Putin’s decision to invade Ukraine last year is depleting Russian revenues, forcing the state to enact special taxes.
Wars are expensive, and the illegal Russian invasion of Ukraine is no exception. The "special military operation" enacted by the Kremlin on February 24th, 2022 is digging a hole in Russia’s finances. To increase state revenues, Russian President Vladimir Putin passed a one-time tax on large corporations.
The new tax will target so-called "oligarchs", individuals with large net worth living within Russia. Specifically, Putin’s upcoming tax will entail a one-time payment of 10% of yearly revenues for companies earning more than 1 billion rubles in 2021 and 2022.
The tax is expected to fill Russian coffins with an additional 300 billion rubles in 2023, roughly $3,6 billion. According to the Financial Times, the measure will hit Russia’s metal and fertilizer sectors the hardest.
But Russia’s commodity sector, the most profitable for the country, will likely suffer from the tax as well. Last year, oil and gas giant Gazprom’s revenues declined by 40% following a similar measure.
Furthermore, the European Union was Russia’s biggest consumer of oil and gas, a market almost completely cut off a year into the Ukraine war. Last December, the G7 countries agreed on a price cap for Russian oil, followed by an outright ban by the EU.
At the moment, energy prices in the West have returned to pre-war levels. Russia, on the other hand, was forced to move its commodity market to Chinaand India. This move effectively turned Russia into a "petro-vassal" of China.
The invasion of Ukraine gets more expensive
Putin’s "special military operation" that was supposed to last three days is entering its 16th month.
After the initial advances, it was clear Russia would not achieve any of its strategic objectives without further military commitment. Their attack was stopped dead in Kyiv, Kharkiv, and Kherson. Thanks to large material support from the West, Ukraine was able to counter-attack and reconquer large swaths of land.
Russia’s last victory so far has been the capture of Bakhmut, a Ukrainian town in the Donbas. The fight in the city was brutal and resulted in massive military and personnel losses for both sides.
On the rest of the front, Russia has now turned to the defensive, fortifying the southern sector to prevent a Ukrainian attack on Crimea.
But Russia shows to have lost its ability to attack as it cannot afford to amass enough resources for an offensive anymore.
At the moment, another Ukrainian counter-offensive is on its way. The first reports are scattered and unclear, therefore nobody appears to have gained a decisive advantage yet.
But while Ukraine might try again thanks to constant Western support, Russia has increasingly fewer chances of victory.
