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Chechnya: The economic cost

This Sam Vaknin article analyzes the economic costs to Russia of the war in Chechnya, which cannot be measured just in terms of money.  However, even leaving aside the tens of thousands who have died over the last decade, the bottom line is that it has cost Russia far too much already:

No one knows how much the war has cost Russia hitherto. It is mostly financed from off-budget clandestine bank accounts owned and managed by the Kremlin, the military, and the security services. Miriam Lanskoy, Program Manager at the Institute for the Study of Conflict, Ideology and Policy at Boston University, estimated for "NIS Observed" and "The Analyst" that Russia has spent, by November 2001, c. $8 billion on the war, money sorely needed to modernize its army and maintain its presence overseas.

Russia was forced to close, post haste, bases in Vietnam and Cuba, two erstwhile pillars of its geopolitical and geostrategic presence. It was too feeble to capitalize on its massive, multi-annual assistance to the Afghan Northern Alliance in both arms and manpower. The USA effortlessly reaped the fruits of this continuous Russian support and established a presence in central Asia which Russia will find impossible to dislodge.

If the war were purely a result of Chechen aggression, and Russia were the innocent victim, we could sympathise.  But Russia isn’t purely a victim.  Russia is involved in this war because some very important people in Russia profit from it.  Not least those who cream off around 10% of the military budget, and and an even higher percentage of the reconstruction budget, for their own purposes.  Even some legitimate businesses profit – particularly the arms industry which can use the Chechen battleground to test and demonstrate their latest weapons.  For a small group of people, war in Chechnya means profit.

Praktike (via whom I found Vaknin’s article) wishes there were a way to make Putin see how terribly he is handling the conflict without making him seem threatened.  The problem is that while Putin’s position as President relies on the backing of small groups of men who have no interest in seeing an end to conflict in Chechnya, he will never be able to push for a peace deal without feeling threatened. 


  • Vaknin’s piece is the best contender for ‘the most ignorant article on Chechen war’ prize. And that’s something.
    Full-scale fisking would be too long, since he lies in almost every paragraph. Just some nitpicking: this war wasn’t officialy ended in 1997, since it started in August 1999. IMF didn’t pay for this war. His statement that “$4.5 billion arrangement was signed with Russia in July 1999” is false. In July 1999 Russia got $640 mln of money that had been negotiated for back in 1998. Russia got no money from IMF since that, and the war started in August with Chechen attack on Dagestan.
    His pricetag estimates are similarly misleading. He likes to take estimates for 2000, the year of the most intensive battles, and extrapolate them on the war as a whole. Reminds me of that ‘report on Iraqi casualties’ made by polling in Fallujah and extrapolating data in the whole Iraq.

  • Mike – I disagree when you say a full scale fisking is in order.

    The point of Vaknin’s article was not to give an exhaustive account of the cost of the Chechen conflict(s). He notes clearly in the first paragraphy that I have excerpted that “No one knows how much the war has cost Russia hitherto.” He is bringing together a number of estimates of the cost to illustrate his point that, by whatever measure you use, the war is very very expensive. Too expensive.

    As for your particular points:

    A peace deal was signed to end of the first Chechen ‘war’ (or, at least, to end the first post-Soviet Chechen war) in early 1997. It seems clear to me that this is this deal to which Vaknin is referring in his article. Today’s conflict is, absurdly to be sure, not officially a war.

    A $4.5 billion IMF deal was signed with Russia in 1999 as a result of negotiations throughout 1998, although only one installment of $640 million was paid to Russia. The reason for the lack of further payments is not entirely clear – some say the G7 refused tried to impose further, harsher, terms on Russia, some say that Russia refused the money. Vaknin does say in his article that earmarked funds are fungible although, to the detriment of his article, he does not make it clear that only one installment of the $4.5 bn was paid.

    As for Vaknin’s estimates coming mainly from 2000, I don’t think this is a particularly bad thing. As he notes in his article, many costs – particularly munitions – were practically zero as Russa has massive Soviet stocks which it does not need to replace. By far the largest financial cost of the conflict in Chechnya is the stationing of troops on the ground, a cost which stays relatively constant whether they are engaged in heavy battles or not.

  • I’d throw in the 13% flat income tax rate. Where are the reasonable economic policies and great expectations of Putin’s first term?

    I may have seen or heard politicians explain how the Chechen war is harming the rest of Russia but I don’t remember anyone citing this harm as the prime reason why ending the conflict should be the government’s first priority. Liberals and human rights activists keep talking about the abuse of Chechens. What the don’t say is “today they’re torturing Chechens, tomorrow they may — and will — torture your kids.” One gets the impression only ethnic minorities can count on their compassion.

  • That is an interesting article, but it does not show how the way out would be. Even when the war ended in 1997, Chechnya collapsed and became a terrorist gangster state and was preparing war in all russian islamic republics eg Moscow appartment bombings and incursions into ingushetia

  • Vaknin probably has his figures wrong — who would claim to have them right? — but it’s obvious that Chechnya is a huge drain on the state budget and most of the money ends up before it reaches the intended recipients. Consider the budgetary allocations on “rebuilding Chechnya” for one. It makes me mad that Russian opponents of the war keep citing human rights issues (how many Russians care about Chechens’ rights?) instead of throwing in catchy slogans like, “Every ruble spent on Chechnya could be spent on your kids’ education.”

    It’s also an excellent opportunity for ethnonationalists: why spend money on keeping “swarthy and uncivilized” Chechens at bay when a million of ethnic Russian kids suffer in orphanages?

    As for the IMF, Russia virtually stopped borrowing after the 1998 crisis, the $640 drawdown in 1999 being the last one (Russia paid back far more that year). This is a very important fact: Russia recovered on its own, unlike most other emerging economies.

  • Alexei, I couldn’t agree more. People in Russia, like everywhere else, care most about issues with direct relevance to themselves and their families, rather than faraway conflicts.

    Why do you suppose, though, that no-one has adopted this approach?

    As for Russia not taking on any further debt since 1998 – I think it is easily the smartest thing that the Russian government has done over the last decade.

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