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Thursday, 16 March, 2000, 15:02 GMT
How Russia pays for the war
Russian apc gun
A knockout blow needs time, and money
By regional analyst Stephen Mulvey

Russia's war in Chechnya has a high cost, both in human life, and in financial terms.

The acting President, Vladimir Putin, has admitted it places a considerable burden on the budget.

There are several theories about how the costs are being met.

It does appear that we in the West may well be funding this operation.

Charles Heyman, Jane's World Armies

Russian sources say the cost of the war in the last three months of 1999 was anything up to 50bn roubles, or $2bn.

In any normal war, munitions and weapons are the most costly items of expenditure, but Russia is thought to have at its disposal huge stockpiles left over from the Soviet Union.

Cold War leftovers

"The Russians are probably still using up huge stocks of ammunition that were put by during the days of the Cold War," says Charles Heyman, editor of Jane's World Armies.

"This war has got to be costing them somewhere between $40m and $50m a day at the moment ... that's the actual cost of the munitions being expended and of course there's a good chance that much of that cost was actually met quite a long time ago."

Russian military analyst Pavel Felgengauer says Moscow's main expenses are fuel, transport, restoration work in occupied areas and the extra payments made to soldiers on active duty.

In Russia it is also reported that the war has prompted the government to start paying off salary arrears right across the armed forces.

Western aid?

But where does the money for this come from?

Charles Heyman says the West is helping to foot the bill.

"We give it to them. If you look at this one very, very carefully it does appear that we in the West may well be funding this operation.

"An awful lot of money is being given by the West in cash - in loans and grants - to keep Russia afloat. Quite a large tranche of money was put in about six weeks ago."

The longer the Russian army has to fight, the fewer resources it has and the weaker it will become

Pavel Felgengauer

The last big loan to Russia from international financial institutions was worth $100m and came from the World Bank to help modernise the coal sector. A spokesman said the money was "specifically earmarked" and could not be diverted.

The last payment from the International Monetary Fund was made in July, came to $640m and, according to acting-President Vladimir Putin, was used only to pay interest on earlier loans.

Budget surplus

The flow of Western credits has reduced to a trickle, says Pavel Felgengauer, and the cost of the war is met out of Russia's own budget surplus.

"Additional money appeared because the price of oil sharply increased, and, apart from that, inflation helped significantly more tax to be collected than had been envisaged in the budget for 1999.

"It was therefore possible to allocate a relatively serious amount of money to the war in Chechnya."

According to the Russian Tax Ministry, revenues in December were more than twice the figure envisaged in the budget - enough to make a sizeable contribution to the government's war chest.

Cost may rise

However, Pavel Felgengauer says that a point may come when the cost of waging the war begins to rise dramatically.

"Of course resources are being used up ... they are not eternal. The longer the Russian army has to fight, the fewer resources it has left, and the weaker the armed forces become, and ultimately it will be necessary to start buying, just to replace what has been lost."

The point has also been made in Russia that doing nothing in Chechnya also entails certain costs.

Criminals have been able to flourish in Chechnya since the breakdown of Soviet power, and Chechens lay behind one of Russia's biggest-ever banking frauds.

In October, Vladimir Putin described Chechnya as a black hole into which Russian money had been disappearing for years, some of it ending up abroad.

He said the war would cost less than allowing this hole to go unplugged.

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