Russia’s Economy—the War Machine That Won’t Break Down

If you’ve kept up with news reports from recent weeks, you’ve undoubtedly heard that the Russian Federation is on the cusp of a mighty economic collapse.

• “To keep [Russia’s] military machine running like this, a lot more money is needed—and there simply is not any,” Russian opposition politician Vladimir Milov said on November 10.
• “Vladimir Putin’s War Machine May Finally Be Running Out of Fuel,” the Atlantic Council headlined last month.
• “[T]hey have long lines waiting for gasoline in Russia right now,” United States President Donald Trump told reporters in the Oval Office the week before. “All of a sudden, this economy is going to collapse.”

It is easy to see why more and more observers are looking at Russia’s economy with a jaundiced eye. Some 45 months into the nation’s “Three-Day War,” its forces control only 19 percent of Ukraine’s territory. And that control came at a staggering cost in blood and treasure—over 1.1 million personnel losses and as much as $300 billion.

As a result of the war, Russia has been cut off from swift banking, its access to foreign currency reserves has been limited, and it is suffering sky-high interest rates and stratospheric levels of inflation. This means the purchasing power of the Russian people has eroded, and they are spending less. At the same time, a demographic crisis, caused by emigration and abysmal birth rates, is deepening. As is the nation’s systemic corruption, which chokes efficiency and private-sector growth.

Meanwhile, the U.S. has lifted Biden-era restrictions on American weapons systems in Ukraine. This has enabled Ukraine to destroy energy infrastructure deep inside of Russia, slashing Russia’s oil refining capacity by some 25 percent so far.

On top of that, the U.S. sanctioned Russia’s two largest oil firms last month, including “secondary sanctions” that threaten to block any organization that trades with these companies from American capital markets. Although China and India are finding loopholes and workarounds, their purchases of Russian energy are declining, weakening the very backbone of Russia’s energy-based economy.

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At the same time, global oil prices are falling, further shrinking the profits from whatever Russia manages to sell.

In light of all this, the doomsaying about the Russian economy is easy to understand.

But what those prophesying collapse fail to grasp is that war economies—as Russia’s has become—are fundamentally unlike the peacetime systems they are accustomed to assessing.

As economist Joeri Schasfoort said in a recent Money and Macro episode, “Lots of really good Western economists now again think Russia’s war economy is heading for a collapse” because “they have been trained to understand peacetime economies, but not war economies.”

How a War Economy Works

Put simply, a war economy is organized around sustaining a military effort. Shifting from a civilian system to a war economy means redirecting the nation’s resources and priorities—from serving the needs of its people to serving the demands of the war.

Of course, war, by its very nature, causes destruction and death, and that weakens a country’s long-term economic foundations. But war also brings massive government spending, large amounts of industrial retooling and innovation, surges in production and full employment. So for several years, a nation operating under a war economy can undergo significant growth in gross domestic product.

This was true in the World War ii era for powers ranging from Germany and the Soviet Union to Britain and the United States. And it is true for Russia today.

Before Russia took its war on Ukraine full scale in February 2022, a considerable portion of its workers were unemployed, and many of its factories were idle. In the time since, the nation has activated much of that untapped economic potential. Unemployment has hit record lows, and factories are in overdrive to keep soldiers equipped with weaponry, ammunition, vehicles and drones. As a result, Russia’s economic growth has outperformed that of major economies such as Germany and the United Kingdom.

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It is true that such growth can’t continue indefinitely when it is operating on a foundation of destruction and death. But the evidence suggests that Russia’s leadership could maintain the current trajectory, and avoid collapse, for far longer than many onlookers would expect—or hope.

The Four Horsemen of Economic Collapse

Economists generally point to four main causes of national economic collapse: a currency crash, being blocked from vital resources, excessive debt levels and widespread public discontent.

The Russian economy appears largely insulated from all of these.

The Kremlin has safeguarded against a currency crash by introducing capital controls. This means the government decides how much money can flow out of the nation. Yes, it reduces the freedom of Russian citizens, restricting their ability to invest abroad, convert savings to dollars or euros, or even send money to relatives in other nations—but it enables the government to tap into much of that previously unrealized economic potential without tanking the ruble. “This move surprised many economic analysts,” Schasfoort said, “because they were no longer used to thinking about capital controls as a viable option. It is, however, the first crucial step to see why Russia’s economy will not collapse.”

The prospect of an economic blockade by outside powers would terrify many nations. But Russia is the world’s largest country, with more surface area than the dwarf planet Pluto. When its vast natural resources are placed alongside stalwart trade partners, such as China and India, it is clear that Russia is not particularly vulnerable to a collapse due to the disruption of inputs.

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Debt is on the rise in Russia today. A housing bubble is forming, excessive government spending is depleting reserves, and debt-servicing costs are climbing. But with the government debt-to-gross domestic product ratio at only 16.4 percent, Russia has a great deal of fiscal headroom. Household debt, meanwhile, is around 20.7 percent of gdp—quite modest compared to many Western economies. At least in the short run, a debt-driven collapse remains extremely unlikely.

Meanwhile, the people of Russia are rallying behind Vladimir Putin. Public opinion is soaring to record highs. So even if more suffering sets in, he can afford to let it slide before it reaches a worrying level.

Schasfoort says Russia’s position on all four fronts suggests it can sustain its war machine at current levels for far longer than many Western analysts might expect. “If you compare Russia’s war economy to historical ones like Nazi Germany, the Soviet Union and even Vietnam-era U.S.A.,” he said, “it actually looks like Russia’s war economy is just getting started.”

Eurasia Group’s Ian Bremmer said in a November 10 briefing that he agrees with this assessment: “Russia can economically keep going with really zero impact on their warfighting ability, despite all of these additional measures, both in terms of what the Ukrainians are hitting and the hits to the Russian economy, certainly for the next year and a half to two years.”

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None of this means Russia doesn’t have serious problems. The early phase of a war economy is generally the easy one, and that phase is coming to an end. In the months ahead, sanctions will likely multiply, manpower and gas shortages may intensify, and Putin’s government will likely feel the need to intervene with a heavier hand to keep the war machine humming. Sky-high interest rates might be pushed still higher, wage and price controls may soon be introduced, and more civilian industries may be sidelined to free up resources for the growing war economy.

This will bring greater economic pain to the Russian people, but Putin already has most of them convinced that the war is a righteous cause that requires noble sacrifice. So even as it shifts into more difficult phases, we should not expect the Russian economy to collapse—or for the man at its helm to be significantly weakened.

A Prophesied ‘Prince’

Around the year a.d. 90, the Apostle John recorded a prophecy in Revelation 9:16 describing an army of 200 million soldiers, which is a force many times larger than any ever amassed in human history. Other passages provide vital details about this gargantuan force. Revelation 16:12 calls it “the kings of the east,” showing it to be a coalition of multiple Asian countries. Daniel 11:44 and 12:1 make clear that this bloc will be one of the primary belligerents in a nuclear World War iii. Ezekiel 38 shows that at the helm of this coalition will be one lead nation and one leading man.

“And the word of the Lord came unto me, saying, ‘Son of man, set thy face unto Gog, of the land of Magog, prince of Rosh, Meshech and Tubal, and prophesy concerning him” (verses 1-2; King James Version and Young’s Literal Translation).

Who is this prince?

Rosh was the ancient name of Russia, once called Rus, a point recognized by commentaries such as the Jamieson, Fausset and Brown Commentary. The names Meshech and Tubal are ancient terms designating the modern Russian cities of Moscow and Tobolsk.

Ezekiel 38 goes on to detail the conquests of the mighty force led by this “prince of Rosh, Meshech and Tubal” and his army’s eventual defeat. In the September 2014 Trumpet, editor in chief Gerald Flurry explained who this man is.

I strongly believe Vladimir Putin is going to lead the 200 million-man army. Just look at the power he already has.

Can you think of any other Russian politician who could become so powerful and have the will to lead Russia into the crisis of crises? I see nobody else on the horizon who could do that. And only a tiny few years remain for the prince of Rosh to appear! …

This much is absolutely certain: The restoring of Russia’s power by Vladimir Putin—the prince of Russia—was prophesied! He has already solidly allied Russia with China. The prophecy about the prince of Russia includes that main alliance. …

The only question is whether or not Putin personally finishes the entire prophecy.

When Mr. Flurry wrote The Prophesied ‘Prince of Russia’ in 2017, he removed all doubt from his stance, asserting with certainty that Putin would personally fulfill this role:

His track record, his nationality and his ideology show that he is fulfilling a linchpin Bible prophecy. The time frame of his rule also shows that nobody else could be fulfilling the Ezekiel 38 and 39 prophecy. …

We need to watch Vladimir Putin closely. He is the “prince of Rosh” whom God inspired Ezekiel to write about 2,500 years ago!

Since the Trumpet has this view of Putin’s role in end-time prophecy, we believe Russia’s economy will avoid collapse and that Putin will grow more powerful—and go on to fight wars far more momentous and destructive than the current violence against Ukraine.

It is clear that the future for Russia, Ukraine and the world is growing bleaker. But Mr. Flurry says the fact that this “prince of Russia” is now ruling shows that the most hope-filled event in mankind’s history is now close. “Vladimir Putin is a sign, literally a sign, that Jesus Christ is about to return!” he writes in his booklet. “This is one of the most inspiring messages in the Bible. What we are seeing in Russia ultimately leads to the transition from man ruling man to God ruling man!”

To understand, order your free copy of The Prophesied ‘Prince of Russia.’