Changes were expected in Russian politics after the recent election formalities and perfunctory 9 May celebrations. Following more than ten months of speculation in the wake of the Wagner mutiny, Vladimir Putin finally moved Sergei Shoigu out of his role as Defense Minister on Saturday and “proposed the candidacy of Andrei Belousov for the post,” according to the Soviet-era state news agency TASS.
Belousev, 65, has no military experience. An economist, he has “at various times held the positions of assistant to the head of state Vladimir Putin on economic issues, Minister of Economic Development of the Russian Federation, Director of the Department of Economics and Finance of the Government of the Russian Federation, General Director of the Center for Macroeconomic Analysis and Short-Term Forecasting, and worked at the Russian Academy in 1981-2006 Sciences (until 1991 - Academy of Sciences of the USSR).”
Answering reporters, Kremlin spokesunit Dmitry Peskov dismissed any need for military experience in the role, declaring that a civilian could open the Ministry of Defense “to innovation, to the introduction of all advanced ideas.” Belousev can “integrate the economy of the security bloc into the country’s economy so that it meets current needs,” Peskov said, adding that Russia’s military budget is now 6.7 percent of GDP.
Belousev “is not just a civilian,” Peskov argued, “but a person who very successfully headed the Ministry of Economic Development of Russia, for a long time he was aide to the president on economic issues, and was also the first deputy chairman of the government in the previous cabinet of ministers.” The new appointment does not mean that civilians are taking over the Russian military, either Peskov said. Chief of the General Staff Valery Gerasimov “will continue his activities” in that role.
Andrei Kolesnikov, an economist and Senior Fellow at the Carnegie Endowment for International Peace, called the appointment “one of Putin's most extravagant.” He notes that Belousev is a ‘supply-side’ or “Keynesian economist,” that is, an economist who believes that government is always the primary factor in production output. This approach, which has always been associated with socialist economics and state capitalism, has historically been optimal in wartime conditions, whereas peacetime Keynesian policy generally results in stagnant growth and inflation.
Russian defense spending has been plagued with corruption under Shoigu, who received public criticism for it from mercenary leader Yevgeny Prighozhin. “It is now important for Putin to make sure that the enormous sums of money spent on war are not stolen,” Kolesnikov says, predicting that “Belousov will now ruin his reputation forever as an accomplice.”
Tatiana Stanovaya, a colleague of Kolesnikov at the Carnegie Russia Eurasia Center, writes that Belousov “is a logical choice” to resolve “the ongoing conflict between the ministry, as the customer, and the military-industrial complex as the producer.” Shoigu had earned the enmity of Deputy Prime Minister Denis Manturov and Sergei Chemezov, respectively the Industry and Trade Minister and the CEO of the state defense corporation Rostec. Putin met with both men yesterday to discuss “issues that require special attention.”
Shoigu was shuffled off to the Security Council, which “is becoming a reservoir for Putin’s ‘former’ key figures - who cannot be let go, but there is no place to house them,” Stanovaya explains. She compares Shoigu to Dmitry Medvedev, Putin’s former placeholder in the Russian presidency. Putin appointed Medvedev to the Secruity Council during 2020 in order “to keep him close yet detached from the 'system' where finding an alternative role would be challenging.”
“This appointment also indicates that the actual significance of the Security Council in the hierarchy may not be as great as observers typically assume,” Stanovaya suggests. Former FSB head Nikolai Patrushev, who reportedly ordered the death of Prigozhin, was also relieved of duty as Secretary of the Security Council in order to make room for Shoigu. Seen as a hawk and a key ideologue in Putin’s regime, Patrushev “will continue to hold this role regardless of the official position he assumes,” Stanovaya says.
Thus the Shoigu Shuffle is less like a dance and more resembles a game of musical chairs played around a big table in a small room.
Questions abound, the most obvious being what this actually means about the direction of Russia’s war. Is the Shoigu Shuffle a case of adaptive strategic genius, or flailing desperation? Shoigu’s departure had been expected for a long time, but the appointment of Belousov came as “a great surprise verging on shock” to at least one Russian official who spoke to The Moscow Times.
“Caligula appointed his horse as a senator. In our case, we could have Putin's Labrador appointed as defense minister,” said a current government official, referring to one of Putin’s dogs, a Labrador named Koni.
“This appointment does not make logical sense. I've already seen 20 versions explaining why Belousov is a good defense minister. But it’s all complete nonsense," the government official said.
“Andrei Removich [Belousov] is fully a theorist. He had little to do with the actual economy. And as for the mobilization economy‚ where they are now trying to explain that he has to set up something new ... it's complete bulls***,” the source said.
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“If this is not a deliberate decision to worsen the chances of success in the special military operation, one can only assume that the military-industrial complex is the new point of economic growth,” the source said, describing Belousov as a Keynesian who favors government economic intervention.
“And those who say the special military operation is here for the long term are right,” the source added.
Contradicting the expectations of Carnegie analysts, another Russian government official with “hawkish views” complained that reform efforts now “could throw a wrench into the war effort” and “break everything.” This argument has some merit. In a country where corruption is a way of life, what seems like fraud, waste, and abuse from the top of the hierarchy may in fact be what keeps the system functional at the bottom. Skids and gears that have been greased with money for a very long time may be so reliant on cash-based lubrication that removing it causes the entire machine to grind to a halt.
The appointment of Andrei Belousov therefore represents a risk, but a risk that Putin is willing to take now because Russia faces ever-greater resource limitations the longer the war goes on. Expensive missiles are being expended almost as fast as they can be made. New tanks are not coming off the assembly line fast enough to replace the tanks being pulled from storage and lost in combat. Equipping new troop formations is already a challenge and this will only become a bigger headache if Putin decides on another round of mobilization.
If Russia tries to spend their way out of these problems, Soviet-style, they risk overheating the economy through inflation, which is already much worse than official figures show. Gazprom is currently losing money for the Russian state thanks to the Ukrainian drone campaign against fuel facilities and oil cracking towers. The “rainy day fund” that Putin built up before the war is not infinite, and further budget deficits will eat up the “sugar high” of state asset seizures.
Hard numbers, not the embarassment of the Wagner mutiny, drove Shoigu out and put Belousov in. Russia is returning to the command economy. That does not mean the war is about to end, but it also proves Russia cannot fight an endless war, whatever they say about themselves in public.