Question for those in the know: If Russia Is Bankrupted, Can It Continue Its War In Ukraine?

[Felis Leo]

Here is a question I had for any macroeconomic wonks among us who also have any expertise in overall warfighting capabilities of nations: If Russia defaults on its sovereign debt as it appears it is about to do, how would that affect it effectively continue its war against Ukraine?

Russia could be about to default on its debt: Here's what you need to know

Russia could be about to default on its foreign currency debts for the first time in decades, likely beginning a drawn out wrangling process.

www.cnbc.com

What would be the effects, if any, of a sovereign default on Russia's ability to wage war and maintain an occupation force?

 

[brothern]

Short answer: Yes.

Long answer: Nations at war — including democracies — have far-reaching power to seize control over their economy and direct the means of production during wartime. Just because such a thing hasn't happened in some time doesn't mean that Russia can't implement these policies.

These are policies like: nationalizing industries and factories, rationing goods (sugar, oil, copper, coffee, etc.), selling wartime bonds, resurrecting conscription, importing migrant labor, etc.

 

[Felis Leo]

Short answer: Yes.

What do you think the effects would be? Because the only times I can think of bankrupted nations with market economies continuing to fight wars are in cases of countries like Nazi Germany or Imperial Japan. And both those countries lost. Of course, both those countries were also bombed to pieces, and no one is going to be carpet bombing Russian towns and cities.

But do we have examples of bankrupt nations continuing to maintain large occupying military forces outside the homeland for long stretches of time?

 

[southwest88]

The Russian ground forces don't seem to have the training nor flexibility for operating in hostile territory. Nor do their logistics seem strong enough. (Information keeps leaking out about shortages of Russian fuel, ammo, food - & poor morale.) If they don't have the logistics to keep the front-line troops in beans & bullets, they're not going to do well in urban warfare - unless they simply pound everything into rubble. (& that would depend on their stock of long-range cannon ammo & missiles.)

 

[Felis Leo]

The Russian ground forces don't seem to have the training nor flexibility for operating in hostile territory. Nor do their logistics seem strong enough. (Information keeps leaking out about shortages of Russian fuel, ammo, food - & poor morale.) If they don't have the logistics to keep the front-line troops in beans & bullets, they're not going to do well in urban warfare - unless they simply pound everything into rubble. (& that would depend on their stock of long-range cannon ammo & missiles.)

Well yes, and that was before the sanctions hit Russia and sovereign default. I am wondering what the effects of the sanctions and possible sovereign default and massive currency devaluation will have on the Russian's ability to wage war and maintain a large occupying force outside the borders of their homeland. I certainly don't think it will get any better. I am just wondering how bad it would get.

Because I cannot recall any time in history that a bankrupted nation which defaulted on its debts and faced the possibility of hyper-inflation managed to wage a massive war.

 

[brothern]

What would the effects be? Because the only times I can think of bankrupted nations with market economies continuing to fight wars are in cases of countries like Nazi Germany or Imperial Japan. And both those countries lost. But do we have examples of bankrupt nations continuing to maintain large occupying forces outside the homeland for long stretches of time?

Russia would suspend its market economy. During WWII as you so cite, the Allies suspended their market economies to enable their ability to conduct war.

Now I'm not saying that Russia is going to be successful in this war against Ukraine. All I'm saying is that when it comes down to it, Russia isn't going to just roll over because some bankers in suits are huffy with them. Being a nation state means that they have the ability and prerogative to seize control over all of Russia's resources and utilize them to conduct hostilities for years.

 

[Felis Leo]

Russia would suspend its market economy. During WWII as you so cite, the Allies suspended their market economies to enable their ability to conduct war.

Now I'm not saying that Russia is going to be successful in this war against Ukraine. All I'm saying is that when it comes down to it, Russia isn't going to just roll over because some bankers in suits are huffy with them. Being a nation state means that they have the ability and prerogative to seize control over all of Russia's resources and utilize them to conduct hostilities for years.

Well, Russia certainly does have a history having done that, and I am sure they have muscle memory of total state control over all industries and productive capacity as well as rationing things such as food and fuel for the civilian population (We did it and Great Britain did it during WW2). I just cannot imagine how successful central economic planning would be, and how long such autarky would be able to last. It is not as though Russia's productive capacity is currently anything to write home about even if the government seizes all the factories in order to start producing guns instead of butter and tanks instead of tractors.

 

[Crovax]

Here is a question I had for any macroeconomic wonks among us who also have any expertise in overall warfighting capabilities of nations: If Russia defaults on its sovereign debt as it appears it is about to do, how would that affect it effectively continue its war against Ukraine?

Russia could be about to default on its debt: Here's what you need to know

Russia could be about to default on its foreign currency debts for the first time in decades, likely beginning a drawn out wrangling process.

www.cnbc.com

What would be the effects, if any, of a sovereign default on Russia's ability to wage war and maintain an occupation force?

Assuming that a country can be mostly self sufficient then defaulting on debt does nothing to them in the short term

 

[brothern]

Well, Russia certainly does have a history having done that, and I am sure they have muscle memory of total state control over all industries and productive capacity as well as rationing things such as food and fuel for the civilian population (We did it and Great Britain did it during WW2). I just cannot imagine how successful central economic planning would be, and how long such autarky would be able to last.

No idea, but I have an account on VK that surprisingly hasn't been shut down or limited access yet. I also can't speak Russian. But, using Google Translate to read comments being posted by Russian users ... most of them are presenting themselves as being 100% on board with the Krelim's POV. Obviously there may be private views not being shared. However what I interpret from what I see is that the the "average" Russian is basically impervious to the reality of the situation in Ukraine.

 

[Nomad4Ever]

As a wikipedia certified PhD in geopolitics and macroeconomics I have come to offer my professional opinion.

In all seriousness I did take some upper level macro classes in college, but actually I'm not sure that is necessarily the most relevant field to answer this question. I think you need to look at a couple of areas to answer this question as it is not purely economic. However, that's where I will start.

Russia has been insulating itself from potential sanctions for some time. This has been a very deliberate and intentional effort to be able to continue a conflict in exactly the situation they are in now.

Over the same period, Moscow has tried to wean its oil-dependent economy off the dollar, limited government spending and stockpiled foreign currencies.
Putin's economic planners have sought to boost domestic production of certain goods by blocking equivalent products from abroad. Moscow has meanwhile amassed a war chest of $630 billion in international reserves — a huge sum compared to most other countries.

David Lubin, a Citi economist and associate fellow at Chatham House, said "fortress economics" requires the creation of big foreign currency reserves that can be spent if sanctions bite.

Well aware of this, US sanctions have targeted some weak points in the 'fortress'.

The United States is also trying to hobble Russian military and industrial companies by preventing them from buying critical technology such as advanced computer chips.

Analysis: Sanctions will put Russia's 'fortress' economy to the test

Vladimir Putin has been expecting the West.

www.cnn.com

However, Putin has been strategically nationalizing the Russian economy. Of course recently he has threatened to nationalize companies that leave Russia, but he has been making sure there is state control over important sectors for some time.

government control is now highly concentrated in energy, banking and a handful of other, often “strategic” sectors—perhaps not surprising considering the topic of Putin’s somewhat controversial dissertation on strategic planning and state control of resources. (Source)

It's also worth noting that in addition to those sectors, the Russian rail company is also nationalized. This is important as rail is critical to Russian logistics.

Russian army logistics forces are not designed for a large-scale ground offensive far from their railroads. Inside maneuver units, Russian sustainment units are a size lower than their Western counterparts....The reason Russia is unique in having railroad brigades is that logistically, Russian forces are tied to railroad from factory to army depot and to combined arms army and, where possible, to the division/brigade level. No other European nation uses railroads to the extent that the Russian army does. Part of the reason is that Russia is so vast — over 6,000 miles from one end to the other.

I highly recommend reading this article. It is rather long but very insightful.

Feeding the Bear: A Closer Look at Russian Army Logistics and the Fait Accompli - War on the Rocks

Editor's note: Don't miss our comprehensive guide to Russia's war against Ukraine. Russia’s military buildup along the border with Ukraine has

warontherocks.com

Now, Russia also technically has access to all the resources it need internally to continue this conflict. Oil, food, and manpower. It has already nationalized many of its industries. You mentioned later that there aren't any examples of a market economy maintaining a conflict while economically isolated. Well, Putin is quickly moving Russia away from a market and towards full war mobilization.

(continued)

 

[Nomad4Ever]

Now, all that being said. I would say no. I do not think Russia can maintain an invasion outside of their soil for a long period of time. They can nationalize all they want, but real life isn't a 4X strategy game anymore and war machines are more complicated. The technical ability to (theoretically) supply troops with food, bullets, and produce tanks just isn't that meaningful anymore.

A huge issue in the long term is access to computer hardware required for many complicated modern weapons platforms. Look at how effective the Ukrainian drones have been in this conflict.

The economy is so much more globalized now than in WWII. Russia cutting off from the globalized supply chains will send it's ability to produce weaponry back to about that era. Never mind how pissed people will be when they can't buy phones and computers.

I also believe the reliance on their rail for logistics (as smart as it is defensively) is extremely limiting their offensive capabilities.

 

[Lursa]

Pretty sure there would be some major negative affects on troops fighting/occupying a country when they started not being paid, not being fed decently, not getting enough ammo/weapons when needed, etc.

And that's not even considering their families at home that will start having less food and way fewer consumer goods.

 

[Nomad4Ever]

I think there is a reason that we are seeing so much soviet era hardware. At first it seemed like Russia was just emptying the reserves to soften up Ukrainian defense...but it actually seems that really was the main body of the military hardware they had access too. High tech military equipment is extremely difficult to both design and manufacture. A blurb from Northrup Grumman:

Commercial electronics are typically designed to last just a few years. But military electronic systems need to last a few decades. The ASICs go inside vehicles and other equipment that will be deployed to remote locations for 20 or even 30 years. The high tech chips must also be resilient enough to withstand high altitudes and extreme environments, such as deserts and the coldest uninhabited regions. For military devices, reliability and dependability are matters of life and death.

“If our stuff doesn’t work then our war fighters are seriously in trouble,” says Kober. “Their lives are dependent on things behaving the way they’re supposed to.” (Source)

Russia has been trying to develop domestic silicon production for some time. With....limited success.

The company advertised the systems as 'all-Russian' computers that use hardware and software designed in Russia. But the memory, SSDs, HDDs, and other components were neither designed nor produced in Russia.

Despite its rather mediocre configuration and feature set, the 28-nm Baikal-M has an up to 35W TDP, which is okay for mainstream desktops and entry-level laptops, but which excludes these SoCs from various sleek PC designs and various small form-factor edge applications.

Russia Gets First Batch of Arm-Based Homegrown SoCs: All 66 Kgs of Them

Designed in Russia, fabbed in Taiwan.

www.tomshardware.com

They still mostly import semiconductors and advanced computer parts like memory.

Harvard Business School professor Willy Shih told Protocol that a significant portion of the imported chips are analog semiconductors used in industrial equipment and things such as switches and motor controls.

Infineon, an analog chipmaker based in Germany, exports the largest dollar value of loose chips to Russia, according to the data.

Where Russia gets its chips

Today: a Protocol analysis breaks down the impact of sanctions on the Russian chip market, the Ukraine war hits home for a metal fabrication plant in Ohio and the latest job moves from enterprise tech’s best and brightest.

www.protocol.com

Say goodbye to those chips from Germany lol.

Even if China continues to supply them with computer hardware, logistics and supply chains just aren't that dynamic and China would have to pull out of deals it has made with other companies to divert supply to Russia. Something I don't think China is willing to do.

 

[SonOfDaedalus]

Short answer: Yes.

Long answer: Nations at war — including democracies — have far-reaching power to seize control over their economy and direct the means of production during wartime. Just because such a thing hasn't happened in some time doesn't mean that Russia can't implement these policies.

These are policies like: nationalizing industries and factories, rationing goods (sugar, oil, copper, coffee, etc.), selling wartime bonds, resurrecting conscription, importing migrant labor, etc.

I'm no expert but aren't you talking about a total war scenario where a nation diverts all its resources towards a war effort. It would be absurd for Russia to need to do that just to subjugate Ukraine. He could not justify it politically.

So, he would have to keep paying for the war by running up massive deficits and printing rubles. Of course, this would lead to runaway hyperinflation.

As we see with North Korea, it all depends on how much suffering the people are willing to tolerate. In theory, they can operate with a ruined economy forever like North Korea. But North Korea is not actively in combat. If your enemy is being supported by external allies then you will eventually lose the conflict and be forced to retreat to within your borders.

 

[Questerr]

Russia would suspend its market economy. During WWII as you so cite, the Allies suspended their market economies to enable their ability to conduct war.

Now I'm not saying that Russia is going to be successful in this war against Ukraine. All I'm saying is that when it comes down to it, Russia isn't going to just roll over because some bankers in suits are huffy with them. Being a nation state means that they have the ability and prerogative to seize control over all of Russia's resources and utilize them to conduct hostilities for years.

Suspending the Russian market economy over a war that is entirely of Russia’s choice and that they can end at any time with no threat to Russia would not be a popular decision, whether from the oligarchs or the average Russian.

 

[brothern]

I'm no expert but aren't you talking about a total war scenario where a nation diverts all its resources towards a war effort. It would be absurd for Russia to need to do that just to subjugate Ukraine. He could not justify it politically. So, he would have to keep paying for the war by running up massive deficits and printing rubles. Of course, this would lead to runaway hyperinflation. As we see with North Korea, it all depends on how much suffering the people are willing to tolerate. In theory, they can operate with a ruined economy forever like North Korea. But North Korea is not actively in combat. If your enemy is being supported by external allies then you will eventually lose the conflict and be forced to retreat to within your borders.

The average Russian's POV is warped to the point of incredulity. Like, I cannot even begin to describe it: "The entire world is racist, evil and out to get us ... poor, helpless Russia! Vladimir Putin's the sole person who is willing to stand up against the world. God bless him! We've been through major economic crises before: the shock therapy, the 1998 and 2014 crisis. We'll do our patriotic duty to our country and to our countrymen and ride this out. Like we've done before."

Right here, right now, I can tell you that the average Russian citizen is saying they will see this to the bitter end.

Suspending the Russian market economy over a war that is entirely of Russia’s choice and that they can end at any time with no threat to Russia would not be a popular decision, whether from the oligarchs or the average Russian.

Sure, but Russia's an autocratic country. Personal discontentment or disagreement is never voiced. To do so is a surefire way to destroy your career, your family and risk long-term imprisonment. Absolutely nothing will change about Putin's control of the country unless it gets really, really, really unimaginably bad for the average Russian and that permits the floodgates to blow and civil unrest to start.

However like I said to SonOfDaedalus ... the average Russian is bonkers.

 

[Monica33]

OP ,just keep watching .
America is going under . Russia is not even blinking .
More in the world will work with Russia than will not . The Petro Dollar is dead and America goes under fairly quickly.

 

[Roadvirus]

Here is a question I had for any macroeconomic wonks among us who also have any expertise in overall warfighting capabilities of nations: If Russia defaults on its sovereign debt as it appears it is about to do, how would that affect it effectively continue its war against Ukraine?

Russia could be about to default on its debt: Here's what you need to know

Russia could be about to default on its foreign currency debts for the first time in decades, likely beginning a drawn out wrangling process.

www.cnbc.com

What would be the effects, if any, of a sovereign default on Russia's ability to wage war and maintain an occupation force?

Pretty hard to buy up weapons when the world is keeping away from you the materials needed to make them.

 

[beefheart]

OP ,just keep watching .
America is going under . Russia is not even blinking .
More in the world will work with Russia than will not . The Petro Dollar is dead and America goes under fairly quickly.

Your propaganda cries get more and more desperate. Russia screwed up, they destroyed their country and showed the world just how weak their military is.