Recently sworn in for a fifth term, Russian President Vladimir Putin did a surprise reshuffle of his defence establishment, demoting two of his closest aides—former defence minister Sergei Shoigu and ex-secretary of Security Council of Russia Nikolai Patrushev. This re-shuffle comes at a time when ‘mobilisation’ was expected to be Putin’s first move after re-election. The President has chosen deputy prime minister and long-time economic advisor Andrei Belousov to replace Shoigu, who in turn has replaced Patrushev. The latter’s new appointment remains unknown.
The move is being seen as an effort to reduce the unsustainable and soaring costs of the war in Ukraine. It also challenges the narrative that the Russian economy is unaffected by the sanctions in the long-standing war. For 2024 alone, Putin has allocated $117 billion for the special military operation against Ukraine. His war economy runs feverishly in an overheated mode. Most international estimates state that 7.5 per cent of Russia’s GDP is directed to the military-industrial complex although Kremlin’s official estimates claim it is 6.7 percent.
It is a rare submission of a rising-cost problem from Putin, who had preferred to continue with his hunting-holidaying excursions pal Shoigu despite repeated allegations of systemic corruption and inefficiency against him for years. These allegations became the order of the day when mercenary group Wagner, led by Yevgeny Prigozhin, was brought to deliver victory in the infamous battle for Bakhmut in 2023. Putin’s slighting of Prigozhin’s outright allegations against Shoigu and Chief of General Staff Valery Gerasimov led to the incredible Wagner mutiny against the two generals, which ended up with Prigozhin’s death in uncanny circumstances.
It, however, unleashed an investigation into rampant corruption inside Russia’s military leadership, of which Prigozhin had become the most notorious victim. Russia-watchers had an inkling of Shoigu’s exit after Prigozhin and his aides were made to bid adieu into the flannel skies, and many corrupt links started to get exposed in the Ministry of Defence. The inkling became stronger as Shoigu’s deputies, including Timur Ivanov, got arrested on corruption charges last month. Soon, two other deputy defence ministers allegedly backdated their resignations before 9 May, or the Soviet Victory Day.
The Russian army was supposed to make an impressive win in Chasiv Yar on the eastern front but had to make do with American tanks captured at a small village called Berdychi when Ukranians retreated, running out of ammunition to fire.
All has certainly not been going as planned.
Also read: Russia has a window to exploit & defeat Ukraine. Otherwise, it will get sucked into endless war
Largest cabinet shake-up
The latest reshuffling in key defence and security offices has been Putin’s biggest shake-up in the past 15 years. There are two reasons for this. One is ensuring economic efficiency at a time when the stakes are very high for Russia and Putin. And two, Shoigu’s leadership has not been able to yield the anticipated results in the Ukraine war. His current appointment is a step-down with little direct authority.
Getting an economist like Belousov in the key position of a defence minister also shows that Putin is preparing for the longer haul. It is a solemn reiteration that the Ukraine war has indeed been reduced to a grinding war of attrition, with both sides lacking the capabilities to end it anytime soon. Europe’s combined strategies to support Kyiv militarily won’t come to fruition until mid-2025. American aid and the conditionalities attached are likely to help Ukraine stay afloat, but not gain a decisive edge.
That said, Russia, too, has been astonishingly lacklustre in exploiting the window of opportunity that had remained open for the last six months as Ukraine was outgunned and outnumbered with a lack of troops and ammunition. Despite the high intensity, war-economy mode with the reported 7.5 per cent of GDP directed to war effort, the Shoigu-Gerasimov duo could have done better than landing villages along with Avdiivka on the eastern front. Russia could have certainly conquered more than half a dozen or more in the buffer zone in the ‘bolt out of the blue’ Kharkhiv raid launched on 10 May, which concluded without significant strategic gains four days later. Even though Moscow has been clearly able to ramp up pressure on an outgunned Kyiv holding on in regions like Robotyne and Vovchansk, ideally, one would have expected Moscow to finish the war with every single advantage and metric in its favour. That goes on to validate the set of hypotheses that raises doubts on the realistic capabilities of Russia’s military foresight when deployed in its own theatre, against its own neighbour.
For now, Gerasimov remains in his position, but it remains unclear how long would he be able to work in tandem with an economist defence minister with almost all erstwhile deputies arrested or resigned.
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It’s the economy, stupid
Belousov, Russia’s new defence minister, has never served in the military, not even through conscription. That, however, is not a drawback because the task of the defence minister is to oversee budgetary matters and supplies. Military deployments are the responsibility of the Chief of the General Staff, that is Gen Gerasimov.
An economist at the helm of military logistics shows that Putin is in no mood to make further mistakes and wishes to max out efficiency and return to scale within the matrix of the current war economy. Unlike the long list of military personnel that have either been arrested or have resigned in anticipation of a crackdown, Belousov has had a cleaner image with no scandalous stains on his reputation.
What has really helped his appointment is the role he played in raising funds as Russia’s military budget went on stretching because of the Ukraine war. Belousov has done it through different taxation schemes. His most credible performance has been to stimulate Russia’s drone production programme that remained overwhelmingly dependent on mainly Iranian imports. This programme has showcased Russia’s adaptation to the evolving realities of war by pushing for innovation.
It also speaks of the premium Putin has put on winning the defence industry race with the West, as Western companies struggle to ramp up production. Western economies are not operating as war economies. Largely welfare economies, with high social spending, these governments are bound by their own liberal-democratic visions. That is an advantage for Russia in the short term, but it is rife with complications in the long term as the socio-economic support for the population shrinks.
The push for economic efficiency also stresses the cardinal role that China is further going to play in Russia’s future under Putin. As expected, Putin chose Beijing to pay his first overseas visit after getting sworn in for a fifth term. The “no-limits friendship” has been thriving due to China’s exploitation of the various loopholes of the Western sanction regime and providing unprecedented economic, fiscal, diplomatic and strategic support to Russia. Regardless of the outcome of the Ukraine war, Russia getting pushed with China is a rather irrevocable trajectory, as it will get further isolated from Western markets and technology, more in the lap of the dragon.
Alexandra Prokopenko, former advisor to Russia’s central bank, has duly elaborated the indispensability of sustained support from China in resolving Putin’s trilemma — financing a seemingly endless war, managing inflation to maintain living standards, and ensuring that the Russian economy does not lose its macroeconomic balance.
A Soviet route?
From India’s perspective, the etching in stone of the Russia-China partnership, capable of subverting the current global order, is the most feared outcome of the Ukraine war. New Delhi’s core economic and technological interests are more aligned with the West’s, even though its multi-aligned worldview sees genuine value in resilient strategies in a collaborative framework. Russia has been a historical partner. Balancing in current circumstances is no easy feat for New Delhi and must be rooted in strategic realism.
Kremlin’s fiery spokesperson Dmitri Peskov’s statement on an economist at the helm of the Russian military establishment reverberated in an unnerving recollection—Russia has been once again on the path of approaching Soviet-era levels of military expenditure.
Last time the Soviet Union was on that path, it led to an “end of history” in a world largely unprepared to handle the cost of those seismic shockwaves to the global order. Getting a civilian and an economist like Beolousov is a timely response to check Russia’s advance into eternally dangerous waters of unchecked military spending amid rampant corruption.
The writer is an Associate Fellow, Europe and Eurasia Center, at the Manohar Parrikar Institute for Defence Studies and Analyses. She tweets @swasrao. Views are personal.
(Edited by Humra Laeeq)