A Hollowed-Out Military and an Unsustainable Economy
Russia's war in Ukraine has exposed a critical weakness behind its military facade: a stagnating economy that threatens its long-term power. While Moscow still possesses vast Soviet-era stockpiles of tanks, artillery, and aircraft—allowing it to sustain heavy battlefield losses—the real crisis lies in its economic foundations, which are eroding under the weight of sanctions, mismanagement, and misplaced priorities.
Despite initial resilience, Russia's economy is increasingly reliant on unsustainable military spending, which now accounts for 40% of the state budget. GDP growth, once buoyed by wartime production, is slowing—projected at just 1.8% in 2025, down from 4.1% in 2024. Meanwhile, inflation remains stubbornly high at 9.5%, forcing the central bank to maintain interest rates at 21%, stifling private investment.
The Illusion of Strength
Russia entered the war with a vast arsenal, but losses have been staggering:
- Tanks and armored vehicles reduced by 25-50% since 2022.
- Aircraft grounded due to maintenance shortages, with satellite imagery showing abandoned jets at key airbases.
- Artillery shells increasingly sourced from North Korea, signaling domestic production struggles.
Yet, as analysts note, Russia still has thousands of mothballed Soviet-era weapons to draw from. The deeper issue is that this stockpile-driven warfare masks a failure to modernize. Instead of building a competitive, high-tech economy, Moscow has doubled down on low-tech, attritional warfare, resembling the "Kalashnikov model"—cheap, durable, but outdated.
The Economic Time Bomb
Russia's real crisis is not military but economic and demographic:
- Labor Shortages – Over 1.5 million skilled workers are missing due to war casualties, emigration, and mobilization. By 2030, the deficit could reach 2.4 million.
- Sanctions and Isolation – Despite evasion efforts, Russia's access to critical microelectronics and high-tech imports has been severely restricted, forcing reliance on China and shadow networks.
- Dependence on Energy Exports – Oil and gas still fund 27% of the budget, but Western sanctions and a global oil price drop threaten this lifeline.
- Reverse Industrialization – Civilian sectors stagnate while military production soars, creating a lopsided economy.
The Long-Term Consequences
Even if Russia secures gains in Ukraine, its window for economic recovery is closing. While NATO rearmament accelerates—with European defense spending now at Cold War levels—Russia risks becoming a militarized backwater, unable to compete with the economic powerhouses of the U.S., EU, or China.
As one economist starkly put it: "Russia had every resource under the sun but chose tanks over development. Now, it faces a future where money—not brute force—will dictate power."
If current trends continue, Russia may find itself outmatched not on the battlefield, but in the global economic arena—a far more decisive front.
Sources: BOFIT, CEPA, Jamestown Institute, PISM, RUSI, Riddle, Reuters