Ukraine’s GenStaff says its deep strikes have erased 4% of Russia’s GDP this year, and that figure certainly grabs your attention. Four percent might not seem like a colossal figure at first glance, but when you’re talking about the entire economic output of a country, it represents a significant dent, a real punch to the gut. It’s a substantial sum of money, and you have to wonder, just how much damage needs to be inflicted before it becomes truly unsustainable for Russia to keep up the fight?
This brings up the million-dollar question: What percentage point of economic damage would it take to make the war unfeasible for Russia to continue?… Continue reading
By the end of July, Russia’s federal budget deficit surged to 4.9 trillion rubles ($61.4 billion), exceeding the government’s full-year target by over 30%. This increase is largely attributed to reduced oil prices, which significantly impacted revenues. While expenditures grew substantially, outpacing revenue growth, leading to a decline in real terms. Several experts attribute the economic challenges to sanctions and trade disruptions, while some suggest the falling oil revenues could potentially impact Russia’s ongoing war efforts.
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The Russian economy is facing a deteriorating outlook, with potential risks extending beyond public acknowledgments. Banking officials express growing concern regarding the level of bad debt within their financial institutions. These concerns are primarily fueled by the increasing number of corporate and retail clients failing to meet their loan obligations. High interest rates are significantly contributing to these payment defaults, raising the risk of a potential systemic banking crisis within the next year.
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Despite positive GDP growth (1.5% in the first four months), driven primarily by defense spending, business sentiment indicates an impending recession. This economic downturn is exacerbated by falling global oil prices and the government’s ending of subsidy programs, creating tension between the central bank, which is raising interest rates to combat inflation, and businesses. Putin, while praising the central bank’s efforts, emphasized the need for balanced economic growth, yet offered no concessions regarding the conflict in Ukraine.
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Russia’s economy is teetering on the brink of recession, according to Economy Minister Maxim Reshetnikov, due to weak business sentiment and indicators. He urged the central bank to ease its monetary policy, despite a recent interest rate reduction to 20 percent following a peak of 21 percent. Persistent inflation, exceeding 8 percent annually, is fueled by war spending and labor shortages, hindering sustainable economic growth. This economic fragility comes amidst ongoing conflict in Ukraine, including recent drone attacks and concerns over the Zaporizhzhia nuclear power plant.
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In a recent interview, Russian Ambassador Andrey Kelin confirmed approximately 600,000 Russian soldiers are currently engaged in the Ukraine conflict, a figure consistent with earlier Ukrainian estimates. Despite claiming monthly recruitment of 50-60,000 volunteers, Russia’s substantial troop losses, estimated by Ukraine at 217,440 since January 1, 2025, and independently verified, are straining the Russian economy. These high casualty rates, coupled with significant recruitment bonuses, are placing immense pressure on already sanctioned Russian finances, raising serious concerns about the long-term economic stability of the country.
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A new report by the Center for Macroeconomic Analysis and Short-Term Forecasting (CAMAC) warns that Russia’s economy is teetering on the brink of stagflation, with a potential recession looming in the second and third quarters of 2025. The report cites slowing GDP growth (1.4 percent in Q1 2025), high inflation (9.8 percent), and weakening consumer demand as key contributing factors. This precarious situation is exacerbated by falling investments and construction projects. To mitigate the crisis, the report recommends tackling inflation and stimulating investment, while the Central Bank of Russia maintains a tight monetary policy despite cutting its key interest rate.
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Russia’s increasingly desperate attempts to circumvent international sanctions are becoming painfully clear. The use of gold bars as payment for weapons and military capabilities speaks volumes about the limitations of their current financial situation. It’s not simply a matter of evading sanctions; the reluctance of many suppliers to accept rubles, Russia’s own currency, significantly restricts their options.
This reliance on gold highlights a critical vulnerability within the Russian economy. Modern international trade overwhelmingly favors transactions in readily accepted currencies, primarily the US dollar. The fact that Russia is resorting to a precious metal signifies a considerable weakening of their financial power.… Continue reading
Microsoft is fully withdrawing from Russia, with its subsidiary, Microsoft Rus, initiating bankruptcy proceedings in a Moscow court. This action follows a lawsuit by Gazprombank seeking repayment for allegedly unfulfilled contract obligations totaling approximately US$1.14 million. Despite a significant revenue drop since Russia’s invasion of Ukraine, Microsoft Rus reported a net profit before filing for bankruptcy. The move marks the final stage of Microsoft’s departure from the Russian market, following the closure of its 13 Russian branches earlier this year.
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International sanctions have cost Russia an estimated US$450 billion in energy sector revenue. This financial strain, coupled with a 21% interest rate surge and prioritization of defense spending over social programs, reflects deep economic instability within Russia. Defense spending now surpasses social spending for the first time since the Soviet Union’s collapse, and the nation has depleted a significant portion of its National Wealth Fund. These economic realities underscore the Kremlin’s prioritization of the war effort over its citizens’ well-being.
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Matt Underwood 
John Q. Hosedrinker