Russia appears to the economic cliff after 40 months of war | International

Forty months are many in a war. Even more, for an economy that already dragged dangerous dependencies of a world, fossil, which, fortunately, in a few decades will be relegated to history books. Almost three and a half years after Vladimir Putin gave the order of invading Ukraine, thus breaking all bridges with the West, Russia is today trapped in a maze of difficult exit: low growth and triggered prices, with annual double -digit increases.

The Economic Forum of St. Petersburg, once showcase and symbol of the Russian strength in the global market, became a couple of weeks ago a walk of Putinism. Although not precisely happy. “We are on the verge of recession,” admitted the Minister of Economic Development, Maxim Reshetnikov. The reserves that supported the accounts these years, apostilled the governor of the Russian Central Bank, Elvira Nabiúlina, “have been exhausted.”

Little remains of the Russia of the late 2021, when the verbal clash with kyiv went to more, but few, very few, suspected the step that Putin was about to give. Today, in July 2025, its Central Bank is installed in an crossroads, a double parallel combat against inflation and against Kremlin. Something like dancing a waltz on a dynamite barrel.

“The country is in a situation of stagning,” he says, without a bit of doubt, the Macroeconomic Analysis Center and short -term forecasts (TSMAKP, in its acronym in Russian) in a recent report. “Economic dynamics is declining quickly and there is a risk of a technical recession in the second and third quarter, but inflation remains high.”

Not three weeks ago since the emitter institute, theoretically independent of government control, symbolically lowered interest rates: from 21% to 20%. It thus fulfilled an old demand of the Kremlin. It was the first time that he has done it since September 2022, the year of the Russian invasion of Ukraine. Thus, a long path of increases in the price of money was left behind to try to placate the flooding of prices.

The situation, however, remains devilish. Inflation is still 10% year -on -year in its official reading, although several independent centers place the real figure above 15%. With the still runaway spending, “the risks continue to have an inflationary bias,” Nabiúlina warned. “So reducing interest rate requires great caution.”

The contradiction in which the central bank lives is a faithful reflection of the moment that the Russian economy is going through, it has long been Top 10 World by size. At this point, even the Kremlin begins to recognize the evidence: that the economic pull driven by the war industry touches its end and that saved before the war no longer gives more of itself.

The Economy Advisor of the Almighty Presidential Administration, Maxim Orelhkin, said the king is naked just before the St. Petersburg forum: “This growth model has been exhausted (…). An advance is necessary; not forward, but up: towards the next technological and organizational level.”

However, Russian propaganda insists that Russia is better than the European Union, its continental nemesis. The unemployment rate, defends, is minimal: of just over 2%. The National Statistical Office, Rostat, emphasizes that the average salary exceeds for the first time the barrier of 100,000 blubers per month (1,100 euros), 40% more than in 2022.

Prices that eat salary increases

That is the fixed photo in nominal terms; Not real. Even to its official measure, makeup, inflation has shot 24% in that period. “The government and everyone hides real reading because, if they show it, they will have to raise salaries in the public sector and pensions,” said Deputy Nikolai Arefiev a few months ago. “And they don’t want to waste money.”

They don’t want and can’t. The Russian authorities trusted to close 2025 with a public deficit of 0.5%, the lowest since 2021, with the war still in treasury and the high prices of fossil fuels priming public coffers. But the very expensive fighting with Ukraine continues and the lower house has just reviewed the prognosis for more than tripling it: now it awaits 1.7%, as in 2024. Kremlin has less than four billion liquid rubles in its sovereign background, the equivalent of the deficit planned for this year.

The real flood of prices devours, week by week and month after month, salary increases. Damaging the pocket of the Russians, yes, and also the mood of a country at war: only one in ten Russians has noticed an improvement in its financial situation this year, according to the Center for Sociological Studies FOM. One in five perceives it worse.

With the feeling of the latter, the TSMAKP agrees: “There is a tendency towards an almost total slowdown of the activity: the stagnation of investment in machinery and equipment has been aggravated by the growing problems in construction,” warns in a shady tone. “And, most importantly, a crisis in consumption is coming, especially in the demand for non -food goods.”

After an economic overheating period, the indications of crisis are piled up. Despite the innumerable state aid to the financing of the war industry, the general credit volume barely grows 1% so far this year. Seven out of ten companies have suffered a sinking in consumption in the first quarter, according to a survey of the Stolypin Institute. Employment vacancies have fallen to minimums since the beginning of the war, according to the Huntflow human resources firm count. The delays in salary payments have tripled, while more than 8.8 million Russians are unable to return loans with delays of less than 90 days. Car sales have collapsed 25% in the first semester, and clothing chains warn that their sales have been reduced by 30% and 35%; In part, for the increase in other basic family expenses.

The military, unique engine of the Russian economy since February 2022 together with oil and gas exports, artificially promoted the economy in 2023 and 2024 on the back of a high demand for weapons and high wages for recruits. But that bum, usual in a country at war, begins to combine in past. Partly for Western sanctions, yes, but not only.

One year of margin

The war countercara is that the defense sector has drained and continues to drain huge resources to a real economy mired in the recession. The civil industry has been in those since the past fall, volatilizing the growth accumulated in the first years of war thanks to the irrigation of public money. With an aggravating aggravation: instead of replacing imports with national product, as Putin insists, the Russian market is increasingly dependent on other countries, especially China.

If the military industry is withdrawn from the equation, Russian civil production has barely grown 1.9% in the last four years, according to ROSSTAT data and the Higher School of Economics. Much less than other countries around you. And, most likely, also less than he would have grown up not having chosen to invade Ukraine.

The Kremlin has just over a year of margin to maintain its current military expense before putting a great dyeing, Vladislav Inezemtsev, co -founder of the analysis center and strategies in Europe (Case), emphasizes. On the horizon, in addition, the big doubt what will happen if there is peace: it seems difficult for the military, who now charge more than 2,000 euros per month – a more than respectable figure in Russia -, accept to return to a quarter of that salary when they return.

In this situation, says Maxim Mironov, professor at the IE Business School, Moscow has a possible letter to play: even more devaluate the ruble, even at the expense of importing even more inflation. The government, which enters dollars and euros – by hydrocarbons – and spends on rubles, would be the first interested in devaluing the national currency. Also for most companies – Salvo for importers – who drag a lacerating loss of competitiveness.

The Middle East oxygen ball

In those was Russia when Israel undertook its large -scale war campaign on Iran, on Friday, June 13. As it could not be otherwise, the Kremlin condemned the attack against one of its great allies. But under that reality there was another, much more complex and, also, more favorable for their interests: oil and natural gas, fundamental in their export matrix, rose strongly.

Moscow left behind, even if it were only for a few weeks, the falls in the price of both raw materials, which had drastically cut their perspective of short and medium term income. And that they had become, in the words of Elina Ribakova, of the Peterson Institute for International Economics, “one of the greatest, if not the greatest” indirect sanction on the Russian economy. Superiors, even to the packages approved by the G-7.

Its calculations are eloquent: a drop of $ 10 in the international price of crude oil is a pit of 17,000 million dollars (14.8 billion euros) in the Russian public budget, according to Ribakova. It is about 0.8% of GDP. A calculation that obviously also operates in reverse.

Since the war items take more than 40% of the Russian budget (which is confidential), “every dollar that enters or stops entering is a dollar more or less for war,” recalls the investigator of the Bruegel Bruegel Studies Center. A prompt solution to the crisis in the Middle East, increasingly complex, would press the downward prices again and “increase Putin incentives to negotiate,” confidents Sergey Guriev, rector of Sciences Po Paris.