The Economics of Losses: Why War is More Profitable Than Schools

Historical irony: Nearly 100 years ago, academician Nikolai Aleksandrovich Kozyrev was arrested and sentenced to 10 years in prison on charges of attempting to “hijack the Volga River from Russia to the West.” This was the madness of Stalin’s regime — a fabrication of an absurd accusation against a scientist.

Today, Putin’s nouveau riche are actually planning to reverse rivers. But not for the sake of science or development — rather to master another few trillion rubles on a project that will never be completed and whose results no one will ever be able to verify. What was repressive absurdity in 1937 has become corrupt reality in the 2020s.

The Scale of Corruption Robbery: Concrete Examples

BAM and Trans-Siberian Railway: “Modernization” as an Endless Trough

In 2013, Putin announced a massive modernization of the Baikal-Amur Mainline (BAM) and Trans-Siberian Railway. This became one of the largest infrastructure projects, which continues to this day and costs more and more.

Financial parameters:

• First stage (2013–2019): 562 billion rubles (~$16 billion at the exchange rate of that time)
• Second stage (until 2025): 1.1 trillion rubles (~$12 billion)
• Third stage (until 2032): 3.7 trillion rubles (~$41 billion)
• Total cost: 5.4 trillion rubles (~$69 billion)

This is more than what Putin called “the largest infrastructure project of the USSR.” But the main thing is not the scale, but the efficiency of mastering. The project is constantly becoming more expensive, deadlines are shifting, and real results are far from promises.

Why this is an ideal scheme:

• Thousands of kilometers of track in impenetrable taiga — impossible to verify
• Permafrost as justification for any problems
• Decades of “phased implementation”
• Can endlessly “modernize” what was built 40 years ago

Vostochny Cosmodrome: $146 Million Lost in Orbit

The construction of Vostochny Cosmodrome, started in 2012, became a textbook example of “economics of losses.” 91 billion rubles ($1.2 billion) were allocated, 66 billion ($880 million) were mastered. Meanwhile, over 11 billion rubles ($146 million) were stolen — and this is only the officially confirmed amount.

Specific theft schemes:

• Yuri Khrizman (ex-head of Dalspetsstroy): embezzlement of over 5.5 billion rubles ($73 million)
• Sergey Degtyarev (VIP-Stroyinzhiniring): theft of 1.3 billion rubles ($17 million), received 8 years
• Vadim Mitryakov: theft of 1.3 billion ($17 million) on transport facilities
• Anatoly Ryazanov: over 1.1 billion ($15 million) on metal structure supplies

According to the Prosecutor General’s Office, over 140 criminal cases were initiated. Only 3.5 billion out of 11 billion stolen were returned ($47 million out of $146 million). In 2019, Putin himself publicly expressed outrage: “They’re stealing hundreds of millions!” — but the thefts continued.

Rusnano: Technology as Cover for Capital Export

The state corporation “Rusnano” under the leadership of Anatoly Chubais (2008–2020) turned into a giant scheme for budget sawing under the guise of innovative development.

Financial catastrophe:

• In 10 years, the corporation lost two-thirds of its investments
• Total losses are estimated at 137 billion rubles (~$1.8 billion)
• The “Plastic Logic” case: losses of over 13 billion rubles (~$170 million) on the “Chubais flexible tablets” project
• In 2025, a lawsuit for 5.6 billion rubles (~$62 million) was filed against Chubais and seven top managers

Key scheme: investments went not to the Russian economy, but to legal entities registered abroad. The factory in Zelenograd was never launched, and the money was “mastered.”

Ministry of Defense: Corruption at Every Level

The case of Deputy Defense Minister Timur Ivanov (2024):

• Suspicion of receiving bribes totaling over 1 billion rubles (~$11 million)
• Kickback scheme from government contracts in construction

Other high-profile cases:

• Alexander Arslanov: losses of 1.6 billion rubles (~$18 million) in military procurement
• Sergey Borodin (Quartering Department): appropriation of over 45 hectares of military land worth over 1 billion rubles (~$11 million)
• Mikhail Kotov (46th TsNII): 176 million rubles (~$2 million) for unfulfilled R&D within a 19 trillion ruble (~$211 billion) armament program

War as the Biggest Corruption Opportunity

Scale of Military Spending

Defense budget dynamics:

• 2021 (before war): 3.6 trillion rubles / $48 billion (2.7% of GDP)
• 2023: 6.4 trillion rubles / $85 billion (3.9% of GDP)
• 2024: 10.8 trillion rubles / $120 billion (6% of GDP, 68% increase)
• 2025 (plan): 13.5 trillion rubles / $150 billion (over 8% of GDP)

For 2022–2023, direct military expenditures and the cost of lost equipment amounted to approximately $167 billion.

Expenditure structure (2024):

• National defense: 10.8 trillion / $120 billion (29.5% of budget)
• National security and law enforcement: 3.5 trillion / $39 billion (9%)
• Total for war and security forces: 14.3 trillion / $159 billion (39% of budget)
• Secret items: 11.1 trillion / $123 billion (30% of budget, almost doubled)

Why War is More Profitable Than Anything Else

1. Scale of Mastering

Compare opportunities:

• Laying pavement: millions-tens of millions per facility (~$100–500 thousand)
• Rusnano in 10 years: ~$1.8 billion in losses
• Vostochny Cosmodrome: $146 million stolen
• BAM-Trans-Siberian Railway: $69 billion for “modernization” (with an unknown percentage of embezzlement)
• War annually: $120–150 billion

War allows “mastering” thousands of times larger sums than any other projects.

2. Low Transparency

In 2024, secret budget items amount to $123 billion — 30% of all expenditures. This is an order of magnitude more than in developed countries. Any machinations can be hidden behind secrecy.

3. Absence of Control

“Wartime” justifies:

• Quick tenders without competitions
• Inflated prices for everything
• Lack of accountability (“state secret”)
• Impossibility of verifying actual execution

4. Legitimacy of Losses

Destroyed equipment, lost ammunition, “spent” resources cannot be verified. The system itself generates the need for new expenditures.

5. Accelerated Depreciation

According to the official version:

• Equipment worth $34 billion was lost
• This requires new purchases
• New purchases = new kickbacks
• The cycle repeats endlessly

War Beneficiaries

Defense industry:

• United Shipbuilding Corporation: losses of 20 billion rubles (vs. profit of 508 million in 2019)
• Growth in navigation equipment production: +72.4%
• Growth in “other transport” production: +66.7%
• Computers and electronics: +42.6%

These “growths” occur solely due to budget injections and mean only one thing: an increase in sawing volumes.

Why Schools and Hospitals Are Needed by No One

The System Admits Itself

November 2024: Yevgeny Dunaev, a deputy of the Astrakhan Regional Duma, during the discussion of the 2026 budget, proposed allocating 10% in the budget for “anticipated thefts.”

Quote: “Every day we see news reports of thefts: ‘Fifteen million stolen in kindergarten construction,’ ‘Construction of treatment facilities not completed, thirty million stolen.’ This is a pattern. Maybe we should immediately provide 10% in the budget for anticipated thefts? Is this realistic?”

Later, the deputy called this “irony to draw public attention to the problem.” But the irony is that he told the truth. The system already works exactly like this — just these 10% (actually 30–80%) are not officially prescribed, but are embedded through price increases, “unforeseen expenses,” “technical difficulties,” and secret items.

War provides the best opportunity: you can lay in not 10%, but 50–80% — and justify everything with “military secrecy.”

Social Infrastructure as an Obstacle

Real social infrastructure creates problems for the regime:

1. Educated citizens are harder to control — schools teach thinking
2. Healthy people are dangerous — they can protest
3. Quality roads are unnecessary — the population must be immobile
4. Developed regions threaten the center — it’s harder to extract resources from them

War solves all these “problems”:

• Extracts money from regions under patriotic slogans
• Justifies any expenditures
• Suppresses dissent through censorship
• Gives unlimited power to security forces

Comparison of Corruption Opportunities

School construction:

• Budget: 200–500 million rubles (~$2–5 million)
• Control: local community sees the result
• Transparency: building can be inspected
• Accountability: there are specific user-people
• Maximum for embezzlement: 20–30% of estimate = $400–900 thousand

Arms supply:

• Budget: billions-tens of billions of rubles (~$100 million — $1 billion)
• Control: state secret
• Transparency: zero
• Accountability: blurred among dozens of structures
• Can be stolen: 50–80% and more = $50–800 million

The math is simple:

• School for $5 million → can steal $0.6–1.5 million
• Batch of tanks for $500 million → can steal $250–400 million

The difference is 200–300 times in favor of military contracts.

Social Infrastructure as an Obstacle

Real social infrastructure creates problems for the regime:

1. Educated citizens are harder to control — schools teach thinking
2. Healthy people are dangerous — they can protest
3. Quality roads are unnecessary — the population must be immobile
4. Developed regions threaten the center — it’s harder to extract resources from them

War solves all these “problems”:

• Extracts money from regions under patriotic slogans
• Justifies any expenditures
• Suppresses dissent through censorship
• Gives unlimited power to security forces

Alternative Options: How to Surpass the Profitability of War

The problem is that for corrupt officials, war is an almost ideal scheme. But there are theoretical possibilities to create even more profitable conditions for embezzlement that could compete with war:

Option 0: “Eternal Infrastructure Modernization” (THEY’RE ALREADY DOING THIS!)

Essence: BAM and Trans-Siberian Railway as a model. Announce “modernization” every 5–10 years, endlessly “increasing throughput capacity.”

Advantages for corrupt officials:

• Decades of “phased implementation” — can be dragged out for 50 years
• Vast territories in taiga — no control whatsoever
• Permafrost as justification for any failures
• Each stage costs trillions: $69 billion already allocated
• “Geological difficulties” explain any cost overruns

Why it works: Russia started “modernization” in 2013. Already spent $28 billion, another $41 billion planned. And no one can verify whether a “second Severomuysky tunnel” is really needed or it’s just a way to master another $10 billion.

Disadvantages:

• Still a peaceful project — no “enemy”
• Regions may ask about results
• Hard to justify deterioration of people’s lives

Option 1: “Space Colonization” Program

Essence: Announce a large-scale space exploration program with construction of a Martian base, orbital stations, lunar settlements.

Advantages for corrupt officials:

• No control: “Are you going to fly to Mars to check?”
• Secrecy: “Space technologies are secret”
• Duration: 50–100 years of “development”
• Scale: trillions of rubles annually
• Absence of result easily explained: “It’s complex science”

Disadvantages:

• No “enemy” to mobilize the population
• Hard to justify worsening living conditions
• Requires at least minimal imitation of activity

Option 2: “Ecological Transformation of Siberia”

Essence: Large-scale projects for “climate improvement,” creating artificial seas, redirecting rivers (as the regime now proposes).

Advantages:

• Huge territories = huge contracts
• Can “study” and “design” for decades
• Environmental theme is always relevant
• Results impossible to verify

Disadvantages:

• Less legitimacy of expenditures than war
• Environmentalists can criticize
• Hard to create atmosphere of “besieged fortress”

Option 3: “Total Digital Sovereignty Program”

Essence: Creating own internet, operating systems, processors, entire digital infrastructure “from scratch.”

Advantages:

• Technology can always be “improved”
• High prices justified by “complexity”
• Control under guise of “security”
• Can make non-working prototypes for years

Disadvantages:

• Existing technologies prove possibility
• China shows it’s really achievable
• Too technical sphere for traditional corruption

Option 4: “Artificial Intelligence and Quantum Technologies Program”

Essence: Developing “own” AI, quantum computers, neural networks for everything.

Advantages:

• Absolute opacity: few understand the technology
• Can “develop” without results for years
• Very expensive: one “quantum computer” = billions
• Fashionable and modern

Disadvantages:

• Real specialists needed
• World achievements demonstrate the possible
• Hard to keep secret

Why No Option Will Surpass War

Unique Advantages of War for Corrupt Officials:

1. Indefinite Legitimacy of Expenditures War can be waged for a long time. As long as there’s an “enemy,” one can spend.

2. Absolute Secrecy “State secret” closes 30% of the budget. No “peaceful” program provides such opportunities.

3. Population Mobilization People can be forced to endure through “enemy image.” Other projects don’t work that way.

4. Suppression of Dissent “During war, criticism is treason.” Peaceful projects don’t provide such opportunities.

5. Automatic Justification of Failures “The enemy interfered,” “Western sanctions,” “technological blockade” — war provides ready answers to all questions.

6. Physical Destruction of Evidence Equipment, ammunition, materials “lost in battle” — real sawing is impossible to prove.

7. Wide Corruption Network War creates corruption opportunities at all levels: from supplying socks to rockets, from military commissariats to general staff.

Conclusion: Economics as an Instrument of Robbery

The Russian system doesn’t build an economy for development. It builds an economy for embezzlement. And in this logic:

• Schools are unnecessary — small scale ($2–5 million), high control
• Hospitals are useless — too visible result
• Roads are superfluous — the population must be immobile
• BAM is “ideal” — $69 billion for “modernization,” zero control, decades of implementation
• War is the best — $150 billion annually, absolute secrecy, eternal justification

Putin’s “nouveau riche” are reversing rivers not for development. They’re looking for large-scale loss projects where billions can be stolen, where no one will check anything, where everything can be written off as “objective difficulties.”

BAM “modernization” is not an exception. It’s the rule.

Since 2013, they’ve been “modernizing” the railway through Siberia. Spent $28 billion, planning another $41 billion. And no one can say whether these “second tracks” and “new tunnels” are really needed, or if it’s just a way to master tens of billions in impenetrable taiga where no auditor will reach.

But even BAM doesn’t equal war. Because BAM lacks war’s main advantage: the “enemy image”.

War gives not just money. It gives the power to suppress dissent, censor information, mobilize the population, justify any failures. BAM doesn’t provide such opportunities.

The economics of losses is not a system error. It’s its essence.

And as long as this system exists, any development project will be turned into an embezzlement project. Because development requires results, accountability, control. And corrupt officials need only one thing: maximum money with minimum accountability.

War provides both. BAM provides almost the same, but without “patriotic” cover. Therefore, it won’t end as long as the system that profits from it exists.

And when academician Kozyrev 100 years ago received 10 years for “attempting to hijack the Volga to the West,” it was the madness of a totalitarian regime. Today, Putin’s nouveau riche are actually planning to reverse rivers — but not for development, but to master another trillion on a project that will never be completed and whose results no one will be able to verify.

This is the economics of losses in its purest form: the bigger the failure, the bigger the profit. The smaller the result, the more can be stolen. The longer the “construction,” the longer the robbery.