That's leather, right? This website: https://www.furnitureclinic.com/Leather_Repair?gclid=EAIaIQobChMIvfytstu14wIVD5-fCh0IlAIgEAAYAiAAEgKFVvD_BwE has leather repair products plus step-by-step tutorials on leather repair. It isn't cheap, but it works - I've used their products on a leather chair. I hope this helps!
It’s vinyl or cowhide that is imitation leather. Real Leather is tough an don’t shred like that. You have to have it stripped an reupholstered
It's too far gone to repair. Sorry.
You can recover with a fabric that contrasts with the fabric that’s already there. But if you can’t do it yourself and you can’t afford to have it done. Keep your eyes open for second hand furniture at estate sales, Goodwill, and Facebook Marketplace.
They make a product that you paint on that looks like leather. I am not sure of the name but saw an ad and thought my friend needed it. It can't hurt to search.
I agree with Kelli, it's beyond repair. The easiest and least expensive option might be to try armrest covers. You can buy them for less than $20 from Amazon.