Putin’s victory in taking Donbass will cost him billions

The Kremlin has confirmed that it will officially annex four areas of Ukraine where referendums on joining Russia have been held in the occupied territories in recent days, but President Vladimir Putin’s victory in the Donbass region is likely to cost him billions of dollars, as well as those of imposed economic sanctions, the West begins to attack Russia.

On Thursday, Russia announced that it would recognize the Donetsk People’s Republic (DPR), the Lugansk People’s Republic (LNR), the Kherson region and Zaporizhia as part of the Russian Federation. Days earlier, polls by Russia-backed separatist groups showed an overwhelming majority opting to join Russia. The referendums have been widely condemned as fraud by Ukraine and its Western allies.

As Putin prepares for Friday’s ceremony at which the four regions will officially be part of Russia, some are reminded of the 2014 annexation of Crimea – a decision that cost the Kremlin billions of dollars. According to the Geopolitical Intelligence Services Reports, Moscow had to spend between $1 billion and $2.7 billion a year on infrastructure restoration.

Although that cost is manageable for Russia’s $1.7 trillion economy, experts estimate that Putin’s recent victory in Ukraine will likely cost him much more.

Yuri Zhukov, associate professor of political science at the University of Michigan, said news week that the cost of rebuilding these areas “exceeds the cost of infrastructure projects in Russian-occupied Crimea”.

“That’s more the size of Syria or even parts of the Soviet Union after World War II,” he said. Estimates put the cost of rebuilding Syria at $400 billion.

Putin Referendum Russia Costs
Russian President Vladimir Putin meets with heads of leading engineering schools and their industrial partners on September 21, 2022 in Veliky Novgorod. The cost of taking over four territories in Ukraine will cost the Kremlin billions of dollars.

In the Donbass region, where fighting has been going on since 2014, more than 14,000 people have died over the past eight years as Ukrainians and Russians fought for control of the contested country. Ukrainian President Volodymyr Zelenskyy has focused his presidential campaign on a solution with Putin over the area that has become the center of the current war in Ukraine.

Air raids on the battlefield have resulted in tremendous destruction. Back in May, Zelenskyy said Russian troops had “completely destroyed” the Donbass region after a series of offensive bombardments. Some estimates suggest that it would cost between $100 billion and $200 billion to rebuild civilian infrastructure, such as bridges and buildings, that were destroyed by the war.

According to William Reno, chair of Northwestern University’s political science department, many of Russia’s rural areas are already in need of rebuilding. As such, it will be difficult for Russia to find enough resources to get around, and the annexed territories will likely be the last to receive these reinforcements.

After the referendum, Russia will also need to add all basic utilities to its grid, according to Michael Kimmage, a former member of the US Secretary of State’s policy planning team. Spending, Kimmage said, would be “through the roof.”

Retaking Donbass has been one of Putin’s stated goals for the war from the start, and Russia has widely viewed the referendum as evidence that Ukrainians support Putin’s goals.

However, local reports say residents were forced to mark ballots at gunpoint as armed guards went door-to-door to collect votes. Serhii Hayday, the head of the military administration of the Luhansk region of Ukraine, also said on Telegram: “Rumours are being spread that people who vote against will be taken away somewhere. This is done deliberately to intimidate the local population.”

Putin referendum annexation of Russia
A woman casts her ballot for a referendum at a polling station in Mariupol, Ukraine, September 27, 2022. Russia announced it would officially annex the four regions in Ukraine that held referendums on joining Russia this week.

Zhukov expects that Russia will rely heavily on the forced labor of Ukrainian POWs and local civilians to rebuild the territory. Even if Putin manages to get cheap labor, “the cost to the Russian economy will still be high, not even counting the damage from additional rounds of sanctions that this will inevitably provoke.”

The forthcoming costs the Kremlin is willing to bear also come as Russia feels the effects of economic sanctions imposed by the West, making the annexations an even greater financial drain on Putin.

Heads of state and government from around the world have repeatedly condemned the referenda as “illegal” and a “stunt”. NATO has vowed not to recognize the votes, claiming the referendums will not stop Western allies from continuing to support Ukraine.

The US also stands ready to impose “additional heightened sanctions,” including against entities and companies outside Russia that support Moscow and the referendums, once the vote is announced, National Security Advisor Jake Sullivan said over the weekend.

While Russia has managed to sustain its economy despite the sanctions, in large part due to its oil revenues, Kimmage said Putin is facing the “calm before the storm” regarding Russia’s economy. He pointed out that the sanctions will come into effect this winter, so money to rebuild the new areas will be “very tight”.

Russia’s war effort is already severely draining the country’s finances, and combined with falling sanctions revenues and Russia’s economic isolation, the Kremlin is in a difficult financial position to then take over four new territories.

“In the short term, the Russian state will only be able to rebuild administrative buildings and militarily critical infrastructure in the Donetsk and Luhansk regions,” said Lawrence Reardon, a professor of political science at the University of New Hampshire news week. “But no doubt the rest of the region will languish without Russian investment and international aid.”

While Biden has promised to keep sanctions in place for as long as necessary, experts believe Putin is banking on the war’s economic damage being short-lived. Knowing the cost of taking over the four separatist-backed regions, Reno said Putin likely hopes his withholding of power from Europe will bring about political change.

Protests have already erupted in several countries over the hardship Putin’s war has inflicted on Europeans, and energy prices are expected to skyrocket in the winter. According to Reno, some Europeans are growing tired of the impact sanctions on Russia are having on them, and Putin hopes this will force politicians’ hands.

“Russia’s government is playing a long game towards the goal of lowering its cost of conquest,” he said.

Zhukov agreed that Putin had already calculated how the cost of capturing Donbass would develop. “Putin is betting that the Russians will be happy to bear that cost and that he can reignite the nationalist euphoria following the annexation of Crimea in 2014,” he said.

https://www.newsweek.com/putin-taking-donbas-will-cost-billions-russia-ukraine-war-1747655 Putin’s victory in taking Donbass will cost him billions

Rick Schindler

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