Heusgen predicts "devastating" economic problems for Putin
With the attack on Ukraine, Russia is shifting its economy towards a war economy. Hundreds of companies are producing weapons and other military goods. However, this will eventually lead to significant economic problems for Russia, according to the CEO of the Munich Security Conference. Is this the way to peace?
The CEO of the Munich Security Conference, Christoph Heusgen, believes that the Russian economy's conversion to a war economy will lead to "devastating economic problems" that could potentially provide an opportunity for peace with Ukraine. He made these remarks in an interview with the Redaktionsnetzwerk Deutschland (RND) in response to a question about whether he sees another way to peace besides military strength. "Putin will eventually face significant economic challenges," believes the former security advisor to Chancellor Angela Merkel. "Russia won't be able to cope with it."
Russia has shifted its industry towards a war economy with its attack on Ukraine and has begun investing hundreds of billions of rubles into the production of military goods. For the defense budget alone, the Kremlin has allocated approximately 110 billion Euros for this year. Additionally, there are another 34 billion Euros for national security and security agencies.
Overall, 38.6% of the Russian state's expenditures or 8% of its Gross Domestic Product (GDP) go towards the military. For the first time, Russia is investing more money in its security agencies than in social spending. Thanks to this war economy, the Russian economy is experiencing a boom: a growth rate of 2.8% is expected for this year.
"Russia's economy needs a constant war"
"The military-industrial complex is the engine of the economy," explained the first deputy prime minister, Denis Manturov, in June at the 27th St. Petersburg International Economic Forum (SPIEF). Putin has signed a whole list of instructions for the development of the defense sector to produce more weapons and ammunition, Manturov added. The country is preparing for a long-term war economy.
However, even Russian economists believe this could lead to significant problems. "Russia's bet on its military industry is risky because it is not sustainable," explained Alexandra Prokopenko, a former advisor to the Russian Central Bank, in a recent interview with ntv.de. "Medium-term problems are to be expected because the military-industrial complex requires more and more investments. If this complex is to be the motor of the economy, it needs a constant demand. The source of demand for the products of the military-industrial complex is the army itself. So, Russia needs a constant war for its economy."
"Thus, the war is prolonged"
Heusgen, therefore, calls for greater pressure from the USA, the EU, and NATO on countries like China, India, or Turkey, which continue to do business with Russia. "The war is prolonged," Heusgen criticizes in the interview with the RND.
"Russian soldiers are dying every day," Heusgen points out. This would eventually reach the people in Moscow and St. Petersburg. "Putin believes he has more breath than us. We need to prove that he is wrong," he says. "And we have managed to do that as a coalition in the Cold War. Why do we think we can't do it now?"
- Christoph Heusgen, the CEO of the Munich Security Conference, expressed concerns over Russia's shift towards a war economy, stating that it could lead to "devastating economic problems" and potentially pave the way for peace with Ukraine.
- The first deputy prime minister, Denis Manturov, justified Russia's shift to a war economy, arguing that the military-industrial complex is the "engine of the economy" and that Putin has signed instructions for the defense sector to produce more weapons and ammunition.
- Alexandra Prokopenko, a former advisor to the Russian Central Bank, criticized Russia's reliance on its military industry, stating that it is not sustainable and requires constant demand, which can only be met through a constant war.
- Heusgen advocated for increased pressure on countries doing business with Russia, arguing that prolonging the war would eventually impact the Russian populace and that the coalition had successfully done so during the Cold War.
