Russia buys acceptance with cash, plunging economy into uncertainty

December 20, 2024

By Ukraine

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For Russia's military recruiters, money talks.

In July, Russian President Vladimir Putin doubled the federal signing-on bonus for contract soldiers to 400,000 rubles ($3,850) — over five times the country's average monthly wage.

Regional governments are expected to top this up further, although the exact amount differs in each area.

In the Siberian Khanty-Mansi Autonomous Okrug, soldiers receive 2.2 million rubles from city hall ($21,000). In Belgorod Oblast, it's an additional 2.6 million ($25,200).

These benefits – as well as payments to veterans and to soldiers' families in the event of their deaths — have been vital in enticing men to join the Russian army.

Speaking on Dec. 16, Russian President Vladimir Putin claimed that more than 430,000 people had signed up to join the country's Armed Forces in 2024 alone.

Most troops hail from Russia's most disadvantaged regions — places where the prospect of upfront cash is simply too difficult to ignore.

But these payments are also increasingly warping Russia's social fabric. The funds used to provide local sign-on bonuses, as well as war pensions, are drawn from regional welfare budgets: money traditionally put aside to support vulnerable groups such as disabled people or large families.

An investigation by independent Russian news outlet iStories found that war payments increasingly dominate these funds. Data analysis shows that from a sample of 48 Russian regions, more than a third are allocating 25 percent or more of welfare budgets to war-related payments.

In some regions, that percentage rises dramatically. In the Stavropol Krai in Russia's North Caucasus, some 62 percent of social welfare spending has been allocated to providing war pensions and support for wounded veterans. Data analyzed by the BBC and Mediazona to estimate Russia's war deaths found that as of mid-December, at least 1,342 soldiers from Stavropol Krai had died in Ukraine, although this is likely to be an undercount.

A further 21 percent of Stavropol Krai's social welfare budget, or 2 billion rubles ($19.4 million), went to providing sign-on incentives, iStories reported.

At the start of 2024, the region offered a relatively modest regional bonus of 100,000 rubles ($968). By the end of the year, that had catapulted to 1.6 million ($15,500). The shift put its bonus on par with neighboring Karachay-Cherkessia, which had already pumped 63 percent of the region's welfare budget into providing sign-on incentives.

These sweeping payments leave little behind for Russia's most vulnerable. Stavropol Krai paid 83 percent of its 2024 welfare budget to soldiers, veterans, and their families but just 2 percent to children in state care and 4 percent to the unemployed. In Karachay-Cherkessia, war payments outstripped unemployment benefits nine times over.

The changing face of Russia's welfare state reveals how the Kremlin is buying the acceptance — if not the support — of millions of ordinary Russians while the country's economic future is bargained to fuel its wartime present.

`Help that counts`

Welfare payments have an outsized impact on Russian society precisely because they are so needed.

Most Russians do not live in poverty, says Thomas F. Remington, a visiting professor of government at Harvard University. However, a high proportion hover just above it, struggling to get by.

"How we measure poverty always varies, but by reasonable measures, the share of people in poverty (in Russia) is not so great," Remington says. "But the share of people who are near poverty, those who are just hovering close to the poverty line, living on meager, barely adequate wages or special income such as pensions, there's quite a high proportion."

"The share of people who are near poverty, those who are just hovering close to the poverty line, living on meager, barely adequate wages or special income such as pensions, there's quite a high proportion."

In these struggling communities, in particular, war-related payments can win acceptance for the full-scale invasion and the government itself. Using the welfare state to placate particular social groups is a well-worn tactic, says Sarah Wilson Sohkey, associate professor in the Department of Political Science at the University of Colorado. Payments may not win a person's outright support for government policy, but it can make them less likely to protest.

"For example, what Putin has done — very strategically — is that every time there is a presidential election, he boosts pension payments. (Former Russian President Boris) Yeltsin did this, too, repeatedly. Those one-time bumps before every presidential election, very consistently, were really good in ensuring that pensioners would keep supporting them," she says.

"It's not really buying people's loyalty, but more their acquiescence."

Making one-off payments in a bid to encourage specific actions, such as joining the army, is also well-inscribed in the Kremlin playbook. In Russia, one-off payments have been made to encourage families to have more children — a topic that Moscow has been keen to promote amid a plummeting birth rate.

"The welfare state has always been about manufacturing consent," says Dr. Amanda Zadorian, a visiting assistant professor of politics at Oberlin College.

"The kind of direct payments that we see (in Russia) incentivize a very specific behavior, whereas, for benefits like pensions payments, we haven't really seen increases."

`A balanced risk`

There is some risk that Russia is sowing the seeds of later discontent with generous war benefits. Welfare payments may be propping up Russia's economy, but they, too, come with a cost: investment in education or healthcare, for example, or support for vulnerable groups.

Yet, while Russia's welfare system has been used to placate the population, its weakening or disintegration is unlikely to cause widespread unrest, says Wilson Sohkey. In many cases, it is the families that rely most on Russia's state services that are also benefiting from war payments — and their focus is survival, rather than political policy.

"For Russians from poor rural areas, the money (that comes from joining the army) just means so much to them," says Wilson Sohkey. "They're not sitting there with this meta-view of the education system not being very good. They're getting a big one-time payment that's sometimes vital for their family's survival."

"For Russians from poor rural areas, the money (that comes from joining the army) just means so much to them."

The Kremlin has also been able to face down previous protests on welfare issues. When Moscow decided to raise the state pension age in 2018, rallies took place in tens of towns and cities across Russia, already a rare show of defiance. But despite somewhat poor local election results that year, Moscow was still able to pass the reform without difficulty.

The one-off nature of sign-on bonuses in particular makes them an easy win for the Kremlin, says Zadorian. Unlike pensions, which require a decades-long commitment, one-time bonuses put little pressure on the government itself, keeping expectations low and removing the threat of potentially unfulfilled promises that could boil into resentment.

"If people perceive that something might be being taken away from them, they respond more negatively than if they never had anything in the first place," says Zadorian. "It's much easier to create this sense of entitlement."

`Seeds of discontent`

War-related payments are not only shaping Russia's social spending. They are also obscuring and accelerating potential economic pain.

War benefits, as well as higher salaries for workers producing war-related goods, have acted as a buoyancy aid not only for struggling families, but the Russian economy as a whole. As soldiers' families spend, their new-found wealth is spread throughout their communities, driving Russia's economy.

This growth, however, is unlikely to be healthy or sustainable in years to come. Increased state spending is also driving a growing threat to Russia's economy: inflation. Prices rose 8.9% in November 2024 compared to the previous year, more than twice the state's 4% target. In a country where many families spend a large proportion of their income on food, state benefits have cushioned the blow for the most vulnerable. Yet, if inflation continues, it may no longer be enough.

"The crunch, if and when it comes, will have to do with high grocery prices. If Putin agrees to relax interest rates and we get into very high inflation and the devaluation of currency, I don't think that can last long," says Remington. "That's when we get rationing; we get hoarding; we get shortages — and we get real political protests."

Pouring money, attention, and effort into the military also damages wider productivity, Remington says. While military innovation can be used to create real-world economic benefits for ordinary people, this is not an area where Russia has traditionally excelled.

"Russia, historically, has not been good at converting the technologies that it develops for the military into benefits for the overall economy. In the Soviet era, military technology was pretty good, but the benefits of it tended not to spill over. In particular, with the invasion of Ukraine, wider industry is now being starved of investment. When you're producing overwhelmingly for the war, you are not upgrading the level of technological effectiveness," Remington says.

All of this ultimately forecasts trouble for the Russian economy's longer-term prospects.

"The economy is setting itself back a decade by devoting everything to the war. That means that the overall capacity of the economy to maintain a good standard of living for an aging population is diminishing," Remington says. "They're consuming their future for the sake of their present."

While some Russians may consider death a risk worth taking for a cash lump sum, it will never — economically or otherwise — equal a person's life.

"The sign-on bonus money does not replace the economic productivity of a person over the course of their lifetime," says Zadorian. "In the long term, we're less likely to see that effect of payments stimulating local economies and more likely to see further dependence on the state."

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