In any case, projections from the International Monetary Fund estimate a decrease in the Russian GDP by 153 billion dollars in 2023 compared to 2022, which if I'm not mistaken is equivalent (more or less) to the entire GDP of Ukraine from last year.
Isn't the rise in the price of imported cars by 60 % the result of the ruble weakening against the dollar plus sanctions against buying cars and not a reflection of the manufacturing capabilities of Russian industries
Probably both? Obviously domestic and imported cars are substitute goods. So if the price of imports increase, domestic manufactures can raise prices, and if the domestic production languish, foreign manufactures can increase prices.
Only having an IV you can quantify precisely the two effects, albeit intuitively it's the domestic dearth to dominate, given that foreign cars are quite rare in Russia
Great article Joseph. Sad to hear that China has so effectively thwarted Western sanctions to support Russian aggression in this terrible Ukranian war. Too bad we do not have the means to blockade Chinese imports to ourselves. Everyone is forced to speak out of both sides of their mouth!
"In documents seen by Reuters, Russia now expects to spend more than $100B on the war throughout this year—for context, that would be roughly 5% of GDP spent on the military. Meanwhile, Allied countries have been able to mobilize roughly $90B in direct military equipment assistance alone—at a time when Russia’s government budget deficit is at some of the highest levels since the turn of the century."
There's a serious problem with this line of reasoning. Russia does not purchase Leopards and GMLRS rockets to equip its own forces. It purchases domestically manufactured munitions and equipment. Comparing dollar figures is simply not a fair comparison since the equivalent Russian amount buys larger quantities of material.
Maybe, but that $100B dollar amount includes wages and salaries for Russian troops alongside a bunch of other indirect non-equipment/munition expenses. The point was mostly just to illustrate the rising costs for Russia if it has to match Western spending.
"the rising costs for Russia if it has to match Western spending."
It doesn't have to match Western spending, especially in defensive operations:
* It already has a large stock of material which the other side is seriously lacking, mainly an air force/attack chopers.
* As long as it is in the defensive the cost benefit ratio can work to its favor. Destroying a Leopard with a mine or an anti-tank rocket is significantly cost effective. It is the same effectiveness that enabled Ukraine to impose large costs at the initial phases of the Russian offensive (in 2022Q1) using relatively inexpensive weapons such as Javelins and Stingers.
In the current attritional state of affairs, specific metrics are the ones with the highest significance. Metrics such as shell production. It is very difficult to win a war of attrition if the other side has a 5:1 advantage in artillery. An inventory of 100 Leo-2A4 will obviously carry a large monetary value but not necessarily a corresponding tactical value. Having the ability to sustainably fire 50K shells/day is exceedingly more cost effective. Yet, these are the metrics where the West is severely lacking.
This is a good question and something I had an aside on in one of my prior articles but cut out of this one to save space.
The short version is that while Russia has incentives to overestimate data for foreign consumption, they also have strong incentives to publish accurate data for domestic consumption—warmaking is hard already, and it's even harder if you can't get an accurate account of what's going on economically within your own borders. Much of the data in this piece is now only available in Russian and through difficult-to-access websites partially for this reason—it's targeted primarily for domestic consumption among experts. Plus, institutions like the Central Bank are more independent than you might expect (though this is changing).
Likewise Russia seems content to just suppress data that reflects poorly on them instead of manipulating it it—budget, trade, and energy production data has simply been hidden when it looks bad for the economy. I also don't think it's a coincidence that they only recently began republishing data on the currency composition of trade only after they had reduced usage of the dollar and Euro significantly.
I also think you can often trust the detailed data a bit more than the headline numbers—there's less propaganda value in faking appliance manufacturing statistics than GDP. Still, if you want to treat the official data as a floor/ceiling on the situation I think that's okay too.
Thanks for this amazing article Joseph !
Thanks Ketan! Glad you enjoyed
I am very impressed with the facts and analysis contained in this report. This what I don't see in the L.A. Times.
Thanks John! I'm very glad you enjoyed
Very cogent and informative piece.
Thanks Allan! I'm very glad you enjoyed
Thank you for this informative read!
Glad you enjoyed Meher!
In any case, projections from the International Monetary Fund estimate a decrease in the Russian GDP by 153 billion dollars in 2023 compared to 2022, which if I'm not mistaken is equivalent (more or less) to the entire GDP of Ukraine from last year.
Isn't the rise in the price of imported cars by 60 % the result of the ruble weakening against the dollar plus sanctions against buying cars and not a reflection of the manufacturing capabilities of Russian industries
Probably both? Obviously domestic and imported cars are substitute goods. So if the price of imports increase, domestic manufactures can raise prices, and if the domestic production languish, foreign manufactures can increase prices.
Only having an IV you can quantify precisely the two effects, albeit intuitively it's the domestic dearth to dominate, given that foreign cars are quite rare in Russia
Great article Joseph. Sad to hear that China has so effectively thwarted Western sanctions to support Russian aggression in this terrible Ukranian war. Too bad we do not have the means to blockade Chinese imports to ourselves. Everyone is forced to speak out of both sides of their mouth!
"In documents seen by Reuters, Russia now expects to spend more than $100B on the war throughout this year—for context, that would be roughly 5% of GDP spent on the military. Meanwhile, Allied countries have been able to mobilize roughly $90B in direct military equipment assistance alone—at a time when Russia’s government budget deficit is at some of the highest levels since the turn of the century."
There's a serious problem with this line of reasoning. Russia does not purchase Leopards and GMLRS rockets to equip its own forces. It purchases domestically manufactured munitions and equipment. Comparing dollar figures is simply not a fair comparison since the equivalent Russian amount buys larger quantities of material.
Maybe, but that $100B dollar amount includes wages and salaries for Russian troops alongside a bunch of other indirect non-equipment/munition expenses. The point was mostly just to illustrate the rising costs for Russia if it has to match Western spending.
"the rising costs for Russia if it has to match Western spending."
It doesn't have to match Western spending, especially in defensive operations:
* It already has a large stock of material which the other side is seriously lacking, mainly an air force/attack chopers.
* As long as it is in the defensive the cost benefit ratio can work to its favor. Destroying a Leopard with a mine or an anti-tank rocket is significantly cost effective. It is the same effectiveness that enabled Ukraine to impose large costs at the initial phases of the Russian offensive (in 2022Q1) using relatively inexpensive weapons such as Javelins and Stingers.
In the current attritional state of affairs, specific metrics are the ones with the highest significance. Metrics such as shell production. It is very difficult to win a war of attrition if the other side has a 5:1 advantage in artillery. An inventory of 100 Leo-2A4 will obviously carry a large monetary value but not necessarily a corresponding tactical value. Having the ability to sustainably fire 50K shells/day is exceedingly more cost effective. Yet, these are the metrics where the West is severely lacking.
"To the extent you can trust Russian data"...
What can be the credibility of data from a government that censors anything it dislikes, even the word "war"?
This is a good question and something I had an aside on in one of my prior articles but cut out of this one to save space.
The short version is that while Russia has incentives to overestimate data for foreign consumption, they also have strong incentives to publish accurate data for domestic consumption—warmaking is hard already, and it's even harder if you can't get an accurate account of what's going on economically within your own borders. Much of the data in this piece is now only available in Russian and through difficult-to-access websites partially for this reason—it's targeted primarily for domestic consumption among experts. Plus, institutions like the Central Bank are more independent than you might expect (though this is changing).
Likewise Russia seems content to just suppress data that reflects poorly on them instead of manipulating it it—budget, trade, and energy production data has simply been hidden when it looks bad for the economy. I also don't think it's a coincidence that they only recently began republishing data on the currency composition of trade only after they had reduced usage of the dollar and Euro significantly.
I also think you can often trust the detailed data a bit more than the headline numbers—there's less propaganda value in faking appliance manufacturing statistics than GDP. Still, if you want to treat the official data as a floor/ceiling on the situation I think that's okay too.
Thank you very much for your answer.
Is there data for your 10:1 kill ratio? Or for your comments regarding the millions of refugees? Copium quite often rests on misinformation, also.