On a clear sunny day, an official in the Kremlin opens a folder carefully prepared by his faithful assistant. Once he opened the folder, a grim glance featured on his face: The economic indicators are going deep south across all sectors. The war in Ukraine seemingly causes a visible rift in the numerical scales of the greater economy in Russia. Ordinary citizens are engulfed in a daily struggle against the monstrosity of economic hardships deliberately caused by the war machine that the Kremlin feeds on. Echoes of industries across the Urals gradually fades away as the demand for goods turned down by the wrongdoings of policymakers. So, this leads to a certain dilemma that Muscovite officials might avoid to answer: “Are we destroying the economy that has struggled to sustain since the 1990s?
Industries slow-down, recession, and … pasta?
As the war dragged longer than Moscow anticipated, the malaise effects perpetuated by its war-mongering stance against Ukraine started to show up. Despite its sudden jump-ups on average wage growth (on nominal basis) for the past three years (thanks to the dwindling labor market) and unemployment rate numbering around 2.2 percent, other economic indicators suggest a pessimistic tone on the Russian economy. According to Peterson Institute for International Economics, in the first quarter of 2025, Russian real GDP slashed at negative 0.6%, citing supply-side issues, inflation and declining activity in major sectors like mining. The Kremlin’s bank-maker– Gazprom—which used to be heavily reliant on the European market— shipped only 8.33 billion cubic meters of natural gas to Europe compared to 175 billion cubic meters in 2021 due to the sanctions imposed by western nations. Even though Russia managed to alter its export destinations from Europe to the Indo-Pacific region, President Donald Trump’s “second tariffs” on Moscow’s trade partners might jeopardize its revenue coming from the oil exports as India and China are the biggest buyers of Russian oil. Meanwhile, domestic industries such as steel industry, the total production declined at 7.2% in early 2025 and it is scrambling to sell 6 million tones of steel otherwise the industry will experience several shutdowns. Other industries such as coal, timber and aircraft are also facing daunting challenges such as bankruptcies, sanctions, missing critical parts and lack of workforces. As a result, several companies are aiming to implement drastic measures to tackle economic burden. Chlyabinsk Electrometallurgical Plant, for instance, which supplies 80% of feralloy for the country, is reducing workdays of administrative staff to four starting from September in order to maintain the functionality of the company. The central bank of Russia is also cutting the interest rate to 18% by 200 hundred basis points on 25TH July even though the inflation remains high. Yet, the geopolitical interests of Moscow might expedite the process of depletion of reserve currencies by 2030 if the war in Ukraine still persists according to Janes. In addition, Maxim Reshetnikov, minister of economic development in Russia expressed his deep concern that the country might be on the path to recession. The consequences of militarizing the economy are becoming increasingly visible as the households now primarily consume bread and pasta instead of potato and pork as living standards among the Russians is being pulverized at the mercy of the rising inflation. Besides, ordinary Russians find themselves in desperate situations as 130 critical medical drugs have become unavailable due to the sanctions stretching its supplies according to Novoya Gazette. Plus, El Pais reported that only one out of 10 Russians are secure in terms of personal finances this year. Financially exhausted and economically vulnerable ordinary citizens of Russia are being cornered between the onslaught of war and the uncertainty is surrounding the country’s economic outlooks
“Where did all the good men go?”
Casualties from the war on Russia’s side are about to reach 1 million, the missing working-age men from the active labor market mitigate a severe headache among the Kremlin officials. Statistics suggest that Russia’s fertility rate reached 1.83 child per woman which is below the average 2.1 child per woman that could replenish the population. To maintain the economy’s well-being, Russia is in dire need of 10 million workers. The aging population of Russia is significantly shrinking its tax revenue and obstructing its strategic capability to assert its dominance across the world. Plus, the war in Ukraine deepened the demographic crisis as the country is experiencing brain-drain especially from the highly valuable tech sector. Just like the rest of the developed countries, Russia is importing foreign workers to fill the missing vacant positions albeit to a limited extent. According to Russia’s labor ministry, in 2025, the authorities capped the immigration quota to 235’000. However, it is doubtful to reverse the consequences caused by systematic flaws. Aside from the economy, Russia’s rural regions, especially Siberia and the Far-East, might experience negative trends on population (which means it could curtail the economic development in the regions and hike up the internal immigration movement towards prosperous Moscow and Saint-Petersburg. Thereby, it might be problematic to maintain its territorial integrity of vast lands) as the most of the casualties originated from the regions and autonomous republics. The fragile relations between Moscow and the regions could turn sour as the Kremlin might demand more resources to subsidize its negative impact on economy. To combat the population decline, President Vladimir Putin has been urging citizens to have more babies multiple times and the government was offering several financial incentives to women. Rather than relying on fragile patriotism and social benefits, Russian authorities might have to approach the impending issue in a more structured way to implement a series of effective policies. On the other hand, shrinking coffers of the Russian treasury could yield less-than-expected results.
“The Curse of the Soviet Union”
As the Soviet Union’s legitimate successor, the structure of Russia’s economy is still dominated by natural and oil exports. The heavy reliance on natural resources, primarily oil and natural gas could invite disaster as its fate is still linked to the fluctuation of the global oil market. When the Soviet Union collapsed, one of the driving factors was the oil price fall. In 1980, the price of oil reached 120 dollars per barrel when it was at its peak. But, In 1986, the oil was priced barely at 24 dollars per barrel fueling the Soviet Union’s „existential crisis”. Though modern economy of Russia is not a command economy anymore (with a little twist of oligarchism and autocracy), the economy is turning into a matryoshka with the unfolding economic crises coming up ahead. During the dissolution of the Soviet Union, Russia Federation experienced intense poverty, reduction of GDP in a larger amount, severe decline of industrial activities and separatism turned into war that nearly put an end to the existence of Russia as a diminishing regional-power. The scenario of soviet-styled collapse could be reenacted if the Russia government continues acting recklessly at the expense of its economy. Yet, Russia is still hanging on the threads with its shrewd execution of banning the oil exports to the rest of the world. But, President Donald Trump’s 50-day ultimatum and his relentless military support towards Ukraine could put an end to this trick. Russia’s stubbornness over Ukraine could burn-out the economic prospects in the longer run just as the Soviets did in Afghanistan. Whether Russia is pushing to the heartlands of Ukraine or not, the economy of Russia might put a muzzle on the aggressive bear.