The Russian economy is currently grappling with a multi-faceted crisis: soaring inflation, a widening budget deficit, and dwindling revenues from oil and gas.
While massive military spending for the Ukraine war and Western economic sanctions are the primary drivers of this strain, experts suggest these pressures will not force President Vladimir Putin to the negotiating table anytime soon.
Analysts believe Moscow can sustain the war for several more years despite the current trajectory and international pressure.
Maria Snegovaya, a fellow at the U.S.-based think tank CSIS, notes that while the Russian economy is in decline, it is not on the verge of collapse.
According to her, Russia has the capacity to continue the conflict for another three to five years. Many Russian economists concur, stating that there are no immediate economic barriers preventing the continuation of the war.
Richard Connolly, a researcher at the UK-based security institute RUSI, adds: "As long as Russia can extract oil and sell it at a reasonable price, the country can scrape by. The economy is not yet a decisive hurdle for Putin’s war-related decisions."
Pressure on the General Public
The initial economic shock at the start of the war has leveled off, though the government has raised corporate taxes, income taxes, and VAT to fund military expenditures.
While the price of imported goods has risen, experts point out that the Russian population is historically accustomed to high inflation.
Consequently, large-scale public unrest has not materialized. The IMF projects Russia's average inflation rate to reach approximately 7.6% this year.
The Rise of a "War Economy" Class
Nearly 40% of Russia’s budget is now dedicated to the military sector, benefiting arms manufacturers and factory workers. Surprisingly, poverty has decreased in certain regions.
Rural and impoverished areas have seen an economic uptick due to the high salaries offered to soldiers—currently the highest in Russian history.
Furthermore, the government provides substantial compensation to the families of deceased or injured troops.
This financial cushion is a key reason why there have been no major protests despite nearly one million casualties (including approximately 250,000 deaths).
Why Putin Persists
Experts suggest that ending the war poses its own internal risks.
A cessation of hostilities would see a massive influx of veterans returning to society, many of whom may face unemployment and require expensive medical care.
To avoid these internal complications, Putin remains incentivized to keep the war going.
Long-Term Risks and Potential Breaking Points
The long-term outlook remains precarious. Russia has heavily depleted its National Wealth Fund; its liquid assets have dropped by approximately 57% since the invasion began.
If these reserves continue to dwindle, the government may be forced to slash social spending to maintain military budgets—a move that would be deeply felt by the public.
Additionally, new sanctions from the U.S. and UK targeting major Russian oil companies have forced Moscow to use more expensive, indirect routes for exports.
Experts conclude that Putin may only reconsider his stance if these sanctions are more strictly enforced or if major buyers like India and China significantly reduce their Russian oil imports.
