There is a moment, in every war that lasts beyond all expectations, in which the war machine begins to devour not only the bodies of the soldiers but also the foundations of the economy that fuels it. That moment seems to have arrived for Vladimir Putin’s Russia. Not with a sudden collapse, not with the brutality of an announced financial collapse, but with the silent and inexorable slowness of the numbers which change sign: first the growth halves, then it goes to zero, then it reverses. And the numbers that don’t add up become, day after day, more difficult to hide.
More than four years after its full-scale invasion of Ukraine, Russia presents the world with an apparent paradox: an economy that holds, the shops are not empty, rubles are circulating, wages in defense-related sectors are growingbut which under the surface accumulates structural tensions whose existence no Ministry of Finance, no matter how complacent towards its leader, can no longer silence. The war in Ukraine, Bloomberg observed, is “draining Putin’s money”, and the signs of this silent erosion are multiplying.
The toll of the war: figures that have no historical precedent
The number that best captures the state of things is only one, and it is worth more than a thousand analyses: this year almost 40 percent of the Russian federal budget is allocated to defense and security. A quota that is unprecedented in the modern era, even higher than what the Soviet Union allocated to defense in 1940, on the eve of the Nazi invasion. Then the USSR was preparing for all-out war against an enemy that had already conquered half of Europe. Today Russia claims that it is not “at war”, but in a “special military operation”. The gap between the word and the number is dizzying.
According to documents seen by the Financial Times, the Ministry of Finance has estimated that this year alone it could require at least 28 billion dollars more than expected to finance the conflict. The result is a deficit that continues to widen: in the first four months of 2026 the deficit is already more than 50 percent higher than the target set for the whole year. It’s not the end of the world, but it’s the end of the fiction that war pays for itself.
Bloomberg revealed that in recent weeks some officials from the Ministry of Finance and the Central Bank have raised the alarm to Putin: the current level of military spending risks widening the deficit beyond levels considered sustainable. Some even dared to suggest reductions in defense funding. The president rejected the hypothesis. But rejecting a proposal does not mean erasing the problem.
GDP contracting, growth halved: the numbers that propaganda cannot ignore
In the spring of 2026, something happened that the Kremlin propaganda machine struggles to explain: Russian GDP contracted by 0.2 percent in the first quarter, the first decline in three years. It is true that the Central Bank indicated the exceptional snowfalls of January and February as a contingent cause of the slowdown in the construction sector. But the structural reasons are deeper and more stubborn than the weather.
Growth forecasts for the whole of 2026 have been cut dramatically: from 1.3 percent to 0.4. For 2027 the estimates have been almost halved. The International Monetary Fund, which had slightly revised its estimates upwards (to 1.1%), was keen to point out – through the voice of its general director Kristalina Georgieva – that these data do not reflect the real structural deterioration of the Russian economy. Higher oil prices offer “a bit of respite”, Georgieva explained to Euronews, but are not enough to compensate for the deeper damage to the production system.
Before the war, Russia’s potential growth was estimated at around 1.6 percent. Today it is hovering, at best, around 1 percent. A permanent loss of production capacity, not a simple economic slowdown.
The two-speed economy: cannons and butter don’t go together
The analysis by The Bell, one of the most reliable Russian economic media, highlights a phenomenon that economists know well: the Russian economy is splitting into two halves that live in parallel realities. On the one hand, the companies that work for the State, clogged with guaranteed military orders, with growing salaries and assured orders. On the other hand, the rest of the private sector, caught between stratospheric interest rates, close to 15 percent, as the IMF has noted, is experiencing a shortage of labor and declining consumption.
Military spending now exceeds 7 percent of GDP, compared to 3.6 percent in 2021. According to ISPI data, revenues from oil and gas, which before the war constituted more than 40 percent of state revenues, they had fallen to less than 25 percent by September 2025. In January 2026 they had almost halved compared to the previous year, falling to around 400 billion rubles, equal to just over four billion euros. Less hydrocarbons, more cannons. An equation that holds up in the short term, but which in the medium term erodes the foundations of the Russian model.
Finance Minister Anton Siluanov claims that the population’s real incomes have increased by more than 24 percent in the last three years. True, at least for those who work in the defense industry or have a public contract. But delays in salary payments have almost doubled compared to a year ago, and a growing share of these missed payments concern public contracts: an unmistakable signal that the state machine is starting to show liquidity strains.
Propaganda and the myth of the economic fortress
From Moscow, the narrative is always the same: Western sanctions have failed, the Russian economy is immune, the West has shot itself in the foot. The International Economic Forum in St. Petersburg, the “Russian Davos”, as it is called, is the annual event in which the Kremlin exhibits this resilience. But at the fifth “war” edition this year, the scenario cracked: a swarm of Ukrainian drones fell on the city coinciding with the opening of the forum, forcing the temporary closure of the airport. Guests arrived at the opening ceremony under a blanket of thick smoke.
The contrast is powerful: the Spief wants to communicate normalization and international attractiveness, but the war remains the factor that conditions everything – security, infrastructure, credibility of the Russian model. The narrative of the impenetrable economic fortress clashes with increasingly less governable numbers.
The idea that sanctions “failed” because Russia was not isolated does not stand up to scrutiny. Moscow has certainly diversified its trading partners, pivot towards China, India, Iranand built alternative routes for trade. But the economic system that emerged remains structurally fragile: slow growth, persistent inflation, high rates, dependence on energy and military spending. Von der Leyen found this with precise data: Russian energy revenues fell by around 40 percent at the beginning of 2026hundreds of ships have been hit by sanctions, and export controls are depriving the defense industry of critical technologies and components.
Oil, the Kremlin’s last life insurance
There is one factor that, more than any other, has allowed Putin to postpone the showdown: the price of oil. Every time crude oil rises, the Kremlin buys time. According to Bloomberg, in May 2026 shipments of Russian crude oil abroad reached the highest levels since the beginning of the invasion: paradoxically, the continuous Ukrainian attacks on refineries have convinced the Russians that it is better to export crude oil rather than refine it at home. The closure of the Strait of Hormuz and Middle Eastern tensions have provided unexpected relief to Moscow’s coffers.
But to truly rebalance public finances, crude oil would have to remain steadily above $100 a barrel for a prolonged period. A scenario that no serious analyst considers likely. And in the meantime, Ukrainian attacks with long-range drones continue to hit oil hubs, refineries and tankers of the “shadow fleet” that transports crude oil to evade sanctions: a direct physical risk that now weighs on Russian public finances in an increasingly visible way.
The silent crisis: demographics, brain drain, technological isolation
Behind the GDP and deficit numbers lies an even deeper and more difficult crisis to remedy: the demographic and human capital crisis. The war took away hundreds of people from the working population thousands of men, dead, wounded, enlisted or fled abroad. The IMF has identified the loss of a substantial part of the young population as one of the most serious long-term structural weakening factors.
Technological sanctions are also producing increasingly visible effects in the energy sector: the lack of technological renewal of oil and gas facilities has become, in the words of Georgieva herself, “a serious problem”. This is not an immediate damage, but a progressive erosion of future production capacity. Those who cannot purchase the technologies needed to maintain and expand their oil wells today will produce less crude oil tomorrow. And it is on that crude oil that the Kremlin’s entire financial equation is based.
Russia’s loss of weight and international prestige then has concrete consequences on the economic fabric: fewer exchange opportunities, less foreign investment, less access to markets and knowledge. A relative impoverishment that accumulates silently, year after year.
How long can it hold? The question no one in Moscow wants to ask
The real question is not whether Russia can afford war today. It can still do so, using accumulated reserves, new debt, new taxes. The question is how long he can do this without eroding the consensus of Putin-supporting elites and without further squeezing the rest of the economy. So far the Kremlin has solved the problem by postponing it: when the Ministry of Finance asks for defense cuts, it is told to find savings elsewhere; when the deficit grows, new extraordinary revenues are used. But with each passing year, the room for maneuver becomes smaller.
The spending cuts that become necessary fall mainly on regional budgets, those that support local public services, infrastructure and part of the payments to the families of fighters. Their aggregate deficit is expected to increase further in 2026, after already high levels in 2025. A militarized “hybrid” economyas more than one analyst has defined it, which must finance the war by issuing artificial subsidies and debt, exposing itself to a risk of collapse that becomes less unlikely with each budget exercise.
There is an image that perhaps describes the condition of the Russian economy better than any graph in this fifth year of war: a man walking on ice that he knows is thin, but continues to advance because stopping means admitting that he has taken the wrong path. Putin continues to advance. The ice continues to thin. And all around, the silence of those who observe, in Moscow as in Kyiv, in Brussels as in Washington, becomes more filled with anticipation every day.
