By John Q. Hosedrinker 
Despite initial resilience fueled by military spending and oil exports, the Russian economy is now facing a downturn. Manufacturing is contracting, consumer spending is down, and inflation remains high, straining the national budget. Experts warn that the economy’s reliance on military spending is unsustainable, and Western sanctions are increasingly taking a toll. This economic strain is reducing Russia’s ability to fund the war in Ukraine, with falling oil prices adding further risk to the situation.
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Kremlin’s war economy shows cracks as military spending boom fades, and the signs are, perhaps unsurprisingly, showing up in the official data, if we are to believe it. It’s a situation that conjures up parallels to the Soviet Union’s collapse, a crumbling empire facing economic ruin. The sanctions, seemingly slow-acting at first, are beginning to bite. As with all wars of attrition, things can appear stable until they aren’t, with the potential for sudden, dramatic shifts.
Russia’s path is similar to what we’ve seen in historical conflicts, where a seemingly strong position can unravel quickly. Many analysts predict a significant economic downturn in the coming year or so unless drastic measures are taken. Russia itself seems to recognize this, hence the scramble to untangle its economic woes.
The focus has clearly shifted. The battlefield victory has become less about winning and more about influencing Western sentiment. The goal appears to be to pressure the West into abandoning its support for Ukraine, employing propaganda, hybrid warfare tactics in Europe, and direct attempts to influence political figures. The relentless drone attacks on civilian targets are increasingly seen as punitive measures, lacking any real strategic value.
The core of the problem, if the Russian war economy actually collapses, is how it could be. Unless the military or security apparatus shifts allegiance, which does not seem likely, the path forward is uncertain.
Adding to the complexity, there’s the ever-present support from China, providing a lifeline that, while not a solution, buys Russia some time. Meanwhile, Russia’s efforts to cozy up to the Taliban and other actors, appears to be driven by the desire to acquire cheap equipment and potential mercenaries.
Despite growing drone production, there’s a pervasive sense of déjà vu. The constant predictions of Russia’s economic demise have been circulating since 2022. It’s a sentiment that breeds skepticism, a wait-and-see approach, because Russians are unlikely to be able to change their fate.
The challenges facing Russia are undeniable, and the potential for economic disruption is real. Yet, the context is crucial. While Ukraine faces its own economic challenges, it benefits from substantial Western support. Russia lacks an exit strategy. There is no clear path to ending the war without significant concessions, including territorial losses, demilitarization, war reparations, and the potential for accountability for war crimes. Putin is trapped, and his continued hold on power hinges on prolonging the conflict.