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into question. Alexandra Prokopenko, a prominent analyst, has outlined five reasons why military expenditure is expected to rise.
"The war continues," Prokopenko noted in a tweet. "Military salaries are rising rapidly. The Ministry of Defence (MoD) recruits up to 30,000 men, who can now earn up to $4,500 monthly. MoD's spending on salaries for servicemen was at Rb1.5 trillion and is now likely around Rb2 trillion."
Prokopenko highlighted that defence spending has become a critical driver of economic growth for the Kremlin. "Sanctions and broken supply chains increase the cost of output. After the war finishes, Russia will need to continue spending to replenish stockpiles," she added.
With unemployment at 2.6%, the defence sector is one of the largest employers, offering significant pay increases to turners and machine operators. "The high cost of labour reduces the profitability of the military industry," Prokopenko explained.
Russia’s defence sector remains inefficient, operating with a Soviet-era management mentality, opaque pricing, and complex cross-subsidisation. "Almost every factory has a boiler house, railroad tracks, a couple of sanatoriums, and a bunch of real estate that has no value for production, storage, or admin purposes. The company has to maintain all this, and it costs a huge amount. Rostec estimates its profitability at 2.28%," Prokopenko tweeted.
Global military spending is also on the rise, with 23 of NATO's 32 members meeting the requirement to spend at least 2% on defence. "Putin likely believes if his enemies are arming, it is unlikely that he will reduce his military spending," Prokopenko stated.
Under the slogan "all for the front, all for victory," the Russian state continues to invest heavily in its inefficient defence sector, potentially driving itself into a cycle of increased military expenditure. Prokopenko concluded with a historical reference, "A ghost of Dmitry Ustinov laughing quietly at the whole thing."
86 RUSSIA Country Report July 2024 www.intellinews.com