The frictions in Russia’s wartime economy are growing, as massive military spending balloons the budget deficit.
asserted
spending → grow → deficit
Growth has slowed.
asserted
Growth → slow → ?
None of that, however, signals an imminent financial crisis or economic collapse, economists say.
asserted
economists → signal → crisis
With crucial oil export revenues holding up due to high prices from the Iran war, the government is able to find the money to pay for its 4 1/2-year-old invasion of Ukraine, at least for now.
asserted
government → hold → Ukraine
Meanwhile, low unemployment and government largesse in poor regions help keep a lid on consumer grumbling.
asserted
unemployment → help → grumbling
That picture suits the Kremlin’s narrative of stability ahead of Russia’s stage-managed parliamentary election that got underway Friday and concludes Sunday.
asserted
that → suit → election
But economists warn that longer-term problems are gnawing at the foundations — and could one day result in a crisis.
uncertain
problems → warn → crisis
Consumers and businesses are more pessimistic
Indicators of consumer sentiment have drifted down since a peak in 2024-25, when increased military spending was pumping up growth and wages.
asserted
spending → drift → growth
More recently, consumers have coped with higher gasoline prices and shortages due to Ukrainian drone attacks that knocked out refineries.
asserted
that → cop → refineries
And many small businesses have lost inventory and customers due to strikes against online retailers Wildberries and Ozon.
asserted
businesses → lose → Wildberries
At the same time, growth has slowed from a peak of over 4% annual expansion in 2023-24.
asserted
growth → slow → 2023
The government foresees 0.6% this year, and the economy shrank in the first quarter before rebounding somewhat in the second.
asserted
economy → foresee → second
The consumer sentiment index compiled by the Levada Center, an independent Russian pollster, fell to 94 over the summer, down from 116 in spring and summer of 2025.
asserted
index → compile → 2025
Readings under 100 indicate that consumer sentiment is more negative than positive.
asserted
sentiment → indicate → 100
People asked about the election in Moscow responded with mostly basic concerns about pensions and prices.
asserted
People → ask → pensions
Alexander Vertukhin, a 72-year-old retired military prosecutor, said the government should be focusing on “a decent standard of living for pensioners.”
asserted
government → say → pensioners
As for his own situation, “I’m doing fine, both financially and in every other respect,” he said.
asserted
he → do → respect
“Overall I’d like housing to become more affordable, I’d like pensioners to be able to live decently instead of merely surviving,” said Dmitry Kirillin, 26.
asserted
Kirillin → like → ?
“I’d also like travel in our country to be more affordable.
asserted
travel → like → country
Those are the main things that first come to mind, if I gave it more thought I could probably name more.”
uncertain
I → come → more
He added, “I’d like prices to rise more slowly, if that’s possible in the current situation.”
The gasoline situation and Wildberries strikes have made the war more visible to people but don’t constitute a crisis, said Chris Weafer, CEO of the Macro-Advisory Ltd. consultancy active across the former Soviet Union.
asserted
Weafer → add → Union
He described the economy as in a state of “tolerable stability” and the public mood as “grumbling” but not protesting.
asserted
He → describe → stability
“The economy is under strain — it’s stagnant to the effect that it’s stable but not growing,” Weafer said.
asserted
Weafer → ’ → effect
“But it’s not facing recession either.”
asserted
it → face → recession
Most people “are not that affected” by the Ukrainian strikes, he said.
asserted
he → say → strikes
“Just because your shopping habits are disrupted, that’s not going to change the public support for the Kremlin.”
asserted
that → disrupt → Kremlin
President Vladimir Putin’s approval rating has declined in recent months but remains higher than it was before the war started in 2022.
asserted
war → decline → 2022
Russia’s budget deficit has spiked higher
One key sign of stress is Russia’s budget deficit and the government’s efforts to find new sources of money.
asserted
sign → spike → money
Putin has resorted to increasing value-added tax paid by consumers at the cash register, raising a raft of other fees and tightening taxation of small businesses.
asserted
Putin → resort → businesses
But the deficit has continued to climb.
asserted
deficit → continue → ?
By the end of July, budget data showed a deficit of 2.8% of annual economic output — almost twice the original annual budget target.
asserted
data → show → output
Available resources in Russia’s reserve fund have dwindled to 1.6% of GDP, meaning the Kremlin needs to borrow from domestic banks.
asserted
Kremlin → dwindle → banks
That, however, means paying high borrowing costs, with interest rates on Russian bonds as high as 17%, according to Janis Kluge, an expert on Russia’s finances at the German Institute for International and Security Affairs.
uncertain
That → mean → Affairs
Budget stress is “adding to doubts about how long Russia can sustain the war,” he wrote in a recent report.
asserted
he → add → report
Russia’s central bank has kept rates high to contain the inflation caused by war spending.
asserted
bank → keep → spending
That stresses civilian companies who don’t get the privileged access to credit afforded defense firms.
asserted
who → stress → firms
Another source of war funding has been increased private lending by Russia’s compliant banks to defense-related companies, meaning those debts are not showing up in the deficit figures.
asserted
debts → increase → figures
Some warn the endgame is coming for Russia’s economy
Over the long term, Western sanctions deprive Russia of new investment that would make the economy more productive.
asserted
economy → warn → investment
And the risk factors — high spending, low growth, rising debt and elevated borrowing costs — lead some economists to warn that while Russia’s economy has not collapsed, its structural foundations are eroding dangerously.
asserted
foundations → rise → economists
The current trajectory is “unsustainable,” according to Torbjörn Becker at the Stockholm School of Economics.
uncertain
trajectory → accord → Economics
…and 11 more, not listed.
The Aporia
