Russia's economic crossroads: Challenges beyond the war
The conflict in Ukraine, ongoing for nearly three years, has propelled Russia to the forefront of nations facing sanctions. It has resulted in losses nearing 600,000 people. Although political figures and wealthy entrepreneurs are weary of the war, its conclusion also sparks genuine fear, according to sources close to Putin, speaking to Meduza.
- Predicting life after the conclusion of the special operation is challenging - states a Kremlin insider. - What objectives will the nation prioritize? Currently, the focus is on the war, but once it concludes, they will need to consider the future, strategy, and objectives — which triggers genuine fear.
State Duma elections
Russia is also approaching elections for the State Duma. - At present, there is uncertainty regarding the war's outcome. If the conflict persists, an ultra-patriotic force may be necessary, potentially a revised "A Just Russia," according to Kremlin insiders.
If the war ends, moderate forces will be required. - And if it's over, under what terms will it conclude? The terms will significantly influence the United Russia program. What should be prioritized: restoring new territories or reverting to pre-war living standards? - they add.
A spokesperson for the ruling party's leadership notes that the composition of the United Russia list will depend on the front's situation.
"No one desires an eternal conflict"
On one hand, there is a collective exhaustion and a desire to see the war end. No one wishes for an endless conflict. Some may insist that peace needs to be achieved on Russia's terms, yet this still reflects a vision of peace. This sentiment has grown particularly following the Ukrainian forces' attacks on the Kursk region, a Kremlin source indicates.
Big business also faces uncertainty; sanctions have cut Russian entrepreneurs off from Western markets, reducing their income and investment opportunities. Despite collaboration with nations like China and Turkey, which also partially follow Western restrictions, the situation is unlikely to improve post-war.
Economic promises regarding Russia's sovereign future remain theoretical — difficulties with producing airplanes, tankers, and industrial technologies highlight limitations. Six months prior, research indicated that half of Russian enterprises struggled to find domestic substitutes for imported machinery, facing challenges even in acquiring them from "friendly" countries.
Putin's war economy
Despite massive investments in the arms industry creating an illusion of growth, the International Monetary Fund forecasts that Russian GDP will drop to 1.3 percent from 2025, and the Bank of Russia warns of potential stagnation. Meanwhile, the government is striving to increase budget revenues—currently, it allocates every third ruble to the war, and a new tax reform for 2025 aims to generate 3.6 trillion rubles in additional revenue.
- Nonetheless, these measures may prove inadequate - warns economist Natalia Orlova, suggesting a future necessity to seek additional income. Elina Rybakova from the Peterson Institute for International Economics highlights that concluding the war might be as economically challenging as the war itself.
Defence expenditures comprise 6 percent of GDP, and reducing them raises questions about the future of workers and factories that have shifted to wartime production.
