January 11, 2023: The war has done enormous damage to both Ukraine and Russia. Ukrainian GDP declined 30 percent in 2022 while Russia’s declined about three percent. Russia was hit hard by economic sanctions in 2014 for taking Crimea and parts of eastern Ukraine, and sanctions for its 2022 invasion made it even more isolated from the global economy. Russia’s only arms imports now come from equally poor North Korea (artillery ammo) and Iran (nearly 2,000 cheap Shahed 131/136 cruise missiles. Payment is by barter. North Korea gets badly needed food and oil supplies while Iran receives modern jet fighters and other military tech. China and India help with the funding by purchasing heavily discounted Russian oil and natural gas.

Russian government debt issuance costs a lot more because of higher interest rates for what lenders call “high risk” (of default) debt. That has forced Russia to be selective in what military equipment it purchases. For example, the government won’t buy many new rifles for their combat troops because there are still lots of older weapons in storage. Those were so poorly maintained as to be often obviously rusty and barely operational. The newly mobilized troops complain but the federal government recognizes that most of these poorly trained and equipped soldiers won’t last long in combat. Local governments suffer most of the blowback for this and often organize efforts to raise money locally to buy new weapons and other equipment for the troops.

Russia depends a lot on its Iranian cruise missiles and North Korea artillery ammo to keep the fighting going. The Iranian missiles are not as useful as predicted because the Ukrainians now shoot down nearly all of them. There is still damage, because the wreckage of the downed missiles often still has its explosives on board and these frequently go off when they hit the ground. If Russia uses a lot of cruise missiles in an attack, more will be downed inside an urban area, where the wreckage does some damage to the Ukrainian infrastructure.

Russia’s enormous prewar artillery munitions stocks are now depleted, while its production facilities are unable to expand. Before 1991 a lot of Soviet-era 122m and 152mm ammunition was produced outside post-1991 Russia. That includes Ukraine, Belarus and other countries that have halted production and dismantled production facilities. Russia was not expecting a long war in Ukraine and did not have the artillery munitions available to fire all their shells their available guns sent to Ukraine. On the front lines Ukrainian troops have noted much fewer Russian shells fired at them. Ukrainian artillery, a combination of old 152mm and new 155mm guns are well supplied with shells and use more effective tactics than the Russians.

Russia sought to import 152mm shells but there were few suppliers available. Only North Korea was able draw on its stockpiled 152mm ammunition and increased production. This is all that prevents Russian forces from being overwhelmed by superior numbers of Ukrainian 152mm and (NATO supplied) 155mm shells. Ukraine has managed to repair the artillery ammo production facilities previously knocked out by Russian missile attacks or that were in Russian occupied Ukraine. Eastern European NATO countries have limited stocks of Soviet-era 122mm and 152nn shells in storage since they adopted NATO-standard 155mm artillery. NATO nations have provided lots of military and economic aid that enabled Ukraine to begin rebuilding the damage Russian missiles and artillery have done to residential and industrial areas.

Russia has used up its own supplies of ballistic and cruise missiles; the few remaining are not enough to reverse the progress Ukraine is making in rebuilding its production capabilities. Ukrainian reconstruction is concentrating on keeping the lights on, along with other utilities (water, sewage disposal and heating). While much housing has been damaged or destroyed, 20 percent of Ukrainians have left the country, at least temporarily, leaving enough unoccupied housing for those needing temporary shelter until their bombed-out homes are repaired or rebuilt. Some of the foreign aid consists of building supplies to speed the restoration of war damaged housing. Russia is also suffering a smaller exodus of population. Most of these are military-age men avoiding mobilization or unemployed Russians with skills who can get jobs anywhere. These refugees have been sufficiently numerous to cause labor shortages inside Russia, forcing the government to import North Korean workers to deal with some of the shortages.

Neighboring Belarus is technically an ally but the relationship is more like Belarus being an unwilling donor of resources to a Russia that makes no secret of the plan to absorb Belarus once Ukraine is conquered. Most Belarussians are pro-Ukraine. The pro-Russia Belarus leaders and their security forces (reinforced with some Russians) keeps Belarus from more actively supporting Ukraine. Central Asian nations that also became independent of Russia in 1991 see themselves as on the Russian's acquisition list and have adopted a wary neutrality towards the Russia-Ukraine war. Like Belarus, the Central Asians also support Ukraine. This has limited Russian economic opportunities in Central Asia. China has sped up its efforts to replace Russia as the major foreign trading partner with the Central Asian states.

China has avoided any trade with Russia because of all the sanctions but has quietly increased its trade with North Korea and Iran. China does not give things away but is willing to sell to anyone who can pay. Iran has oil and North Korea has coal and minerals plus whatever its hackers can steal. China allows these hackers to work from China as long as they pay their own way and do not hack Chinese. The North Korean hackers have become quite good at stealing cryptocurrency, which China or Russia will accept as payment.

The more desperate the Russian economic situation gets, the more they have to improvise to survive. That’s an old Russian tradition that must be relied on more often than most Russians want.