Russia prepares to mobilize economy for longer war in Ukraine

Russia will give the state more control over private companies and workers to put the economy on a stronger war base, indicating that the country is preparing for the long haul in its struggle for control of Ukraine.

The proposed new laws are specifically designed to support the military and address “a short-term increased need for repair of weapons and military equipment,” according to an explanation of bills passed by the State Duma, Russia’s lower house of parliament. to go.

The measures come in response to the failure of Moscow’s plan for a quick victory after the invasion of Ukraine as the conflict turns into a war of attrition targeting the eastern Donbas region, and sanctions are expected to take a heavy toll. demands of the Russian economy.

“Russia has been conducting a special military operation for four months under enormous pressure from sanctions,” Deputy Prime Minister Yuri Borisov said.

“The burden on Russia’s defense-industrial complex has increased significantly,” he told the State Duma on Tuesday during a discussion of the bill. “In order to guarantee the supply of weapons and ammunition, it is necessary to optimize the work of the defense industrial complex and the companies collaborating with the defense industry.”

The first bill, which has already passed the second reading in the House of Representatives, allows the government to oblige companies to fulfill state defense contracts, and gives the Ministry of Defense and other authorities the right to change the contract terms. For example, it would allow authorities to force a factory to redirect production towards military needs, and to control how much of a particular product or service the company provides.

However, the measures are primarily aimed at companies that are already on the list of defense sector suppliers, Borisov said. “The bills do not provide for the mandatory conversion of civilian small and medium-sized enterprises to the needs of the armed forces,” he said.

The second bill will make changes to federal labor law to give the government the right to have more control over the workforce. Authorities will be allowed to “determine the legal conditions of employment relations in individual organizations”, including determining “the conditions for performing work outside normal working hours, at night, on weekends and non-working holidays, and providing annual paid vacations.”

This is intended to respond to shortages of specialized workers in defense companies honoring state contracts, Borisov said. Employees who are forced to work extra hours are paid overtime.

The bills also have to go through the Senate, after which they can be signed by President Vladimir Putin. The new measures are “mainly” essential because of sanctions, the explanation said.

Higher prices for oil and gas exports have so far mitigated the effect of sanctions on the Russian economy and provided the Kremlin with strong revenues that it can spend on supporting the economy and its armed forces.

But the impact of sanctions is expected to increase as Ukraine’s allies adopt more and more policies to phase out Russian energy, and Putin has announced measures to provide financial support to the population.

“They are preparing for the worst,” said Elina Ribakova, deputy chief economist at the Institute of International Finance. “Soon, all of this revenue may run out.”

Last week, the Treasury Department proposed cutting some areas — including budgets for transportation infrastructure and science and technology development projects — by $1.6 trillion ($25 billion) over the next three years, according to the Vedomosti newspaper. It also plans to significantly increase Social Security spending, with Rbs936bn to Rbs3.4tn in the following year alone.

The report quoted an unnamed Treasury Department spokesman as saying the changes generally represent a “balance” of the federal budget to focus spending on the most vital areas.

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