siberia-2 gas pipeline will replace lost EU gas exports remain stillborn: there were three Russo-Chinese state level visits in 2023.  On each occasion, Beijing declined from signing (‘The Chinese want everything,’ one insider commented, ‘preferably for free.’)

Social reasons

The dead, wounded and missing: The total number of Russian and separatist dead and missing is approaching 100,000, confirmed by the end-of-year BBC/Mediazona report that tracks obituary notices and cemetery burials. Three times as many have been wounded.  Just over half the wounded – a six figure number – are amputees, following a candid confession by a Russian deputy labour minister.10  This toll cannot be hidden from Russian society indefinitely.

Put’ Domoi (‘The Way Home’): The mobilised soldiers’ wives and mothers movement Put’ Domoi is extremely angry.  Online and street protests are weekly events.  The Ministry of Defence is flooded with letters. Partial mobilisation has become indefinite mobilisation. According to Putin, 244,000 remain mobilised and 41,000 have been released due to reaching the retirement age limit.  This is almost certainly nonsense.  The partial mobilisation scooped up soldiers under 35-years of age, and officers under 50-years of age.  Retirement is at 55-60 years.  The likelihood is that the 41,000 have been released due to injuries11 and 15,000 have been killed or are missing.12

Relatives of mobilized soldiers wearing the white scarves of the Put’ Domoi movement lay flowers at the Tomb of the Unknown Soldier in Moscow. Source: The Moscow Times

The destruction of the Donbass:  ‘Liberated’ Donbass is a ravaged depopulated wasteland.  Less than one in ten of the population remain in what was once the showcase region of the Soviet Union.13  Donbass residents have liberated themselves from Russia. The reasons are not hard to uncover. Donetsk receives water every two days for a matter of hours.  Only 14 of 155 mines in Luhansk remain operational.  There is no meaningful schooling because there are no children. There is a deficit of around 3,000 doctors.  Pensions are not paid.  The two ‘Ps’ (Pushilin and Pasechnik) have become invisible (Pushilin’s only utterance, over Christmas, was ‘the situation is critical’, referring to the lack of electricity and heat14; Pasechnik has not spoken for months).  The reality is the ‘P’s’ are puppets, shadowed by FSB minders, presiding over a slag heap of ruin. Neighbouring Zaporizhzhia has not fared much better: in just the first week of February, Russian forces conducted 1,500 attacks against 570 Ukrainian settlements, the majority in Zaporizhzhia. Neither the Nazi occupation nor Stalin’s 1928 repression of the Donbass miners and later Holodomor destroyed so much – Putin has outdone Hitler and Stalin.

Putin’s ‘liberation’ of the Donbass has resulted in more destruction than the Nazi occupation Source: AFP/Getty Images

Cultural reasons

Collective mendacity: ‘Today, the Ministry of Defence is really sowing panic and defeatist sentiment precisely by the fact that it is not able to tell the people of Russia the TRUTH.’15 So railed Russian defence journalist Roman Skomorokhov during the successful Ukrainian counter-offensive in 2022.  The incapacity to tell truth was institutionalised in the Soviet Union and has become a corrosive acid in Putin’s Russia.  From the day of the invasion, Russia’s war has been an increasingly preposterous pack of lies. From the charge that a liberal, Jewish president is in fact a ‘neo-Nazi’, to the absurd sham referendums that ‘proved’ Ukrainians in the south wish to be ‘Russians’; to the ridiculous claim made by Putin that 100s of Western tanks have been destroyed – it is all lies. Russians know they are lies (and if they were unsure, Prighozin told them so loudly, before he was assassinated). Nobody has ever won a war by spinning.  Nobody ever will.16

Consistent under-estimation of US and European resolve: Also from the beginning, the Kremlin’s arrogance and self-deluding cynicism over an imagined ‘Collective West’, failed to reckon with the resolve of Washington and European capitals.  The Kremlin continues to act as if it can outlast the alliance of nations – not just Western – now supporting Ukraine.  It won’t. The UN Charter and principles of national and territorial sovereignty are not concepts to be traded with a gangland of gangsters as The Economist has dubbed Putin’s Russia.  Like Hitler, Putin views the international order (then the League of Nations) as a scheme to thwart a race – the great Rus’ – from rightful, imperial destiny. Like the Nazi dictator, international relations are viewed through the firing port of a paranoid, nationalist, bunker mentality.

International ostracism: The Kremlin and wider Russian society are keenly sensitive to the pariah status of the country.  Sensitivity over European cold-shouldering is an historic sentiment (in tandem with the nationalist ‘we’ll show our backsides to them’, following Peter the Great).  It is a multilateral world – as Putin keeps insisting – Russia is simply not part of it. It is part of its own narcissistic, exceptionalist, nationalist delirium. Last year, there was a total blackout on reporting on the World Athletics Championship in Russian media from which Russian athletes were banned (the stellar performance by Team USA will have smarted).  The Kremlin cannot hide that the Olympic Games take place this year and has already prepared its propaganda to justify why there will be no Russian participation.  Expulsion by FIFA/UEFA and rejection by Asian leagues means the international football team has played against just Kyrgyzstan, Uzbekistan, Tajikistan, Iran, Iraq, Qatar, Cuba and Cameroon.  Whether fairly or not Russians have been barred from book fairs, cinema festivals, and classical music events.  Russian travellers are becoming invisible again: Eurostat reported 840 million air passenger journeys in 2022; last year the FSB Border service recorded just 1.3 million trips by Russians to EU countries (over 20 million Britons visit Spain alone each year).  Western Russians are deeply uncomfortable with this situation.  Petersburgers loathe Putin.

It always ends the same way

In October 2022, Zelensky gave an address on the annual anniversary of the liberation of Ukraine from the German occupation.  He stood on a Kyiv street next to a downed Iranian kamikaze drone, dressed in a combat T-shirt. He said:

Every year on this day, we celebrate the liberation of Ukraine from the Nazi occupiers… Today we do it, holding not flowers in our hands, but weapons…Evil, which seemed to have been finally defeated and burned to the ground in 1945, is reborn from the ashes 80 years later…The form of evil has changed, but the essence has remained unchanged…evil always ends the same way. The occupier becomes a capitulator.   The invader is a fugitive. War criminals become defendants, aggression is a sentence. Destruction becomes reparations. Enemy equipment becomes museum exhibits…We know that the darkest night becomes the dawn.

Cover photo: Destroyed Russian tanks in Bucha Source: AP/Felipe Dana

Sergio Miller

Sergio Miller is a retired British Army Intelligence Corps officer.  He was a regular contributor and book reviewer forBritish Army Review.  He is the author of a two-part history of the Vietnam War (Osprey/Bloomsbury) and is currently drafting a history of the Russian invasion of Ukraine.


  1. In the second reading of the 2024-26 State Budget Bill, the defence allocation decreased by 397 billion roubles, to 10.38 trillion roubles.
  2. A possible exception may be a country like North Korea but there are no certain metrics associated with this country.
  3. A system of cesspits is used for properties not connected to sewerage systems.
  4. Russia has a two-layered housing market: the secondary market is existing stock; there is also a preferential market for new-build homes.  The preferential market typically offers lower repayment terms. However down payments have now been increased to 30% and the limit on loans reduced to 6 million roubles, creating an unaffordable barrier for the majority of would-be home buyers.  At the beginning of 2024 there were just 300 apartments available in Moscow on preferential terms.
  5. Oil and gas revenues of the Russian budget in 2023, according to the Russian Ministry of Finance, amounted to 8.82 trillion roubles (more than 30% of all budget revenues), or roughly $100 billion.
  6. Production at Russian plants of Renault, Skoda, Volkswagen, Peugeot, Citroen, Mitsubishi, Kia, Hyundai, Nissan, Mercedes-Benz, BMW, Toyota and Mazda stopped. Production of Ford vans, Mercedes-Benz, Isuzu, Volvo, Renault Scania and MAN trucks also ceased. These companies accounted for 60–70% of all motor vehicles produced in Russia.
  7. Pre-war, aircraft spares came from three main Western sources.  Today there are in the order of 330 small front companies procuring spares mainly from the United Arab Emirates, Tajikistan, Kazakhstan and Kyrgyzstan.
  8. Contrary to pessimistic predictions there have not been more air accidents but there have been more flight delays or suspensions due to maintenance issues.  In 2023, 670 incidents were recorded, 400 of which occurred due to the failure of aircraft and engines.
  9. There are 24 road crossing points on the Sino-Russian border. As a consequence of the surge in trade, the average border crossing time for groupage cargo has increased from one to seven days, mostly due to a lack of storage areas. This increases costs.
  10. The reader may wonder why: the answer is shrapnel wounds.  Four in five killed or wounded are accounted by artillery.
  11. Confirmed in a recent Lenta.ru story: ‘Soldiers in the Northern Military District become disabled not only due to wounds. Why do such veterans risk not receiving payments?
  12. 300,000 were partially mobilised.  The numbers cited by Putin leave an unexplained ‘missing’ 15,000.
  13. Around 4.8 million Ukrainians, overwhelmingly from the Donbass, have crossed over into Russia.  The combined pre-war populations of the separatist enclaves were 3.6 million.  How many people are actually left in ‘liberated’ Donbass?  The Interior Ministry has only once released numbers of how many of these displaced Ukrainians have solicited the Russian passport – just 55,000 – or around 1%.  This does not suggest Donbass residents were ‘our own’ as Putin has claimed.
  14. Resistance reporting tells 111 boiler houses are non-working and the wider infrastructure is in a dire state.
  15. In an article for the pro-Kremlin Voennoye Obozreniye (‘Military Review’), a measure of the anger that was felt.
  16. A truism the author owes to the late Anthony Cordesman – his voice will be missed.

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