The economic situation in Russia is becoming increasingly complicated, shifting from stagnation to recession. This is clearly evidenced by the cessation of GDP growth, which is on the verge of decline;<\/em><\/p>\n The negative trends in the Russian economy are mainly the result of Western sanctions imposed on Russia for its attack on Ukraine. The Russian government cannot cope with them, especially with the decline in oil prices.<\/em><\/p>\n this may force Russia to make peace by tightening sanctions against it as part of Donald Trump\u2019s ultimatum and the EU\u2019s preparation of the 18th<\/sup> package of sanctions.<\/em><\/p>\n at the same time, such actions against Russia do not guarantee that Vladimir Putin will automatically end the war. On the contrary, he may intensify military operations to take advantage of his window of opportunity to achieve victory over Ukraine.<\/em><\/p>\n As a result of US President Trump\u2019s ultimatums to impose tough sanctions on Russia and its trading partners if it refuses to sign a peace agreement with Ukraine, a logical question arises about the consequences for the Russian economy<\/strong>. This will determine the Putin regime\u2019s ability to continue the war against Ukraine and its future policy.<\/p>\n According to most forecasts, the implementation of Trump\u2019s threats will deal a powerful blow to the Russian economy. This will not only limit its ability to continue the war, but will also threaten political stability within the country.<\/strong> This is especially true if the EU adopts its 18th<\/sup> package of sanctions, which provides for an even more significant reduction in the price ceiling for Russian oil purchased by importers.<\/p>\n In this regard, it is necessary to consider the current state of the Russian economy, which determines possible consequences of the increased sanctions pressure from the West.<\/strong> Relevant conclusions can be drawn based on an analysis of macroeconomic indicators characterizing Russia\u2019s economy since the beginning of this year.<\/p>\n As always, the open statistical data of Russian state bodies distort the real situation, but they can be used to identify existing trends. The independent experts\u2019 assessments provide the same opportunity.<\/p>\n For a clearer understanding of the issue, let\u2019s break it down into several sections. Some of them may seem too long, so you can skip them and go straight to the conclusions.<\/p>\n <\/p>\n\n <\/p>\n An analysis of macroeconomic indicators, which are provided by various sources and generally coincide, shows that the Russian economy is transitioning from the state of stagnation in which it found itself at the end of last year and the beginning of this year to a recession<\/strong>. In other words, economic stagnation is turning into a decline. In particular, based on the averaging of available data, Russia\u2019s GDP growth in the first half of 2025 can be estimated at 1.5 %, while in the same period last year it was about 4.5 %. Approximately the same level of 1.5 % is expected at the end of this year, while in 2024 this figure was 4.1 %. According to independent experts, the 1.5 % figure is close to the statistical error. That is, Russia\u2019s gross domestic product growth for the first six months of this year can be considered zero.<\/p>\n The situation in Russia\u2019s financial sector has also deteriorated significantly<\/strong>. The planned deficit of Russia\u2019s state budget for 2025 was set at 1.17 trillion rubles. However, in May this year, the government was forced to revise it, increasing it threefold to 3.79 trillion rubles. This is six times higher than the 2024 figure. And in the autumn, it may be increased again. In view of the above, budget expenditures are planned to be reduced or are already being reduced in most areas, except for funds allocated for military purposes.<\/p>\n Inflation keeps rising. According to official data, in the first five months of this year, it rose by 3.57 %, which exceeds the corresponding figure for last year. At the same time, the Russian government has revised its inflation forecast for 2025 downward from 4.5 % to 7\u20138 %.<\/p>\n However, in reality, the inflation rate in Russia is much higher. According to ordinary Russians, which is confirmed by independent experts, prices for basic goods rose by 20-30 % in January-June of this year.<\/p>\n To slow down inflation, the Central Bank of Russia is keeping the lending rate at 20-21 %, which is one of the highest levels among developed countries.<\/p>\n \n <\/p>\n As of mid-July this year, complete statistical data on the performance of the Russian economy in the first half of this year had not yet been published. However, certain assessments on this issue can be made based on available information on the state of the most important industries and individual indicators.<\/p>\n Thus, since the beginning of this year, the performance of Russia\u2019s industrial complex has fully corresponded to the nature of the state economy<\/strong>. Stagnation or recession is observed in most of its sectors, with the exception of those directly or indirectly related to the war. But their problems are also growing.<\/p>\n In the first six months of this year, industrial production grew by only 1.3 %, while in 2024 it increased by 5.2 %. At the same time, the situation in different sectors varies significantly.<\/p>\n As mentioned above, the best performance was recorded in the military industry and related industries. <\/strong>In January\u2013June 2025, the largest annual growth was recorded in the production of the following products:<\/p>\n In other words, only the production of armored vehicles, aircrafts, naval equipment, and medicines has shown consistent positive growth. Obviously, this also applies to missiles, but it is unclear which category they fall under in the statistics. The growth in the production of computer and electronic systems, as well as military ammunition, decreased two to three times.<\/p>\n The production volumes of a number of other types of products, as well as the extraction of most minerals, decreased<\/strong>. First and foremost, these include:<\/p>\n The production of electrical equipment and food products, as well as coal and oil extraction, remained virtually unchanged.<\/p>\n The results of Russia\u2019s agricultural sector can only be adequately assessed in the autumn of this year after the harvest is gathered. However, the situation in the industry is already quite ambiguous.<\/strong><\/p>\n According to official data, during the first half of this year, agricultural production increased by 1 %, which is actually stagnation. However, many experts assess the industry as being in a pre-crisis state. This is evidenced by a decrease in the acreage of most crops and a decline in livestock numbers. The production of tractors, combines, and other equipment has significantly decreased as a result of falling demand.<\/p>\n The transport industry is also facing a difficult situation as a result of the decline in commercial production.<\/strong> In particular, in the first five months of this year, rail transport volumes decreased by 7.5 %.<\/p>\n The decline in the production of Russia\u2019s raw materials, which form the basis of its exports, has led to a reduction in foreign trade volumes.<\/strong> The total figures for the first half of this year, broken down by type of goods, have not yet been released. However, they clearly correlate with the production of oil, gas, coal, and metallurgical and chemical products.<\/p>\n \n \n <\/p>\n According to analysts, the main reasons for the negative trends in the Russian economy and financial sector are Western sanctions, excessive military spending, declining global energy prices, and a number of other problems related to the war.<\/strong><\/p>\n In this regard, a major role was played by the complete or partial refusal of Western countries to import Russian oil, gas, coal, metallurgical products, and timber. This led to a decline in the revenues of Russian enterprises and the state budget from exports of those goods, as well as worsening of the situation in the relevant industries. In particular, the Russian gas monopoly Gazprom remains bankrupt and has excessive gas reserves that it cannot sell. In the coal industry, more than 20 % of enterprises have gone bankrupt or are on the verge of bankruptcy. At this, Moscow\u2019s attempts to reorient its exports to the Asia-Pacific region and Southeast Asia have not yielded the expected results, as their markets are already distributed and captured by other exporters. In addition, countries in those regions are refraining from active economic cooperation with Russia due to the threat of secondary sanctions from the USA and the EU.<\/p>\n For example, China and India, which are currently Russia\u2019s largest trading partners, have refused to purchase additional volumes of Russian raw materials or are buying them at reduced prices. Moreover, they are leading producers of metallurgical products and Russia\u2019s competitors in this sector on world markets.<\/p>\n Besides, Russia\u2019s railway and road networks are oriented towards Europe and therefore cannot significantly increase the volume of its goods supplied to the Asia-Pacific and Southeast Asia markets. Long distances increase transportation costs, which reduces the profitability of trade.<\/p>\n The situation is even more complicated where it comes to transporting Russian oil by sea. According to US and EU sanctions, Russia cannot sell it for more than $65 a barrel. All tankers transporting oil purchased at a higher price are subject to sanctions.<\/p>\n Moscow is trying to resolve this problem with the help of the so-called \u201cshadow fleet.\u201d However, the USA and the EU are tightening control over it, identifying tankers that circumvent sanctions, and imposing appropriate restrictions on them. Therefore, lowering the maximum allowable price for Russian oil, as envisaged by the new EU sanctions, will not only cause additional financial losses to Russia, but will complicate its access to foreign markets.<\/p>\n But then, even without this, the decline in world oil prices has already destabilized the Russian economy. According to Russian economists\u2019 calculations, in wartime conditions, the Russian economy can only function if the price of oil is $100 or more for a barrel. At a price of $70\u201385, it is practically impossible to balance income and expenditure, which leads to a state budget deficit. And if oil prices drop below $60, the deficit becomes uncontrollable. This is especially true when combined with a reduction in income from other sectors of the Russian economy.<\/p>\n Lately, this problem has become critical due to a significant increase in military spending, which exceeds 40 % of the country\u2019s total federal budget or 7.5 % of GDP. Since the start of the war, Russia\u2019s budget deficit has been covered by funds from the National Wealth Fund (NWF). In February 2022, its liquid part amounted to 9 trillion rubles. Now it is only 3 trillion rubles, which is less than the planned state budget deficit, and will be exhausted by the end of this year.<\/p>\n According to established practice, in such a situation, the government of the country obtains the necessary funds through external and internal borrowing. Russia cannot attract external borrowing, again due to Western sanctions. Moreover, even its supposed strategic partner, China, does not lend it money. And the domestic market has high interest rates, which makes it impossible for the state to repay its loans.<\/p>\n That is why the RF\u2019s government is forced to issue unsecured funds (in other words, \u201cturn on the printing press\u201d), which automatically generates inflation. To counteract its rapid growth, the Central Bank is raising the lending rate, which has reached an extremely high level in Russia. However, this hinders the work of both private business and the public sector, including the military-industrial complex.<\/p>\n Thus, businessmen are forced to spend a significant part of their profits on covering loans and interest, which reduces the profitability of their activities or makes them unprofitable altogether. For the same reasons, entrepreneurs refuse to launch new investment projects and suspend many of the existing ones. The same applies to ordinary citizens who cannot afford loans to purchase such expensive items as flats or cars.<\/p>\n As a result, business activity in Russia is declining, and there is a de facto crisis in the construction and automotive industries due to a significant decline in demand for their products. The revenues of Russian companies operating in the domestic market are decreasing, and so are the taxes they pay to the state budget.<\/p>\n Unlike private businesses, which at least have some income that allows them to operate independently, the military-industrial complex is financed from the state budget and is completely dependent on it. Moreover, in many cases, the advances issued by the government for the fulfillment of state orders do not cover the costs of purchasing materials and components, as well as settlements with related enterprises. This creates a crisis of non-payments and a trail of bankruptcies. This undermines the work of the military industry.<\/p>\n Similar processes are observed at the regional level. Thus, taxes from local businesses, which form the bulk of regional budget revenues, in most cases do not cover their expenses. Deficits are compensated by subsidies from the federal budget, which further increases the burden on it. However, this does not resolve the problem, as there are not enough funds for everyone.<\/p>\n These circumstances prevent the Russian government from providing adequate support to those sectors of the economy that find themselves in a difficult situation. In addition to the above-mentioned industries, this also applies to agriculture, which has faced significant difficulties due to low world grain prices, rising transport costs, high borrowing costs, and a lack of imported seeds. As a result, there may be a threat of food shortages in the country as early as this autumn.<\/p>\n Another problem is the shortage of personnel, especially highly qualified specialists. The reasons are well known and include the mass recruitment of people for military service and the flight of citizens from the country after the announcement of partial mobilization in September 2022.<\/p>\n It is also worth mentioning the strikes by the Armed Forces of Ukraine on Russian military and oil industry facilities. They cause relatively minor damage to the Russian economy, but have a cumulative effect. Besides, Moscow is forced to spend money on accommodating refugees from border areas of the Russian Federation that have turned into combat zones.<\/p>\n \n \n <\/p>\n Prospects for the Development of the Economic Situation in Russia and Possible Options for the Country\u2019s Government:<\/strong><\/p>\n Currently, the fact that Russia\u2019s economic problems have reached a critical stage is already being recognized at the highest state level<\/strong>. In this regard, the most revealing statements were made by Russian Minister of Economic Development Maxim Reshetnikov, Minister of Finance Anton Siluanov, Governor of the Central Bank of the RF Elvira Nabiullina, and CEO of Sberbank German Gref at the St. Petersburg International Economic Forum in June this year. Together with other government officials, politicians, and businessmen, they described the economic situation in the country as the beginning of a deep crisis.<\/p>\n Later, Russian President Putin recognized the need to cut military spending. According to him, it will be getting reduced in 2026 and over the next three years. He explained these intentions by the need to overcome inflation, which is a consequence of increased military spending. Previously, Putin categorically denied the existence of problems in the Russian economy and did not recognize the negative impact of the war on it. In other words, the top leadership of the Russian Federation realizes the need to end the war or, at least, to suspend it. At the same time, there are different views on Russia\u2019s ability to continue its aggression against Ukraine, which are likely to influence Putin\u2019s decision on this issue.<\/p>\n According to optimistic estimates, Russia will have the resources to wage war until 2026 and, to some extent, 2027. And if sanctions against it are toughened, it will be able to compensate for them with its own forces and support from partners.<\/p>\n At the same time, according to pessimistic forecasts, Moscow will be able to maintain the current intensity of hostilities until the end of this year at most, namely until it loses the ability to cover the state budget deficit with reserve funds. After that, it will be forced to suspend the war or put the country\u2019s economy into a strict mobilization regime similar to military communism.<\/p>\n However, according to supporters of this option, even if such measures are taken, Russia will be able to hold out no longer than until the end of 2026 or early 2027. The introduction of critical sanctions against Russia by the USA and the EU, as provided for in Trump\u2019s ultimatum and the EU\u2019s 18th<\/sup> package, will accelerate the process of exhausting the Russian economy.<\/p>\n According to experts\u2019 forecasts, even before the USA introduces new sanctions, the mere expectation of them by Russian financial and economic entities and their partners will lead to a decline in the country\u2019s stock market. At the same time, inflation will rise, forcing the Central Bank to raise interest rates. As a result, economic conditions in Russia will deteriorate even further.<\/p>\n The result of these processes will be a rapid increase in the country\u2019s budget deficit and a shortage of funds for military needs. To cover it, the Russian government will have no other options but to confiscate the property of large and medium-sized businesses and carry out new privatization, as well as use citizens\u2019 bank savings by \u201cfreezing\u201d their accounts. In addition, tough measures of state control over the economy will be taken.<\/p>\n A corresponding reaction from Russia\u2019s partners and allies should also be expected. Most of them will support it in words, but in reality they will intensify their efforts to reorient their trade and economic ties to other countries. As a result, Russia\u2019s foreign trade and revenues from it will decline. In particular, China has already condemned the USA and EU\u2019s intentions to impose new sanctions against Russia, but has not shown any willingness to take real steps to help it.<\/p>\n These processes will also have political consequences, including increased dissatisfaction among the Russian population and business circles with the policies of its authorities, as well as the departure of most of its allies and partners.<\/p>\n However, this will still not lead to the immediate collapse of the Russian economy, which is what Putin hopes for. According to experts, he is seeking decisive success on the front lines to force Ukraine to capitulate within the next two to three months, while he still has the economic resources to do so. In Putin\u2019s imagination, Ukraine\u2019s surrender would mean recognition of Russia\u2019s ownership of the occupied territories, which would automatically lead to the lifting of Western sanctions. This, in turn, would make it possible to quickly deal with the problems of the Russian economy.<\/p>\n That is why Putin is ignoring these problems, hoping that they will disappear in the near future, before they become irreversible for Russia. Evidence of this is the intensification of hostilities on the front lines, which is being financed by printing money that is not backed by the country\u2019s real assets.<\/p>\n \n <\/p>\n Actually, this is a \u201cgame all-in\u201d that could end in defeat for Russia with catastrophic consequences.<\/strong><\/p>\n Thus, the economic situation in Russia is deteriorating, which is already systemic in nature. The reasons for this are Western sanctions, decreasing world oil prices, and excessive military spending.<\/strong><\/p>\n According to different estimates, in such a situation, Moscow can continue the war at its current intensity until the end of this year or the beginning of next year. At the same time, the introduction of critical sanctions against Russia by the USA and the EU will accelerate the process of depleting its economic and military potential.<\/strong><\/p>\n The leadership of the Russian Federation obviously understands this prospect. However, Putin hopes to achieve decisive successes on the front and force Ukraine to surrender before Russia loses its ability to continue active combat operations.<\/strong><\/p>\n Yurii Ilchenko, <\/p>\n","protected":false},"excerpt":{"rendered":" Yurii Ilchenko<\/p>\n The economic situation in Russia is becoming increasingly complicated, shifting from stagnation to recession<\/p>\n","protected":false},"author":8,"featured_media":30552,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","ngg_post_thumbnail":0,"footnotes":""},"categories":[261,260],"tags":[268],"class_list":["post-30550","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-analitika","category-publikacii","tag-ilchenko","wp-image-borders"],"translation":{"provider":"WPGlobus","version":"3.0.2","language":"en","enabled_languages":["uk","en","ru","fr","ar"],"languages":{"uk":{"title":true,"content":true,"excerpt":true},"en":{"title":true,"content":true,"excerpt":true},"ru":{"title":true,"content":true,"excerpt":true},"fr":{"title":false,"content":false,"excerpt":false},"ar":{"title":false,"content":false,"excerpt":false}}},"gutentor_comment":0,"yoast_head":"\n\n
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