FLASH
Shkruar nga Janusz Bugajski
A cluster of negative factors could turn into a full-blown crisis within the coming months.
The Russian state is showing increasing signs of stress, decline, and conflict, evident in several dramatic recent developments. In particular, divisions within the elite are becoming more apparent, as the state rapidly depletes its declining revenues and depletes its financial reserves. A confluence of negative factors could escalate into a full-blown crisis within the coming months.
Russia is in a deep economic slump, and the rosy picture painted by the Kremlin is a facade. Russia faces deep structural problems with an overreliance on energy exports and the pursuit of a war economy at the expense of the civilian sector. By 2025, military spending will reach a third of the federal budget, with resources diverted from other shrinking economic sectors. Growing difficulties are plaguing Russia’s industrial economy. Key export sectors such as steel, chemicals and machinery have collapsed as international sanctions have cut off access to key markets, spare parts and finance.
Crude oil sales have kept Russia’s economy afloat, but the oil market is volatile, and Russia’s refined oil exports are in decline. Although Western energy sanctions were insufficient during the first three years of the war, they are now being expanded to restrict Russia’s oil trade and reduce state revenues. Oil and gas revenues have fallen by more than a third this year compared to 2024. Russia is also depleting its financial reserves accumulated during periods of high energy prices and is unable to borrow on international financial markets. Russia’s National Wealth Fund could be completely depleted by the end of 2025. Even Elvira Nabiullina, the head of the Central Bank, declares that Russia’s resources are practically exhausted.
All of these factors will have serious consequences for the financing of the war, for social spending, and for Russia’s internal stability. The current level of defense spending is unsustainable and will destabilize the civilian economy. The authorities will sooner or later be unable to pay government salaries and pensions or finance necessary social services. Western intelligence services estimate that Moscow’s ongoing summer offensive has proven to be the costliest of the war so far, with total manpower losses now reaching 1.3 million. As Russian forces suffer further attrition, Moscow may need to carry out mass mobilization, a highly unpopular move that it has avoided for fear of triggering another mass exodus and possible social unrest in the major cities.
The purges and power struggles have already begun. Russia’s elites fear that, as the revenue pie shrinks, they will lose the resources and positions they have been allocated by the Kremlin. Some members of the elite are trying to create their own political coalitions in order to survive beyond the Putin era. This in itself undermines the regime’s foundations and will accelerate power struggles, as Putin has no obvious successor. Growing factionalism and violence between security and economic clans will test the country’s survival.
In a sign of the mounting pressure on the regime, Russia’s transport minister and former governor of the Kursk region was recently found dead in his car after being dismissed from his post. He had been set to be arrested for embezzling state funds earmarked for the construction of defensive fortifications in Kursk. Several top generals have been arrested for corruption or incompetence in the war against Ukraine, while others have been sidelined as Moscow tries to mount an anti-corruption crackdown to stem the flow of increasingly scarce financial resources. The Kremlin is also squeezing the oligarchs for needed funds, including energy and mineral tycoons, and is on the verge of seizing all major private assets and nationalizing major companies. Even the oligarchs’ loyalty to Putin and the war effort will not spare them from the government’s financial desperation.
A struggling central regime in Moscow, with dwindling economic resources and growing dissatisfaction with the war’s outcome, could destroy Russia. As during the collapse of the Soviet Union, this could bring out more independent regional leaders who would challenge Moscow’s economic exploitation and keep the revenue payments to the center. In addition, tens of thousands of returning military veterans, unable to reintegrate into the civilian sector and facing extreme poverty, could form armed militias and gravitate toward regional leaders who could offer them better terms in exchange for protection against Moscow. Then, as the center weakens, some regions and republics could seek true sovereignty and even independence, as we have seen in previous imperial collapses.
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