The real situation of Russia's economy

 

Warnings emerge from Western analysts claiming that Russia’s economy is teetering on the brink of collapse. Allegations that the Kremlin is manipulating official data, combined with international sanctions, inflation, and underperforming debt, have raised serious concerns. While it's clear Russia is under pressure, some economists argue that signs of a full-blown implosion remain inconclusive.

Russia's assault on Ukraine

In 2026, the world marked the fourth year of Russia’s assault on Ukraine. With Trump’s return to office, Ukraine is concerned about its support from the American government as the new administration seeks to end the conflict as soon as possible.

Oil and gas exports

Russia’s resilient and strong economy, particularly its oil and gas exports, has consistently been referenced as a point that allows the nation to remain in an advantageous position.

Is Russia's economy really stable?

Russia gives the impression that there is no bottom to its financial means. But is this true? Is Russia-s economy really the stable horse that it paints itself to be? Historian and economist Adam Tooze provides an overview of the arguments that are driving narratives about Russia's economy and the impact on war efforts.

Economic data

In November 2024, the Financial Times published a piece that questioned the economic data coming out of Russia. A subsequent article doubled down on this argument, casting greater doubt on the numbers.

Corporate borrowing

Global financial analyst Craig Kennedy, a leading expert on Russian economics, published data demonstrating how Russia has been conducting a great deal of corporate borrowing.

Subsidized loans

What does corporate borrowing mean? Essentially, these are loans that are provided at subsidized rates. This kind of activity allows nations to access financing for their war activities through legal means.

Keep up financing

Russian President Vladimir Putin has consistently referenced his nation’s capacity to keep up financing for its war efforts, almost indefinitely.

Time is on his side

In his January 2025 Financial Times article, Martin Sandbu argues that Putin continues to reiterate to Ukraine’s allies that “time is on his side.” 

What’s the point of Putin's comments?

Putin wants to impress on the West more broadly that the only way to end the war between Russia and Ukraine is to concede to his will.

Misinformation

Pundits reduce many of Putin’s comments to misinformation. Some argue that Putin is merely driving a rhetoric to distort the pressure the nation is facing. Let’s look at some analytical perspectives.

Government officials

Sandbu references comments issued by Russian officials who are starting to feel the heat of Russia’s war efforts in their pockets. For example, Rostec (state defense) Chief Executive, Sergei Chemezov (pictured), stated that high credit rates were destroying his weapons exports activities.

More fragile

Analysts argue that the situation must be serious for Chemezov to speak publicly on the matter. It likely means that the picture that Putin paints of a financially stable and materially rich war effort is likely much more fragile than he states.

Debt

This concern is well reflected in Kennedy’s 2025 report, which notes a spike in Russian corporate debt. According to the report, the debt rate has increased by 71% just since 2022; a significant spike.

Lending

Russian banks are lending companies that are critical to government interests and services credit that is issued at below-market rates.

Money printing

Another way to see what’s happening, according to Sandbu, is that Russia is “engaged in massive money printing,” perhaps amounting to 20% of Russia’s overall output in 2023.

What does this do in a practical sense?

According to Tooze, some of the very real impacts on the Russian economy include: high inflation rates (official data puts inflation at 6%, but it’s likely much higher), reduction of diverse investment and borrowing options, and mounting debts (even worse—underperforming debts).

Sanctions

Coupled with increased sanctions that hit the Russian government at the tail end of 2024, Russia is certainly facing greater turmoil than it is letting on.

Ruble facing challenges

As of 2026, the Russian currency, the ruble, is facing new challenges with its value dropping. The ruble regained some strength after a drastic dip in 2023, but it is now seeing fluctuations and is expected to continue facing challenges throughout 2026. With limited options to stabilize the currency due to ongoing sanctions, Russia is now navigating a complex economic landscape.

How bad are things?

The risks Russia is taking on are certainly significant. Without the means to reign things in, perceptions of a stable Russian economy are deteriorating. But how bad is the actual situation?

Difficult answer

The key question remains: How strong is the Russian economy? The answer to which is, as highlighted by Tooze, difficult to pin down. 

Keynesian war economy

Tooze highlights how Russia responded to Western sanctions and the financial pressures of war by taking on what's called a “Keynesian war economy.” This just means that the economy is controlled by the government to make sure there are adequate resources to spend on war efforts.

Preventing the economy from collapse

Weapons, supplies, and soldiers, among other things, are all given a boost in spending to push the economy forward. Essentially, it allows for money to keep circulating, people to maintain employment, and prevents the economy from falling apart.

Underreporting spending

While Russia only claims to be spending eight percent of its budget on defense, this is likely, as noted by Kennedy and Sandbu, a grave underestimation. War efforts are not only likely being underreported, but they are certainly beyond the scope of public budgets.

Energy prices up

By boosting its energy prices in response to the pressures of international sanctions, Russia is also raking in high revenues from energy exports.

Production of weapons

A 2024 Carnegie Endowment for International Peace report highlights how Russia has significantly increased its production of weapons, including armored vehicles and military drones (pictured are fragments of a Russian-modified Molniya-2 drone).

Financial incentives for new recruits

Requiring tens of thousands of additional soldiers every month, Russia has also used a great deal of financial incentives to attract more enlistments, issuing heavy payouts.

Generating interest

As the war drags on, potential recruits are losing their eagerness to join the frontlines. Russia has even expanded soldier benefits benefits to include strategies that the American army sometimes uses, such as debt forgiveness and guaranteed compensation for deceased soldiers, among others. Pictured is a bus carrying Russian naval cadets.

Russia's ability to offset challenges

There is no doubt that sanctions have placed a great deal of pressure on the Russian economy, but the nation’s response has also been able to offset many of the challenges Western analysts claim to be crippling the Russian state.

Unemployment rates

Unemployment rates in Russia are just over 2%, as the nation continues to demand more workers to fulfill its needs. Household income is, too, increasing. Some of the nation’s poorest have seen an increase of nearly two-thirds since 2022 alone.

Is an implosion coming?

Is Russia’s economic growth stable? Is it as resilient as it seems or is it facing an implosion, as some analysts argue? Tooze points to the masterful capacity of the Russian government to deal with the fallout of the 2008 financial crisis.

How will this unfold?

With fewer risks today than in 2008, it seems that the nation knows what it’s doing in terms of balancing potential crises. At worst, its economy may be currently facing some sort of stagnation. How long can its economy continue in this format? This is what has yet to be seen.