The underlying reasons for Russia’s invasion of Ukraine

Reasons for Russia’s invasion of Ukraine may well include a vision to re-create a Russian empire.  The urgency to act is likely to be due to two other factors.

Russia’s financial dependence on oil and gas is very high – 60% of exports and 40% of the federal government’s revenue derives from oil and gas.  As the world acts against climate change by reducing fossil fuel consumption Russia stands to suffer a significant decline in income in coming decades.  This negatively impacts the flow of cash to the government and to the oligarchs who support Putin.

In addition, the Russian population is shrinking by up to one million a year, from a base of over 140 million.  President Putin has allocated considerable funds to encourage young people to lift the birth rate, but other countries have tried this without much success.  A shrinking population lowers the tax base which reduces tax revenue.

Ukraine possesses abundant supplies of minerals such as uranium, iron ore, and many others.  Much of Ukraine’s iron ore is exported to China.  These resources and Ukraine’s population of 43 million would be a valuable acquisition to more than offset Russia’s population and income decline.  And to preserve the wealth of the rulers.

The cost of sanctions imposed on Russia for its invasion may not be large compared with what they face by the end of the decade.