Maximum reach. “This was never the case in Russia”

Despite nearly 3 years of driving wars with Ukraine and subsequent sanctions Russian economy has not broken down. The stimulus package proved to be spending on the military. Although, according to analysts, The crisis is getting worse.

– After the first hit of sanctions it seemed that Russian manufacture could last a real collapse in many sectors. This happened, for example, in the car industry. But The Russian state has responded with massive war expenses. This money not only allowed the economy to survive, but even to grow faster than everyone expected – he says Interii Dr. Tomasz Makarewicz, economist at Bielefeld University.

In a country that uses immense resources to fund further attacks, life is worse, though There are groups whose material situation has improved considerably. Their common denominator is war.

The hazard of death on the front or of severe wounds is enormous. However, part Russian decides to fight due to the fact that in return, the state offers large – for its reality – money.

– Signing an army contract means getting promoted to a social ladder by even respective levels, thus improving the existence especially for the family, due to the fact that many soldiers will never return from trenches," says Interii analyst of the Center for east Studies Iwona Wiśniewska.

– For enrolling in the army you can get PLN 15,000, plus various bonuses. In the territory of Svergovia, the fresh recruit receives 86 1000 zlotys – says Dr. Tomasz Makarewicz.

Let's point out that minimum remuneration In Russia since 1 January 2025 is about 835 zł.

High salaries, extra overtime can besides be counted for those employed in the arms industry.

However, the bat has 2 ends. The government invests in war, it turns the spiral of inflation. Officially it is 9.5 percentbut according to analysts, real inflation may be even twice as high.

– Inflation is the average price increase. According to the data, the cost of purchasing basic food products increased significantly, where The evidence belongs to potatoes – 88.8%. – points out the economist.

Real inflation tries to measurement the ROMIR Institute. How? "They collect millions of receipts of citizens who undergo analyses. It follows that the increase in the prices of goods purchased regular by the Russians was at the level of Over 20 percent – notes ORW analyst Iwona Wiśniewska.

Combating inflation Central Bank of the Russian Federation introduced interest rates of 21 %.which caused an additional increase in the cost of living.

– People who have mortgages found themselves in a very hard situation because Typical interest is 30% per year. If specified a debt stops paying off for 3 years, its value will be doubled in time – says Dr. Tomasz Makarewicz.

Businesses are besides affected. War sucks out the workforce, it's harder to get workers, and over 1/3 of companies complain that counterparties do not pay liabilities.

In addition, High interest rates are misjudged by Russian elites. Central Bank policy has been powerfully criticised by Sergei Chamiezova, head of state defence conglomerate Rostec and longtime friend Putin. “If the head of the state monopoly in the arms manufacture publically complains about economical conditions in the country, there is no uncertainty that it is bad. The problem with the availability of loans is so immense that it starts to bother even giants like Rostec – says Dr. Makarewicz.

He explains that interest rates were expected to cool the overheated economy.

– Interest rate At 21 percent, inflation should crush. But erstwhile the economy is overheated, The government is pouring coal into the oven.: Increases war spending and sucks more and more people out of the market, sending them to the front, so The Central Bank's bitter pill is not working – says the economist.

The Russian currency in the context of abroad trade practically ceased to exist. The first weeks after the invasion For a dollar, you had to pay 150 rubles.That's twice as much as before the war. However, the Central Bank managed to stabilise the situation rather quickly, at the expense of the conversion of ruble. However, in 2024, Russian currency again weakened, which was mostly the consequence of American sanctions. Now, $1 is worth over 100 rubles..

However, the rate is not set by the markets. It's determined by the Russians themselves, the Central Bank.

– The sanctions made the ruble unalterable. The dollar trade on the Moscow stock exchange has been halted and transactions involving Western currencies are mainly carried out by commercial banks. The rate offered by them is not attractive for both buyers and sellers, due to the large currency spread (difference in the exchange rate-red.). The authoritative ruble course of the Central Bank of Russia determines regular on the basis of bank operations, explains OSW expert Iwona Wiśniewsa.

Ruble weakness is 1 of the many evidences that sanctions, although critics believe there should be sharper and better enforced, they work.

The sanctions hit Russia. erstwhile they came into force, The Russian economy had a "supplement of fat", so the sanctioned hunger did not reign immediately. Meanwhile, the government sought fresh import and export markets. Part of it worked. However, sanctions are important. 1 example is the railway movement, which in Russia fell by 25 percent. The reason is no locomotives. Russians are incapable to produce fresh ones or rapidly repair old ones, due to the fact that they deficiency parts – says Dr. Tomasz Makarewicz.

There are besides problems with the aviation fleet and the already mentioned production of cars. Vladimir Putin He besides loses the conflict for cereals," emphasises the Italian paper "Corriere della Sera". The paper notes, that in 2 years agricultural production fell there by 20 percent. He besides notes that this is akin to the times of the collapse of the russian Union and continues to impoverish the poorest Russians.

In addition, in January, a punishment was imposed on the alleged "shadow float" alleged ships which illegally transport goods. According to Bloomberg, in connection with sanctions The cost of Russian oil transport by "shadow float" increased 3 times.

The Russian economy was based on exports of energy natural materials. After 3 years of war, his value was reduced. Russia has found fresh outlets in India and Chinabut they will not replace the European market.

In addition, the Ukrainian gas pipeline thread has disappeared since 1 January. This is another blow against Russia and sealing the hard situation in which he found himself Gasprom – pearl in the crown of Russian economical potential.

– Before the war Europe was for Gaspromin the main and most profitable market. In 2023, the company recorded a financial failure for the first time in 25 years.Moreover, gasprom supplies of natural materials to Europe scope a historical minimum. Gazprom has not exported so small since the 1970s, erstwhile the USSR started deliveries," emphasises OsW analyst Iwona Wiśniewska.

On the closure of a thread leading through Ukraine, Gazprom will lose about EUR 5 billion. This is simply a serious harm to the company. By saving yourself, company increases exports to Chinese directionThrough the Siberian Power Gas pipeline. In addition, Gazprom continues to export to Turkey and partially to South Europe, through Turkish thread.

According to the AGS, despite efforts to get fresh markets, for now Nothing will fill the severe gap that caused the failure of specified an crucial client as Europe.

Gazprom's serious problems are besides evidenced by the information that appeared in early January. – The company plans group redundancies. They can cover about 1.6 1000 employees, i.e. 40% of the crew employed at the company's headquarters – says the expert.

Putin's regime's way of facing a hard economical situation, in addition to propelling the war industry, has become, among others, a way. LNG exports (condensed gas). – You gotta admit that After the war, European countries began to increase their purchases of liquefied gas from the Russian Jamal LNG project. In 2024, its share increased to 20% of all EU imports of this natural material, as indicated by the OSH expert.

Russia continues in the next attempts to circumvent sanctions: utilizing companies registered in 3rd countries, or sending into the planet the said "shadow float".

Despite efforts, the budgetary situation is not stable.

– The budget in a full-screen war is being implemented with a deficit. It's fresh in Putinian Russia. backing takes place from previously accumulated government reserves and by borrowing interior debt. The Ministry of Finance sells bonds which are mostly purchased by Russian commercial banks for the money they received from the Central Bank. De facto is It's an component of money printing. Dynamically rising spending on the needs of the army is besides covered by an increase in taxation burden on citizens and business, says Wiśniewska.

The government has unlimited possibilities to print money and make inflation, which is simply a hidden tax.

– In 2025 More than 40% of the Russian budget will be targeted at war-related needs. It's a immense sum. Interestingly, defence spending will be higher than the projected export gross from oil and gas. We have never observed specified a situation in Russia – points out the analyst of OSW Iwona Wiśniewska.

How do they fund it? “More taxation increases, but besides reducing another spending, including social policy,” he says.

Massive war effort has so far contributed to GDP growth, and in 2024 it was around 3.6 percent. – However, the economy is not able to grow further at this rate, growth factors are moving out. Companies have reached their maximum production capacity, they deficiency hands and machines – says Iwona Wiśniewska.

Dr Tomasz Makareivcz besides admits that after 3 years economists began to foretell the collapse of the Russian economy again. Sooner or later, something will break. The next steps, like the Central Bank, are to break fever in a patient who has a severe flu virus. Only antibiotics will aid – that is, the end of a war that cannot be sustained indefinitely – concludes.

– erstwhile the war is over, there will be quite a few effort to fix the Russian economy," adds the analyst of the OSH.