In Russia’s war economy, civilians chase butter and potatoes

Mark O'Neill January 01, 2025 06:00

The white carpet of a snow-covered field in western Russia is pockmarked by corpses of Russian and North Korean soldiers killed during ‘meat assaults’ on foot. The family of each dead Russian is promised US$54,000 by the state.

At a supermarket in Moscow, the price of a pack of high-grade butter has risen 34 per cent in one year to 240 roubles (US$2.47). Over the same period, potatoes have risen 95 per cent, cabbage 38 per cent, beetroot 34 per cent and olive oil 31 per cent, according to Rosstat, the official statistics bureau.

Welcome to Russia’s “total-war economy”. Defence and security account for eight per cent of GDP and 40 per cent of total federal spending, the highest level since the Cold War. Short of new recruits, Russia has raised the average enlistment bonus to US$11,000, compared to an average annual salary of US$13,300.

The defence sector is booming, the rest of the economy is suffering. Interest rates are at a record 21 per cent, inflation this month is 9.5 per cent. Non-military companies are struggling to pay debts and raise money. Ralf Ringer, the country’s shoe manufacturer, was declared bankrupt this month. Since August, the rouble has fallen about 20 per cent to the U.S. dollar.

On December 18, the Russian Council of Shopping Centres said that 25 per cent of the country’s shopping centres risk closure in 2025, due to the sharply higher interest rates, higher taxes and the loss of foreign goods.

The defence sector has hired thousands of workers to work three shifts a day, with some salaries rising by 45 per cent in the first half of the year. As a result, unemployment has fallen to 2.3 per cent. There is a shortage of 1.5 million highly skilled workers, especially in construction, transport and utilities, deputy Prime Minister Alexander Novak said this month.

The war is not economically productive. According to the General Staff of the Ukrainian Army, since it launched its full-scale invasion in February 2022, Russia has lost 772,280 killed, wounded and missing, including 1,860 in the single day of last Saturday. Payments to families of the dead and care of the wounded and handicapped will cost the state billions of roubles over decades.

Russia says it has “liberated” about 20 per cent of Ukraine, in the east. To do this, it has reduced cities and towns to ruins and destroyed their factories and infrastructure. If it retains these territories in a post-war settlement, reconstruction of them will require colossal investment, with no help from the western world.

Butter is a good example of the price the civilian economy is paying. It is a staple food of the Russian diet. One quarter of its supply comes from abroad. Since the invasion, New Zealand, Australia and Latin America have banned butter exports to Russia. Belarus, India, Iran and Turkey stepped in to replace them.

Russian banks are cut off from the global Swift financial system. This forces importers and middlemen to find new, and more expensive, ways to finance the imports.

Butter has become a treasured commodity, sought by criminal gangs. In October, a CCTV video from a Moscow supermarket posted online showed a man stealing 25 packets of butter. When confronted by a shop assistant, he tries to escape, and a fight breaks out. Many shops have put their butter in locked cages; those wanting to buy it must ask staff to open them.

Meanwhile, images from the frontline becomes increasingly apocalyptic. They show Russians in their 50s and 60s practising, clumsily, to load machine guns as they prepare for the front. Another, in his 60s, is lured out of his trench by Ukrainians pretending to be Russian soldiers. They arrest him.

One who is captured explains to an interview: “there were 100 soldiers for breakfast and seven for dinner. To try to prevent us surrendering, our commanders use drones to follow us everywhere, with the threat to fire if we attempt it.”

Drones, used by both sides, provide astonishing battlefield coverage. A Ukrainian drone follows North Korean soldiers through a wheat field. Unprepared for this kind of warfare, they run terrified, trying to escape.

The Ukrainian army has dropped leaflets in Korean, urging them to surrender and go to South Korea the next day. “You have been sold”, one leaflet says. According to South Korean intelligence, Putin is paying US$2,000 per month to each North Korean soldier – but most of this goes to their government, not the individual.

In a single line, Russian tanks and armed personnel carriers cross a snow-covered field with no tree cover, making them sitting ducks for Ukrainian drones and artillery.

As the world prepares to celebrate the birth of the son of God, we look at the bloodshed in Ukraine and the poverty in Russia and wonder how we humans have come to this.

Mark O'Neill

A Hong Kong-based writer, teacher and speaker.