As the Russia-Ukraine war enters its fourth winter, the economic pressure in Russia is spreading from the battlefield to domestic livelihoods. Decreased energy income, shrinking consumer spending, and high labor costs are gradually impacting Russian citizens and private industries, highlighting the real-life consequences brought by the war.
According to a report by Forbes on Tuesday (November 25), the Kremlin has injected billions of rubles to support the war effort, exacerbating budget deficits and making it difficult for local Russian governments to maintain high recruitment bonuses. Despite the military-industrial complex continuing its operations, Russia’s strategic options are narrowing.
The United States and its allies have implemented a series of sanctions targeting energy revenues, primarily hitting the income sources of oil and natural gas supporting Moscow’s war efforts. Recently, the US escalated sanctions on Russia, with the US Treasury Department blacklisting Russian oil companies such as Rosneft and Lukoil, along with dozens of their subsidiaries, ordering all transactions to be halted by November 21.
These two companies account for nearly half of Russia’s crude oil exports. While China and India have maintained some of their purchases, recent cancellations of spot orders and freezing of new acquisitions have occurred. However, pipeline transport to northern China continues. Russia’s major state-owned oil refining companies are experiencing a gradual decline in export income, weakening the resilience of Russia’s energy economy.
According to a report by Bloomberg on November 27, ongoing drone attacks on Russian energy facilities from Ukraine have intensified fuel supply tensions. Russia’s oil prices have remained high since late August, directly impacting the daily lives of ordinary citizens.
Bloomberg reports that Russia’s private economy is visibly affected. The cost of living for Russian citizens is rising, leading to a decrease in food and daily goods consumption. For instance, residents like Denis in Tambov have reduced purchasing fruits and vegetables, while Irina in Moscow has switched to buying more domestic brands to cut expenses.
The retail market is also suffering, with the X5 Group’s third-quarter net profit decreasing by nearly 20%, a 45% closure rate for fashion retail stores, the most severe decline in the electronics market in thirty years, and a roughly 25% drop in car sales.
However, a report from Reuters on the 27th revealed that industrial output in Russia unexpectedly surged by 3.1% in October, with engineering and defense-related manufacturing being primary drivers. Output of military vehicles, equipment, and weapons has significantly increased, reflecting government orders supporting growth in certain industries.
Nevertheless, the report mentions that private industries such as passenger car manufacturing and most civilian processing industries have seen significant declines, indicating ongoing weakness in the private economy. Data shows that the decrease in passenger car production expanded from 1.7% in September to 46.7%. The Russian Ministry of Economic Development has revised down the growth expectation for 2025 industrial output from 2.6% to 1.5%. Industrial output grew by 5.6% last year.
Ordinary citizens are also feeling the economic pressure in their daily lives. Russians are facing scenarios where prices are rising faster than wage growth, reduced food expenditures, closures of retail stores, and significant decreases in car sales.
Weak demand is prevalent in the food, electronics, and fashion retail markets, while the steel and coal industries are experiencing production declines, and the banking sector’s non-performing loans are increasing. To address the deficit, the Ministry of Finance plans to issue new bonds and raise value-added taxes and automobile acquisition taxes.
Experts suggest that while Russia’s overall economy has not yet plunged into a systemic crisis, the decline in private industries and fiscal pressure continues to accumulate. Oleg Buklemishev, Director of the Economic Policy Research Center at the Moscow State University, stated, “Russia’s economic resilience has been severely weakened, and while a systemic crisis may not occur in 2026, the economic situation will continue to deteriorate.”
“If Russian authorities intend for the economy to function normally, they must halt the so-called ‘special military operations,'” Buklemishev pointed out, using Putin’s term for the war. “They have not fully realized the need to make choices, but the warning signs are already evident.”
Despite the short-term support provided by the military-industrial complex for industrial growth, Russia’s overall economy is facing multiple pressures from the war, sanctions, and declining private demand. Decreased energy revenues, expanding budget deficits, and a slump in private economy indicate long-term economic challenges for Russia.