The Russian economy is deteriorating under western sanctions, with warnings that Moscow's narrative of strength is a lie. According to analysis, President Vladimir Putin's regime is peddling a false story of economic resilience while the war economy shows clear signs of strain.
Key indicators include a labour market so tight that Putin has approved replacing imprisonment with forced labour. Unemployment has fallen, pushing up wages, while a weaker ruble fuels import prices and inflation, despite high interest rates from the central bank. Russia's national wealth fund has almost halved in size since the full-scale invasion of Ukraine, as the government taps liquid assets to finance the war.
Moscow has resorted to Soviet-style interventions: export bans on petrol and sugar, strict capital controls to prevent fund outflows, and heavy investment in the war industry. These measures are seen as a return to the Soviet playbook, prioritising military production over civilian welfare.
While GDP may be growing, it is fuelled by fiscal stimulus and war industry output, which is at maximum capacity. Economists warn this is not sustainable, leading to likely stagnation, rampant inflation, and pressure on households. The long-term damage could be significant if Putin continues on this path.
The analysis concludes that sanctions are effective and necessary, having reshaped Russia's trade and limited access to battlefield items. It calls for continued pressure and support for Ukraine, while challenging Russian propaganda.
