Russia will give the state greater control over private business and workers in order to put the economy on a stronger war footing, signalling that the country is preparing for the long-haul in its battle for control of Ukraine.
Proposed new laws are intended specifically to support the military and meet “a short-term increased need for the repair of weapons and military equipment”, according to an explanatory note attached to the bills going through the Duma, Russia’s lower house of parliament.
The measures respond to the fact that Moscow’s plan for a rapid victory following its invasion of Ukraine has failed, with the conflict becoming a war of attrition focused on the eastern Donbas region, and that sanctions are predicted to take a heavy toll on Russia’s economy.
“Russia has been conducting a special military operation for four months now under enormous sanctions pressure,” said deputy prime minister Yuri Borisov.
“The burden on the Russian defence-industrial complex has increased significantly,” he told the Duma on Tuesday during a discussion of the bill. “In order to guarantee the supply of arms and ammunition it is necessary to optimise the work of the defence-industrial complex and enterprises working in co-operation with the defence industry.”
The first bill, which has already passed its second reading in the lower house of parliament, will allow the government to oblige businesses to fulfil state defence contracts, and gives the defence ministry and other bodies the right to change contract terms. It would permit authorities, for example, to compel a factory to redirect production towards military needs, and to control how much of a certain product or service the business provides.
The measures, however, are primarily directed at enterprises already on the list of defence sector suppliers, Borisov said. “The bills do not provide for compulsory conversion of civilian small and medium-sized enterprises for the needs of the armed forces,” he said.
The second bill will introduce changes to the federal labour law to give the government the right to increase control over the workforce. Authorities will be permitted to “establish the legal terms of labour relations in individual organisations”, including setting “the conditions of engagement in work beyond established working hours, at night, on weekends and non-working holidays, and the provision of annual paid vacations.”
This is intended to respond to shortages of specialist employees in defence businesses that fulfil state contracts, Borisov said. Employees compelled to work extra hours will be paid overtime.
The bills must also pass through the upper house, after which they can be signed into law by President Vladimir Putin. The new measures are “especially” essential because of sanctions, the explanatory note said.
Higher prices for oil and gas exports have so far diminished the effect of sanctions on the Russian economy and provided the Kremlin with strong revenues that it can direct towards supporting the economy and the armed forces.
But the impact of sanctions is predicted to increase as Ukraine’s allies increasingly adopt policies to wean themselves off Russian energy, and Putin has announced measures to provide financial support for the population.
“They are preparing for the worst,” said Elina Ribakova, deputy chief economist at the Institute of International Finance. “Soon all these revenues may run out.”
Last week the finance ministry proposed cutting spending in some areas — including the budgets for transport infrastructure and scientific and technological development projects — over the next three years by Rbs1.6tn ($25bn), according to the Vedomosti newspaper. It also plans to substantially increase spending on social welfare, by Rbs936bn to Rbs3.4tn in the next year alone.
The report cited an unnamed finance ministry spokesperson as saying that overall the changes represent a “balancing” of the federal budget to concentrate spending on the most vital areas.
