People protesting the Russia-Ukraine war
Source: Getty

Russia Is Losing Over $20 Billion Every Day During the Ukraine War


Mar. 3 2022, Published 10:14 a.m. ET

What started as a “special military operation” by Russia, has now transformed into a war with Ukraine. Every war has a cost, and so does Russia’s war with Ukraine. How much money is Russia losing daily in the war against Ukraine?

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First, we should understand that apart from the terrible loss of lives, there are other costs associated with a military operation. There are the direct costs related to the military and then there are other financial costs in terms of the impact on the economy. While some of these costs are upfront, others play out over the long term.

How much money is Russia losing daily in the war?

Research by the Centre for Economic Recovery, Civitta, and EasyBusiness estimates that the war with Ukraine costs the Russian military more than $20 billion every day. The amount includes damaged military equipment in the war as well as the loss of potential GDP based on the loss of human lives in the war.

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The research says that the estimates are conservative and don't include lost machinery, fuel, spare parts, or costs associated with evacuation and treatment of wounded soldiers.

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Russian billionaires are also losing billions.

Russian billionaires have lost a collective $83 billion because Russian stock markets crashed after Putin invaded Ukraine. The crash in Russian stock markets eroded a total of $189 billion worth of investors’ wealth. A lot of this wealth is on paper in the form of stock ownership and should come back if Russian stocks rebound.

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After Putin’s belligerence, Russian stock markets, which were risky anyway, have become even riskier. The risk premium on Russian stocks will go up now. Russia also barred foreigners from selling stocks as they crashed. Foreign investors might be wary of investing in Russia given the behavior compared to free markets.

Russia’s borrowing costs will increase.

The yields on Russian bonds have exploded since the war started. The country also banned payments to foreigners holding Russian bonds. Over the long term, it would impact Russia’s ability to access the global markets, if the sanctions are lifted. Simply put, future generations would also pay a price for Putin’s senseless war.

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The crash in the ruble will impact the overall cost.

The crash in the ruble has its costs as well. The crash will lead to imported inflation for Russians as the import prices would go up. To make things worse, several companies have stopped doing business in the country. Also, at least three shipping companies Maersk, Mediterranean Shipping Company, and CMA CGM have halted cargo booking to and from Russia.

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This will invariably lead to product shortages in Russia and lead to inflation and by its extension increase the price of its war with Ukraine.

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The world is also paying the price for Putin's war.

Russia isn't the only country paying the price for the Ukraine invasion. Thanks to Russia's role in global energy, aluminum, coal, and wheat markets, the prices of these commodities have jumped which is having a negative impact on consumers globally.

What are the long-term costs of the Russia-Ukraine war?

There's also a long-term cost associated with Russia’s invasion of Ukraine. Energy exports are a key pillar of the Russian economy and some of the buyers are already shying away from buying oil from the country. Over the long term, Europe will start to wean its overreliance on Russian energy imports. The process is already underway and will continue to gain traction.

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Russia could face more sanctions.

Russia is a major arms exporter and there are already talks of imposing sanctions on its defense exports. India, which is a major U.S. ally, might also have to face sanctions for buying military hardware from Russia, which is its most important partner when it comes to military hardware.

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Putin seems to have miscalculated the costs associated with the Ukraine war. Some of the oligarchs have also been speaking against him as they lose billions due to the war. Apart from the costs, Putin might have miscalculated the resolve of Ukrainian forces, political leadership, as well as the country’s citizens.

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Overall, the direct and indirect costs of the Ukraine war might become too high for Russia. Given the ever-increasing sanctions, the over $600 billion foreign reserves that Putin was banking on might not be of much help.

Another notable aspect would be that Russia could become a pariah state and both investors and businesses would be wary of doing business with the country. This would have a long-term impact on the country's economy, which is hard to quantify.


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