For three years, Russia has been spending without restraint on the large-scale war it is waging in Ukraine. In order to attract volunteers to the front, the authorities have dramatically increased the remuneration of contract soldiers. Monthly pay is set at 210,000 roubles (£2,200), three to four times the average salary, to which are added numerous material and social benefits as well as generous enlistment bonuses financed by the regions. In 2025, the Russian military budget will reach 130 billion euros, representing a third of the country’s total budget, up 30% from 2024, already a record year.

Whilst the major part of this sum is absorbed by the military-industrial complex, other sectors benefit from the state’s generosity: education, culture, health... all reoriented towards what the Kremlin continues to call its “special military operation”. Objectives: to reward the “heroes” fighting in Ukraine, disseminate state propaganda and encourage patriotism in order to legitimise and continue the conflict.

The biannual “presidential grants” competition, supposedly to finance social projects in various fields, perfectly illustrates this trend. Unveiled at the end of January, the 2025 edition awarded 239 projects dedicated to the year’s theme of “Defender of the Fatherland” out of 1,497 finalists. Among them: patriotic propaganda projects, assistance programmes for military families and school initiatives linked to the war.

The largest grant was awarded to a project for rehabilitating wounded soldiers carried out by the Memory of Generations Foundation (72 million roubles - £773,000). The patriotic radio station Pride, which has been broadcasting for a year, received 39 million roubles (£420,000) to launch a series of formats dedicated to Russia’s “historical and cultural heritage”. Nearly 27 million roubles (£291,000) were allocated to creating the “Battlefield: Mariupol” museum. The devastation of the city by Russian troops between February and May 2022, which killed thousands of civilians, is described as “heroic liberation” in the project.

New Political Elite

This militarisation of society and the economy has profound consequences for the country, where social inequalities are durably widening. Whilst some grow rich thanks to the war, a large part of the population becomes poorer. According to Russian economist Igor Lipsits, between 26 and 28 million people have seen their financial situation improve over the past three years.

This group includes soldiers and their families, but also workers in the armaments sector, healthcare professionals employed in military clinics and rehabilitation centres, as well as all professions directly linked to the war effort. “This represents about 20% of the Russian population. It constitutes powerful social support for continuing the conflict,” emphasises Igor Lipsits, exiled in Lithuania.

Over the past year, food prices have exploded: +90% for potatoes, +36% for butter.

Vladimir Putin fully intends to capitalise on this new social group, believing that “all those who serve Russia, workers and warriors” will constitute the “true elite” henceforth. “They must occupy leadership positions in education and youth training, in public associations, in public enterprises, in business, in state and municipal administration, and lead regions, enterprises and, ultimately, the greatest national projects,” declared the Russian president in his address to the Federal Assembly on 29 February 2024.

Whilst the advent of a new political elite formed in the trenches has little chance of materialising, meanwhile, for a majority of Russians, living conditions are deteriorating in wartime. Pensioners are worst off with soaring food prices. Over the past year, food prices have exploded: +90% for potatoes, +36% for butter, +48% for onions, +24% for lamb, according to figures from the federal statistics agency Rosstat.

“Civilian pensioners, about 41 to 42 million people, are seeing their purchasing power collapse, as pension indexation doesn’t keep up with price increases. Their situation is particularly concerning,” warns Professor Igor Lipsits. Especially since several studies estimate that real inflation could be twice as high as official figures.

Colossal Bonuses

Faced with inflationary pressure, the Russian Central Bank has chosen since 2023 to increase its key rate, now at a record level of 21%. This has a very strong impact on the property and construction market. “Until last July, there was a federal programme for preferential-rate mortgages: the rate was capped at 8% for the buyer and the state paid the difference. But this programme was stopped because it was too expensive,” explains Igor Lipsits. “Since then, housing sales have fallen sharply. Only 5% of the Russian population can afford a mortgage at current market rates.”

Worried about a potential collapse of the construction market, the President of the Russian Federation Council, Valentina Matvienko, warns of the need for a moratorium on developer bankruptcies. But some experts fear this measure could trigger a systemic crisis in the banking and property sectors.

Furthermore, the colossal bonuses paid to soldiers and their families are straining regional budgets. According to an investigation by independent media iStories, published in November, in some regions, more than half of social assistance is now devoted to military personnel and their relatives, drastically reducing assistance to the most vulnerable.

“Regional authorities will have to make budget cuts: reduce salaries or lay off public sector workers.” - Igor Lipsits, Russian economist

The Stavropol territory devotes 83% of its social benefits to combatants, with an enlistment bonus of 1.6 million roubles. In Karachay-Cherkessia, 75% of social funds go to military personnel, an amount nine times higher than unemployment benefit. In Kaluga, the proportion is 52%, seventeen times more than aid given to disabled people.

Associations helping the homeless report an increase in the number of people in need in recent years. “Before, we mainly had elderly people, now we also have young families who can no longer afford housing or people who are victims of property fraud,” says Olga Bakhtina, who manages the private Dari Dobro shelter in Yekaterinburg. And the situation affects the whole country. “In 2022-2023, the main reasons for ending up on the streets are losing the ability to rent housing and job loss,” confirms Daniil, a member of Notchlejka, Russia’s oldest homeless assistance organisation, present in Moscow and St Petersburg.

Dangers to Society

Regional budgets are all the more under pressure as tax revenues contracted in 2024, down 7% last year, announced Finance Minister Anton Siluanov. “This will lead regional authorities to make budget cuts: reduce salaries or lay off public sector workers. Such things are already beginning to happen,” states Igor Lipsits. This is the case in the industrial region of Kemerovo where authorities have launched a massive plan to lay off civil servants employed in kindergartens, due to declining tax revenues from the coal industry.

A programme to optimise the health system is also underway in several regions. According to independent daily The Moscow Times, at least 160 public hospitals, clinics, medical centres, dispensaries, maternity hospitals and other health establishments were closed in 2024, thus forcing local populations to travel long distances to access care.

What impact will these social fractures have in the medium term? “It’s difficult to say where this will lead, because Russia is a very unconventional country. People who are becoming poorer will try to survive as best they can. They will probably try to earn more money in the shadows to pay fewer taxes. Social protests are unlikely, but irritation will increase and the underground economy will develop,” predicts Igor Lipsits.

The conflict is also generating a rise in violence in Russia. Local newspapers regularly report sordid crimes committed upon their return from the front by former inmates who had been pardoned in exchange for their military service. In a rare criticism from an official state representative regarding war heroes, Duma deputy Nina Ostanina described ex-prisoners returned from Ukraine as “dangers to society,” calling on law enforcement to protect citizens against these criminals.

According to an investigation by independent media Verstka, cases of domestic violence involving ex-combatants almost doubled during the first two years of the war in Ukraine compared to 2020-2021. The first victims are women.

Estelle Levresse

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