Wagner’s riots will cost Russian taxpayers $14 billion

The revolt of Yevgeny Prigozhin’s Wagner PMC, which shocked the elites and citizens with a march of tanks on Moscow, heralds new pain for the Russian budget, which is losing every second ruble of oil and gas revenues.

Strengthening security measures around the capital, as well as additional funding for the military, will require additional spending of 1.3 trillion rubles, or $14 billion, this year, Bloomberg Economics estimates.

Funds will be needed to increase the number of security forces staff, and this will further exacerbate the “staff shortage” in an economy that the government estimates is short of 600,000 jobs. workers in the industrial sector alone.

The Wagner uprising, which almost became a military coup, Russia’s first since the collapse of the USSR, “increases fiscal strain” for the government and undermines its attempts to stabilize public finances, says Alexander Isakov, Russia economist at Bloomberg Economics.

The federal budget, based on the assumption that Russian oil will cost $70 a barrel and that Gazprom will continue to pump gas to Europe in significant volumes, is already bursting at the seams. According to the results of the first half of the year, it lost 47% of its oil and gas revenues and almost 12% of the total. At the same time, spending increased by 20%, mainly due to secret articles, which increased 10 times compared to last year. As of July 10, the state treasury deficit amounted to 3.2 trillion rubles – 300 billion rubles more than assumed in the original annual plan

To cover the additional costs, the authorities are preparing the sequestration of the so-called unprotected items – these are, for example, support for the national economy or ecology. According to Vedomosti, even 10% of the funds allocated for these purposes in the 2024 budget could go under the knife.

In addition, the “bill” for state employees’ salaries will increase as the Kremlin must maintain the support of a key electorate in the presidential election, Isakov said. From 2024, on behalf of President Vladimir Putin, the minimum wage is to increase by 18.5%, which will affect almost 5 million people.

“The insecurity created by Prigozhin’s rebellion could force the Kremlin to spend even more on buying people’s loyalty to Putin’s system,” says Ben Noble, a professor at University College London.