Russian companies slowly bleeding to death:
Russian shops are now selling bread by the slice:
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The comments are full of questions…
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The 78.2 is not in dollars.
The Russian economy in 2025 presented a complex picture in which resilience and fragility coexisted. This was in spite of the Western sanctions-induced economic shock the country faced following its 2022 invasion of Ukraine, albeit supported by an unexpected economic rebound in 2023 and 2024.
Official data indicate that gross domestic product (GDP) expanded by 4.1 percent in both years, a performance that surprised many external observers. Yet the forces behind this expansion were far from typical for a peacetime, market-oriented economy. Instead, Russia entered what has frequently been described as a “war economy,” in which state spending – especially on the military-industrial complex – became the primary engine of growth.
Within this unusual environment, Russia also witnessed what many have termed a domestic consumer boom. This was driven not by structural improvements in productivity or market conditions, but by rising wages and state transfers linked directly to the war effort.
recent data show monthly net transfers into domestic accounts of 58.5 billion rubles ($756 million) in August 2025 – matching the previous high recorded in March of that year.
This repatriation of capital contributed to a replenishment of liquidity in the domestic banking sector and the economy more broadly. According to data from the Central Bank of Russia, by the end of 2023 the credit that banking systems extended to households and firms rose by 22.9 percent, sharply up from 12 percent growth in 2022; with foreign-currency credit also rising strongly. The expansion in domestic banks’ balance sheets helped fuel a surge in lending: with mortgage, consumer car loans and unsecured consumer credit all growing quickly.
As labor markets tightened – due to both conscription and an increasing demand for workers in defense-related industries – real wages rose rapidly, particularly for those employed in or adjacent to the military-industrial complex.
Over the course of 2025, the sustainability of the consumer boom of the previous two years became increasingly doubtful. Inflationary pressures, high interest rates and the exhaustion of the initial wartime stimulus all pointed toward a slowdown.
By 2025, China had become Russia’s main trading partner for both exports and imports; roughly a third of Russia’s exports go to China, and more than a third of its imports come from Chinese producers.
In terms of sustainability, Russia’s relatively low public debt (as a share of GDP) gives the government some fiscal space to run moderate deficits, yet this tolerance has limits.
So the Russian economy has moved into stagnation.
Similar results in the Ukrainian economy:
https://www.focus-economics.com/countries/ukraine/
Ukraine, a country with vast agricultural and industrial potential, has been significantly impacted by Russia’s full-scale invasion in 2022. Before the war, Ukraine was growing as a key European economy, with a GDP of over $200 billion. However, the war has devastated infrastructure, displaced millions, and drastically reduced economic output. In 2022, GDP contracted by over 30%, with some recovery seen in 2023 as international aid and wartime production supported economic activity. The war has led to severe fiscal strain, with a budget deficit exceeding 20% of GDP, largely financed by Western aid.
*However, the war has disrupted farming, with mined fields, labor shortages, and damaged infrastructure complicating exports. *
The Ukrainian economy will remain highly dependent on foreign aid and the course of the war in the near term.
Also 6 million Ukrainians have fled the country hindering work labor force and military manpower.
Current state of the war:
The war in Ukraine will be entering its fifth year on Tuesday, with no end in sight
The country’s infrastructure, especially housing, has been badly damaged. Wheat exports, so important to the economy, have fallen.
Over the past year, the most significant change has been Ukraine’s ability to defend itself. Western military assistance is falling. At the same time, Russian attacks, with drones in particular, have increased.
The USA has stopped arms & munitions donations to Ukrainians. There is speculation that this is temporary. That the US needs to replenish supplies in its arsenal. If true, it will take quite a while as the US defense industry is at full production mode with no more excess capacity.
The EU is also strained as they move to increase the EU’s defense capability while still providing aid to Ukraine.
The Russian military grew from close to 900,000 before the invasion in 2022 to about 1.3 million in 2025. But almost all of Russia’s recruitment in 2025—30,000 to 35,000 enlistees per month—was to replace combat losses. By December, unrecoverable casualties (those killed and seriously injured) began to exceed monthly recruitment, which also dipped. The upshot is that the Russian military can’t expand at the current pace of offensive operations.
*Although Russia still enjoys a considerable manpower advantage over Ukraine, the negative trends are only likely to get worse. *
The challenge for Ukraine is maintaining the force’s combat strength at the front. Drone units often expand by recruiting within the military rather than outside it. Despite advances in autonomy and artificial intelligence, most systems in Ukraine remain crew-operated and require maintenance, logistics, and enabling technologies. In brief, drone warfare is still manpower-intensive. Unfortunately, this is where Ukraine faces problems. Thousands of personnel are absent without leave. Soldiers are tired, and in the tougher sectors, those in the infantry spend many months in their positions without rotation. And as the fighting shifts from combat infantry to drone units and specialists, losses become increasingly difficult to replace because people serving in those positions require much more training to develop specialized expertise.
Wars are contests of will and endurance as much as they are contests of systems.
The Ukraine war is a war of attrition and both sides are suffering. Russia has sustained more casualties but has a much larger population.
I don’t know Putin’s original goal in this war. But it appears he is willing to settle for the Donbas region in which Russia controls 90%. It has an industrial base with raw materials and a significant number of ethnic Russians. At the present time, the Ukrainians do not have the capability to retake the area. And Western aid is on the decline. Sanctions have not caused the economic collapse the Russians. Nor have sanctions Worked in Iran or Cuba either.
CNN’s take on the situation:
negotiating table for years
Analysts say the Kremlin could weather it for many more years at the current pace of fighting and with existing Western sanctions in place.
“If you look at the economy itself, it’s not going to be that ultimate straw that breaks the camel’s back,” said Maria Snegovaya, a senior fellow for Russia and Eurasia at the Center for Strategic and International Studies (CSIS), a think tank. “It’s not catastrophic. It’s manageable.”
How long can Ukraine endure the strain?
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A full oil embargo may be necessary to get Russias attention. Is that likely?
Were we not just surprised by the same number in the US?
Great minds use the same numbers.