The Kremlin is able to maintain the current combat pace for at least another two years
The Russian economy has avoided recession thanks to high oil prices and fiscal stimulus, yet the Kremlin will be able to sustain the current pace of war for at least another two years. This is evidenced by estimates from Ukrainian economists, who note that the militarization of the budget and the growth of domestic borrowing are deepening macroeconomic imbalances in the aggressor state. This was reported by Economichna Pravda citing Growford Institute, according to the portal PromPolitInform.
For a long time, expectations of a rapid financial collapse of the Russian economy under international sanctions failed to materialize. Moscow adapted its foreign trade flows, reorienting energy supplies to Asia and securing parallel technology imports through third countries.
War financing and budget deficit
Significant budget injections and preferential lending to military-industrial complex enterprises have caused a sharp increase in the debt burden. The share of military spending in the budget has reached record levels, leading to an increase in the state financing deficit.
To cover the shortfall, the Russian government is actively attracting internal resources through bond placements and the use of public bank deposits. At the same time, the rise in the Central Bank’s key rate and demand for cash are creating a liquidity deficit in the financial sector.
Oil revenues and tax pressure
Despite sanctions restrictions, energy carriers continue to provide a significant portion of revenues to the federal budget of the Russian Federation. Fluctuations in global oil market prices give the Kremlin a temporary respite to finance armed aggression.
In addition, the authorities are resorting to increased fiscal pressure on citizens and businesses through hikes in income and consumption taxes. Social spending is gradually being crowded out by priority expenditures on maintaining the army and recruiting military personnel.
Strategy of economic exhaustion
Analysts note that available reserves and export revenues will be sufficient to continue hostilities at the current intensity. The aggressor’s economy is gradually plunging into stagnation due to a shortage of personnel and the technological backwardness of civilian sectors.
Ukrainian experts emphasize the need for a medium-term strategy of economic exhaustion of the enemy rather than waiting for an instant collapse. Systemic restrictions on export revenues and a decrease in the profitability of raw material sectors remain key tools of counteraction.
Photo: Economichna Pravda
Read also: Putin’s envoy flies to the US for meetings with Trump’s team
