Wagner cost Russia suspiciously little money

Wagner Group boss Yevgeny Prigozhin.

In the aftermath of the failed mutiny by the Wagner Group mercenary army and its leader, Yevgeny Prigozhin, dissatisfaction with Russia’s military and political leadership will continue to brew with the fighting in Ukraine. As more details become available about Wagner — until recently, the best-equipped, always regularly paid part of the Russian invasion force —
officers and soldiers alike will wonder why their units often need to rely on public collections for vital equipment and why their pay is often delayed or reduced.

Vladimir Putin’s Russia is known for its ability to fight wars on a relatively small budget. The war in Ukraine is no exception. According to the Stockholm International Peace Research Institute, Russia’s military spending was about 4.4 percent of gross domestic product in 2022 and should not exceed that by much this year. Israel spent 4.5 percent of its GDP on defense last year.

The headline number doesn’t include indirect war-related outlays, such as on construction in occupied areas and in Russian border regions damaged by Ukrainian shelling. But it’s a manageable amount. SIPRI has this to say in a report published last week: "For Ukraine, it is without question a full-scale war for the country’s very existence as an independent state. But Russia has been engaged in the conflict in a more limited manner, as if seeking to minimise its economic cost and the impact on domestic society and on the president’s goals for the country. It is being fought in reality not with the resources of a full-scale war but indeed as a more limited military operation... it is an operation being fought in monetary terms at a cost that the Russian economy can afford, notwithstanding severe sanctions."

The low financial cost of the war may be a major reason why Putin appears to believe that time is on his side and why he isn’t actively seeking peace in Ukraine. However, the tight budget appears to have been spent rather inefficiently compared with how Wagner put to use its government funding.

At a meeting with service members last week, Putin said Wagner’s participation in the Ukraine invasion was fully financed by the Russian government. From May 2022 through April 2023, it was funded to the tune of 70.4 billion rubles ($786 million) for regular pay, 15.9 billion rubles for bonuses and 100.2 billion rubles for “insurance payments,” meaning
compensation for deaths and injuries. Putin didn’t say how much was spent on Wagner’s equipment and ammunition, but the numbers he gave are revealing.

For one, they appear to be insufficient for the group’s reported size. In March, the UK Defense Ministry estimated Wagner had 50,000 fighters in Ukraine. Prigozhin himself said in May that he had 35,000 fighters on the front lines. In addition, he was allowed to recruit 50,000 convicts from prison camps. According to Prigozhin, 20 percent of the former prisoners
— that is, about 10,000 — and an equal number of mercenaries were killed in action. Some 20 percent of both groups were wounded and unable to keep fighting.

Prigozhin’s estimates suggest that, on average, some 20,000 mercenaries and some 30,000 convicts were fighting for Wagner at any given moment. If Putin’s figures are correct, each of the 50,000 fighters received about 144,000 rubles ($1,608) a month. That’s less than even the 200,000 rubles that convicts were promised by Wagner, not to mention the minimum
salaries of 240,000 rubles and monthly bonuses of 150,000 rubles offered to volunteers at the private military company’s recruitment offices throughout Russia.

Meanwhile, the “insurance” payments are closer to Prigozhin’s assessment of about 20,000 dead and 17,000 badly wounded. Wagner paid between 1.1 million rubles and 5.1 million rubles to the family of a fallen mercenary or convict and between 500,000 rubles and 2 million rubles for a severe injury.
Putin’s 100.2 billion rubles for “insurance” would have meant an average of 2.7 million rubles per casualty.

In other words, if Putin’s spending numbers are correct, it’s likely that Prigozhin overstated the size of his army. Indeed, it would be in his interest to do so, inflating Wagner’s importance as the Defense Ministry sought to disband the group. But Prigozhin didn’t seem to stray too far from the truth on casualties as he highlighted the heavy price his mercenary army paid for the relatively insignificant victories at the towns of Soledar and Bakhmut. This would partially explain the failure of the mutiny: Prigozhin’s force was decimated by the losses from urban fighting in Ukraine, so only a few thousand fighters could move on Moscow while a few thousand more patrolled the center of Rostov on June 24.

If no more than 30,000 Wagner soldiers — 10,000 professionals and 20,000 convicts -- fought in Ukraine in any given month, it’s clear where the money went and why so little was required.

The Defense ministry’s math looks murkier. Its contract soldiers are supposed to receive a one-time sign-on bonus of 195,000 rubles and a minimum of 162,000 rubles a month afterwards. At some 210,000 rubles
per month, a Russian military force of 200,000 in Ukraine (UK Defense Ministry estimate) would cost some 504 billion rubles per year, not counting payments to wounded vets and families. That is a mere 20 percent of the Russia’s defense ministry’s 2.54 trillion ruble budget allocation for the Russian armed forces in 2023, which only includes direct spending on maintaining Russia’s main fighting force (and none of the funding set aside for other armed units such as the Rosgvardia national guard, also present in Ukraine). The total Russian defense and security budget in 2023 is expected to reach 6.65 trillion rubles.

No NATO country spends less than 30 percent of its defense budget on personnel. Turkey’s personnel expenses hover near half of its military budget, and the US, which is usually at war somewhere, pays out between 35 percent and 45 percent for its service members.

According to SIPRI, classified “national defense” spending reached 2 trillion rubles between Jan. 1 and May 11 — some 59 percent of the classified spending budgeted for the entire year, which is not unusual since defense industry contractors’ payments tend to be weighted heavily toward the first months of the year. It’s not as if the defense ministry lacks the money to pay soldiers regularly and almost as well as Prigozhin paid his supposedly elite force. And yet service members and their families  regularlycomplain of lapsed payments. Unlike Wagner fighters, mobilised and volunteer soldiers often have to buy their own equipment or rely on supplies from volunteer groups.

The Kremlin is happy that it’s able to keep military spending under control, but even the existing outlay allows for plenty of inefficiency and corruption. That’s the part visible to the soldiers and officers on the ground; after Putin publicly named Wagner’s costs, Wagner’s legend of deadly efficiency can only grow in comparison with what regular soldiers know about the defense ministry’s practices. Wagner’s death rate, shown by the same numbers to be higher than Prigozhin had let on, likely will not affect that legend or damp the anger among Russian service members — if only because both the mercenaries and the convicts knew what they were in for when they signed up for Wagner.

It’s much harder for the regular military to riot than it was for Prigozhin’s mercenaries. Yet the example can be infectious, especially if Russia suffers more setbacks on the battlefield.

Leonid Bershidsky, formerly Bloomberg Opinion’s Europe columnist, is a member of the Bloomberg News Automation Team. Views are personal and do not represent the stand of this publication.

Credit: Bloomberg