Moscow, December 21, 2025 – Russia’s economy is stumbling through inflation, deficits, and shrinking oil revenues, yet experts agree this won’t force President Vladimir Putin to the negotiating table anytime soon to end the war in Ukraine.
The Kremlin appears poised to sustain the conflict for years, relying on oil sales and domestic adjustments that oddly create winners amid the strain.
The impact lands unevenly across Russian society.
Higher taxes and pricier imports pinch ordinary consumers, while defense workers and soldiers enjoy wage boosts that have unexpectedly lowered poverty in some regions.
Analysts note Russia’s economy faces headwinds like unruly inflation – forecast by the IMF to average around 9% in some projections – and a ballooning budget deficit fueled by massive military spending.
Growth has slowed sharply, yet the situation remains “manageable,” allowing the current pace of fighting to continue under existing Western sanctions.
Maria Snegovaya from CSIS describes it as far from catastrophic.
Exiled economists even argue the war faces no real economic constraints.
Richard Connolly from RUSI points out that steady oil sales provide enough to “muddle along.”
History suggests Russia settles unfavorably only during deep slumps, like post-World War I or Afghanistan.
Today’s pressures fall short, and building serious pain would take far longer.
This prolongs bad news for Ukraine and ongoing U.S. efforts under the Trump administration to broker peace.
The initial wartime spending surge has faded.
Now the burden shifts more directly to society through tax hikes on corporations, incomes, and VAT.
Imported goods cost more, squeezing shoppers.
Yet high inflation stirs little discontent, thanks to familiarity in post-Soviet times and other factors like propaganda.
Consumers shrug at prices that would spark outrage elsewhere.
Military spending now claims nearly 40% of the budget, per NATO’s Mark Rutte, with sharp jumps confirmed by research institutes.
This created a new class of beneficiaries.
Defense contractors thrive.
Blue-collar workers in expanded manufacturing – textiles, footwear, electronics – saw wages triple or quintuple since 2021.
Ekaterina Kurbangaleeva’s research highlights this adrenaline shot to certain sectors.
Rural areas, often deprived, get uplifts from generous soldier paychecks and family compensations.
Connolly notes soldiers earn more than any in Russian history, far exceeding civilian options back home.
Recruitment bonuses reach sums like 5.2 million rubles for the first year.
This strategy replaces losses without broad conscription.
It tempers unrest despite casualties nearing a million, with hundreds of thousands dead per estimates.
Protests seen in past wars stay absent.
The government disburses substantial payments to affected families.
Experts say this buys domestic quiet, relieving decision pressure.
Long-term, draining the National Wealth Fund poses risks.
Liquid assets have declined significantly since the war began.
Without cuts to visible social spending, sustaining expenditures grows tricky.
Sanctions evasion adds costs.
Recent measures target oil giants and shadow fleets, raising business expenses.
Yet short-term, the economy holds.
Russia pivots trade eastward, prioritizes military over other needs.
Growth forecasts dip low for coming years.
Still, no immediate collapse looms to alter war calculus.
Putin faces less internal pushback as some sectors prosper oddly from conflict.
Veterans’ reintegration concerns linger, but continuing operations delays those headaches.
The setup lets Moscow persist, selling oil at decent prices while society adapts in uneven ways.
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