Russian President Vladimir Putin’s war in Ukraine isn’t just bringing death and destruction to untold thousands, it’s also creating misery in Russia’s economy too, according to a U.S. Treasury Department analysis.
According a blog on the department’s website Thursday, Russia’s economy would be 5 percent bigger if Putin hadn’t launched the full-scale invasion of Ukraine in early 2022. The analysis from Rachel Lyngaas, the department’s chief sanctions economist, also found that Moscow is now spending over $100 billion on defense—nearly a third of its total expenditures in 2023.
The war, together with international sanctions on Russia and Moscow’s policy response is “putting Russia’s economy under considerable economic strain,” Lyngaas writes, which is “contributing to rapidly growing expenditures, a depreciating ruble, increasing inflation, and a tight labor market reflecting a loss of workers.”
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Russia is also now allegedly also underperforming other energy exporters—including the U.S.—although Western sanctions on Russia’s oil business hadn’t been as consequential as initially thought.
The report also notes people are now leaving Russia at record rates, with emigration hitting 668,000 in 2022—a 71 percent increase above the prior five-year average. “Russians are voting with their feet,” the Treasury report says. “ [T]his permanent loss in human capital [will] further weaken Russia’s growth potential.”
