The Home Fronts during the Russo-Ukrainian War – update 2

Second update to this blog post. The big earthshaking change is that the U.S. Congress has passed a $40.1 billion aid bill for Ukraine. That along with the previously $13.6 billion aid bill passed in March adds up to $53.7 billion from the U.S. alone to Ukraine. One might be able to add to that the $18.4 billion for Ukraine being discussed by the G-7 to total up to $71 billion more for Ukraine. This is on top for the $20 to $25 billion already provided by the international community (see the old blog post below). The Russian defense budget in 2021 was $61.7 billion. The Ukrainian economy was potentially going to lose more than $80 billion over this year because of the war (out of a GDP of $181 billion). So, to be able to keep Ukraine military properly armed, and to support the people there, we are kind of looking at needing about 100 billion or more of aid. It now looks like we are almost there.

Now, there is some questions when looking into these bills in depth. For example, the $13.6 billion passed in March includes 6.5 in military aid, but some of that is for DOD to deploy troops in the region. So, it is not a full $6.5 billion in military aid to Ukraine. There is more than $4 billion in humanitarian aid. Some of that is humanitarian aid for refugees outside of the country, so don’t know to what degree it provides economic support directly to Ukraine. There was 1.8 billion for economic needs in Ukraine and neighboring countries. So, it is hard to sort out exactly how much of this aid is for Ukraine. See: https://www.cnn.com/2022/03/09/politics/ukraine-aid-spending-bill-congress/index.html

The picture is probably more complex for the $40.1 billion bill. I do not have any good breakdown of what is in that bill. It does include $9 billion to replenish depleted U.S. weapon stockpiles, $9 billion for continued operations of the Ukrainian government, and $4 billion in international disaster assistance. See: https://news.yahoo.com/senate-passes-40-billion-ukraine-175423598.html

So not sure exactly where we are at, but we are certainly a good way towards the $100 billion in aid a year that I feel that Ukraine probably needs. 

Now, with around $100 billion in aid a year, not only can Ukraine hold out against Russia, but has the ability to fight back and possibly reclaim territory. This, of course, greatly expands the possibilities and paths for this war. It is no longer a war of strictly defending Ukraine; but may also be a war to reclaim territories taken in 2022, might even become a war to reclaim territories taken in 2014. It does raise all kinds of questions about the duration of the war and how will it be settled. With $100+ billion a year in aid coming in, Ukraine may not be served by agreeing to any peace terms until such time as it gets the conditions that it favors. This war may still be going in 2023.

Anyhow, need to update the figures from my previous blog post but not sure how. Our previous blog post noted $3,285 million in military aid from the U.S. and $1,000 million in humanitarian aid. This was understating the overall amount of U.S. aid. 

 

————previous blog post—————————-

Even though the war is not going well for Russia right now, that might change. Russia still has more than three times the manpower and almost ten times the economy that Ukraine does. Just to compare:

                                  Russia                   Ukraine                 Ratio

Population (2022)    145,478,097          41,167,336             3.53

GDP (2021)               1,710 billion          181 billion             9.45        

per capita                 $11,654                  $4,380                   2.66

GDP (PPP)                4,328 billion         584 billion              7.41

 

Population counts Crimea in the Russia figures. LPR and DPR are nominally counted among the Ukrainian population figures.

Pre-war figures for their armed forces show:

                                   Russia           Ukraine                Ratio

Active personnel      1,014,000       196,600 (2022)       5.16   

Ground forces             280,000       170,600 (2022)       1.64

Budget (2020-2021)  61.7 billion     4.6 (2020)             13.41

Percent GDP (2021)   4.3%              3% (2020)              1.43        

 

2022 Trends: According to estimates from the World Bank the Ukrainian economy is going to shrink by 45% this year. According to various estimates, the Russian economy is going to shrink by 10-20% this year. So, can Ukraine sustain such a war with the international aid it is receiving? The aid they are receiving is provided in a very incomplete list in the following Wikipedia page: List of foreign aid to Ukraine during the Russo-Ukrainian War. This data is very incomplete and we do not have a valuation for a lot of the equipment and goods donated.

Total military aid to Ukraine is at least 9,291 million (? Albania + 225 Aus + ?? Belgium + 584+ Canada + 17 Croatia + 30 Czech + 81 Den + 230 Est + ?? Finland + 125+ France + 1,040+ Germany + ? Greece + ? Icleand + 9 Ire + 114+ Italy + ? Japan + 208+ Latvia + 104+ Lithuania + ? Lux + ? Mont. + 57+ Neth + 11+ NZ + ? N. Macedonia + 44+ Nor + ??? Poland + 11 Port + 3 Rom + 13 Slovakia + ?? Slovenia + ?? S.Korea + ?? Spain + ?? Sweden + ?? Turkey + 1,600 UK + 3,285 US + 1,500 EU). This is a very rough estimate as I don’t have complete figures for many countries. But this figure of 9.3 billion more than doubles what Ukraine spent for it own defense in 2020. On the other hand, it is a fraction of the 61.7 billion Russia spent for defense in 2020-2021.

Total economic and humanitarian aid to Ukraine is at least 8,558 million (? Argentina + 65 Australia + ? Austria + 5 Azer + 1 Bahrain + ? Brazil + ? Bulgaria + 330 Can +  0.1 Chile + 10 China + ? Colombia + .0.3 Croatia + ? Cyprus + 13 Czech + 27 Den + 26 Est + 89 Fin + 2,000 France + ? Georgia + 519 Ger + ? Hungary + ? India + ? Israel + ? Italy + 200 Japan + ? Kazakhstan + 0.1 Kosovo + 2 Kuwait + 0.5 Latvia + 0.5 Liecht + 4 Lith + 1 Malta + 1 Moldova + 0.2 Mongolia + 0.1 Mont + 2 NZ + 208 Nor + ? Pakistan + ??? Poland + 5 Port + 5 Qatar + ? Romania + ? San Marino + 10 SaudiA + 3 Serbia + 3 Singapore + ? Slovenia + 12 S. Korea + 0.2 Spain + 10 Sweden + 80 Swiss + 32 Taiwan + 0.1 Thai + ? Turkey + ? Turkmenistan + ? UAE + 342 UK + 1,000 US + ? Uzbekistan + ? Vatican City + ? Vietnan + 500 EU + 192 companies + 1,359 charities + 1,500 UN + ? IMF). So, over 8.5 billion in economic and humanitarian aid compared to an economy of 181 billion. Now that economy is going to be down maybe 45% for 2022. The economic and humanitarian aid of 8.5 billion is not going to make up the economic shortfall of at least 80 million, and this was not a rich country to start with. 

This is a very poor collection of data and much can be done to improve. But it clearly shows that the military aid, along with Ukraine’s own spending may only be matching 25% of the Russia military spending (9.3 + 4.6 = 13.9/61.7 = 0.23). The economic and humanitarian add may only be making up 10% of Ukraine’s economic shortfall. While all these figures are underestimates, none of this looks good for Ukraine if the war drags on for one or more years.

So, Russia is spending 60 or more billion on its military, it could spend more. Meanwhile, Ukraine was spending maybe 5 billion on its military. It may be able to double that, except its economy is looking at an 80 billion shortfall. Therefore, to achieve some kind of balance, it looks like Ukraine needs to receive a 100 billion or more in outside military, economic and humanitarian aid. Right now, I gather it is receiving around 20 billion (maybe more). Ratcheting the aid up to 100 billion a year does stabilize the situation, but it does not necessarily create victory. So, this may have to be something that continues for years.

It does appear that as this war drags on, it does favor Russia unless aid to Ukraine increases significantly.

 

 

The discussion below is an update to my original posting on the home front.

The Home Front: Count of detained protesters is claimed to be over 14,900 since the war began. See: OVD-info. At least 800 people have been detained in Belarus. There have been only limited protests in the last few weeks.

Exchange rate: The ruble is at 64.72 to a dollar as of 10:03 AM EST. This is “better” than it was before the war began or the last time we reported this. This is mystifying in light of all the other economic news coming out on Russia (see below). The Russian stock market (Moscow exchange) remains closed except for state bonds. As a result of the lower ruble, prices in grocery stores, etc., have returned back to normal. A detailed demonstration of this is provided in this video by Svetlana of Russia (29:36): https://www.youtube.com/watch?v=HK_BKWTaWoU. There gas prices are lower there than here (see 22:15 in the video). Youtube is still up in Russia, although that may not be for long.

Price of oil (Brent crude): $111.41 as of 10:04 AM EST. Several years ago, if the price of oil dropped below $80, the Russian budget would go into the red.

Note that Russia says it received $3.6 million less (302 billion rubles) than it forecast from March old and gas sales. Russia forecasted energy revenue of 790 billion rubles ($9.4 billion) but received around 488 billion rubles., a drop of 38%. The last report I saw, 52% of the Russian government revenue comes from oil (even though it makes up only 7% of their economy). The current Wikipedia article on the Russian economy says that roughly 40% of Russian federal budget comes from the oil and gas sector.

It has been estimated by the World Bank that Ukraine’s economy will shrink by an estimated 45.1% this year (which is a surprising precise estimate in the middle of a war). 

The Russian Ministry of Economy expects 8.8% contraction in 2022. This is a large contraction than anything experienced by the U.S. since the 1930s. Russian estimates of inflation for the next year have ranged from 12.4 percent to as high as 20.7% for the 2022/2023 fiscal year. An independent Western estimate (Capital Economics) project a decline in GDP of 12 percent this year and inflation at 23%. Other Western estimates say GDP will decline by 8.5% (IMF), 10% (European Bank) or 11% (World Bank). Russian inflation rate is currently at 17.62%.

It does appear that the economic impact on Russia will be longer term, as McDonalds and Renault are selling of their businesses in Rusia is now completely pulling out completely.

The value of the ruble seems to have stabilized for the last couple of months at around 64 to 70 per dollar and oil prices at around $100-110. Lower oil prices do undercut the Russian government budget. To further lower the oil prices probably requires the corporation of Saudi Arabia and OPEC. Right now, they are steering a neutral course between the U.S. and Russia, which is kind of questionable on their part.

This entry was posted in Eastern Europe, Economics, Russia by Christopher A. Lawrence. Bookmark the permalink.

About Christopher A. Lawrence

Christopher A. Lawrence is a professional historian and military analyst. He is the Executive Director and President of The Dupuy Institute, an organization dedicated to scholarly research and objective analysis of historical data related to armed conflict and the resolution of armed conflict. The Dupuy Institute provides independent, historically-based analyses of lessons learned from modern military experience. ... Mr. Lawrence was the program manager for the Ardennes Campaign Simulation Data Base, the Kursk Data Base, the Modern Insurgency Spread Sheets and for a number of other smaller combat data bases. He has participated in casualty estimation studies (including estimates for Bosnia and Iraq) and studies of air campaign modeling, enemy prisoner of war capture rates, medium weight armor, urban warfare, situational awareness, counterinsurgency and other subjects for the U.S. Army, the Defense Department, the Joint Staff and the U.S. Air Force. He has also directed a number of studies related to the military impact of banning antipersonnel mines for the Joint Staff, Los Alamos National Laboratories and the Vietnam Veterans of American Foundation. ... His published works include papers and monographs for the Congressional Office of Technology Assessment and the Vietnam Veterans of American Foundation, in addition to over 40 articles written for limited-distribution newsletters and over 60 analytical reports prepared for the Defense Department. He is the author of Kursk: The Battle of Prokhorovka (Aberdeen Books, Sheridan, CO., 2015), America’s Modern Wars: Understanding Iraq, Afghanistan and Vietnam (Casemate Publishers, Philadelphia & Oxford, 2015), War by Numbers: Understanding Conventional Combat (Potomac Books, Lincoln, NE., 2017) , The Battle of Prokhorovka (Stackpole Books, Guilford, CT., 2019), The Battle for Kyiv (Frontline Books, Yorkshire, UK, 2023), Aces at Kursk (Air World, Yorkshire, UK, 2024), Hunting Falcon: The Story of WWI German Ace Hans-Joachim Buddecke (Air World, Yorkshire, UK, 2024) and The Siege of Mariupol (Frontline Books, Yorkshire, UK, 2024). ... Mr. Lawrence lives in northern Virginia, near Washington, D.C., with his wife and son.

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