The Cost of Endurance: Russia’s Economic Limits in the Ukraine War

Since the start of Russia's full-scale invasion of Ukraine dubbed “The Special Military Operation” [SMO] by the Russians. The economy of the Russian Federation has proven remarkably resilient despite western sanctions. However, there is increasing uncertainty as to how long Russia’s  war economy can endure, with current events signalling the Russian economy taking a turn for the worse (Ash. 2025). As the war in Ukraine continues to cause economic strain upon Russia’s economy only time will tell how the Kremlin fairs. Currently, the Kremlin faces two key interrelated economic issues. creating this problem. One domestic. The other foreign.

Firstly, we must look at the domestic issues facing Russia. Whilst it is true that the scale of Russia’s military budget has aided in maintaining the economy’s growth, with national GDP having risen by 4.1% in 2024 (Bank of Russia. 2025. p21) and the level of spending has assisted in dampening the impact of sanctions from the West and funding the war. This is reflected in the level of military spending in Purchasing Power Parity from 2024, with spending leveling to the equivalent of $462b, accounting for 6.7% of GDP (IISS. 2025). It is pertinent to highlight that as of 2025, the predictions for the Ruble [ruble] are less optimistic. The level of military spending has simultaneously catalysed inflation to undesirable levels, with the current inflation target of the ruble at 4% GDP, against the current actual rate of inflation of 8% (Bank of Russia. 2025), means the ruble is still unable to achieve desired rates.

Considering this, the central bank of the Russian Federation, has had to alter its fiscal projections for the year. This poses a degree of risk, as any sudden diminishment of hiking interest rates could impact efforts to counter inflation, if enacted too prematurely. While the domestic resilience of Russia has been upheld by its robust war economy, this system is only a temporary safety net, due to the limited sustainability of such an economic structure.

With the recent attacks from Ukrainian strikes on Russia’s refineries having intensified, it has severely hindered production of domestic diesel and gasoline production. In this regard, the conflict of the war holds a great deal of logistic stress upon Russia, that is not exclusively concerning matters of a military nature. As a result, the rate of national production has dropped by approximately 20% (Financial Times 2025). To further complicate the situation for Russia, OPEC+ has increased production of oil. This is naturally not ideal, especially when combined with the relative low demand for oil in the global economy. It may prove to hold significant economic ramifications for the Russian Federation.

This issue may also hold the risk of creating an environment for diplomatic division between Russia and the wider OPEC+ cartel. Specifically, between founding members (Russia and Saudi Arabia), possibly due to the nature in which the Russian Federation engages with oil exporting at a discounted value. This strategy under normal circumstances would be logical, with the aim of challenging predominantly shale-based oil producers (mainly the USA). Yet given the economic strain already burdening the Kremlin, the further devaluation of crude oil from OPEC+ would only further exacerbate its poor economic performance-given Russia’s discounted export price. Therefore, it is possible that this issue may pose an area of key conflict within the cartel, if it is not rectified soon. As in the near future, rivals of OPEC+ may attempt to exploit this situation.

In conclusion, the current prospect of Russia’s economy is rather uncertain. Yet despite this, the reality of Russia’s geopolitical presence, as a key global actor, persists, even if its economy may begin to show signs of recession. The war is still proving to be an issue of great geopolitical severity, and thus a great opportunity for the Kremlin to expand its hegemonic influence.

Sources:

Bank of Russia (2025). The Central Bank of the Russian Federation. [online] www.cbr.ru. Available at: https://www.cbr.ru/eng/. [Accessed 11 Oct. 2025].

Bank of Russia (2025). Anual Report 2024. [online] Bank of Russia. Available at: https://www.cbr.ru/collection/collection/file/55580/ar_2024_e.pdf. [Accessed 11 Oct. 2025].

Ash, T. (2025). The ‘Fortress Russia’ economy has adapted well to pressure. But stagflation presents an opportunity for the West. [online] Chatham House – International Affairs Think Tank. Available at: https://www.chathamhouse.org/2025/09/fortress-russia-economy-has-adapted-well-pressure-stagflation-presents-opportunity-west. [Accessed 12 Oct. 2025].

Miller, C., Seddon, M. and Mackinnon, A. (2025). Ukraine hit Russian energy sites with US help. [online] @FinancialTimes. Available at: https://www.ft.com/content/f9f42c10-3a30-4ee1-aff7-3368dd831c8c?signupConfirmation=success. [Accessed 12 Oct. 2025].

McGerty, F. and Dewey, . (2025). Global defence spending soars to new high. [online] IISS. Available at: https://www.iiss.org/online-analysis/military-balance/2025/02/global-defence-spending-soars-to-new-high/. [Acessed: 12 Oct. 2025].