James Savin — August 25, 2026
Russia planned to have fully annexed Ukraine within ten days of their first attack in 2022. Five years later, the war is still raging on, and Russia is quickly bleeding their remaining financial resources. Economic sanctions by the West and a move away from Russian oil have ground the Russian economy to a halt. While tremendous wartime production and government bonds was enough to keep Russia afloat in the beginning stages of the war, the nation’s debt has ballooned to an enormous sum. Russians fear an attempt to nationalize bank deposits and are pulling trillions of rubles out of the bank. Many fear an imminent economic collapse.
Ukraine has a wealth of resources that Russia wants to acquire. Ukraine, known as the breadbasket of Europe, is home to vast oil and mineral deposits and especially fertile soil. In the Soviet Union, Ukraine was the second most populous of the fifteen Soviet Republics and home to most of the USSR’s agricultural production and military strength. For modern Russia, it was vital to keep such a resource in their sphere of influence and out of the hands of the West. In recent years, and particularly in the more nationalist western region of Ukraine, there has been a push to align with the EU and more European institutions. While Russia was once Ukraine’s largest trading partner, Ukraine had shifted towards trade with China and the West, effectively boxing Russia out of their resources.
In 2014, Russia annexed the Ukrainian peninsula of Crimea. Crimea is home to multiple large trading ports and military forts that give invaluable access to the Black Sea. This marked the first of Russia’s land grabbing attempts towards Ukraine and gave them access to important trading routes on the Black Sea.
As time went on, Russia began to make overtures towards the rest of Ukraine. The annexation of Crimea was a turning point in the relationship between the two countries. After the annexation of Crimea, Ukrainian positive opinions towards Russia plummeted and Ukraine increasingly turned towards the West and away from Russia. In 2022, Russia attacked Ukraine with the intention of rushing Kyiv in the same way they took Crimea seven years past. Russian warmakers estimated the coup would be finished, and Ukraine in Russia’s grip, within ten days.
Five years later, the planned ten–day coup has transformed into a war of attrition. Ukrainian military casualties are estimated at 400,000, and Russian casualties at 1.2 million. Russia has exhausted most of its financial resources. Prior to the war, Russia had a relatively low national debt compared to its GDP; 19.6 trillion rubles. By 2024, the debt had increased to 20.5 trillion. In 2025, it increased by 25% to 35 trillion. Russia’s deficit, too, keeps growing. The budget deficit from January to July of this year is already at 6.46 trillion rubles, far far more than the 3.8 trillion rubles forecast for the entire year.
It brings in some money from trading oil at a discount to states like China and India, but as sanctions against Russia oil are still in place across the EU and the West, Russia has lost a significant portion of its export revenue and its profits are further diminished by supply chain constraints that make it more expensive to get oil to the few states willing to buy.
Western sanctions have made a significant dent in Russia’s export revenue. The United States froze $5 billion of Russia’s United States assets; equivalent to 413 billion rubles. They also prevented U.S. investors from trading Russian stocks and seized the assets of some sanctioned individuals such as Vladimir Putin. EU sanctions froze another $330 billion dollars worth of Russian money and agreed to ban the export of military weaponry to Russia and its allies.
Russia has embraced military Keynesienism as a method of keeping the economy afloat. In the early stages of the war, Russia invested an estimated 15.5 to 16 trillion rubles into its military. This accounted for roughly 7.5 percent of its GDP. It proved a key way to keep employment rates up and money circulating even with the effect of extreme foreign sanctions. But the money Russia can afford to invest in its military production sector is dwindling—and the economic costs are hitting harder than ever before.
In the first two weeks of the war, $23 billion left the Russian banking system. Concerned investors lined up to empty their accounts, creating a small financial crisis until the Russian government stepped in to jack up interest rates and impose capital controls. This stemmed the flow for the time being. As the war has dragged on, and Russia’s debt has mounted to tremendous levels, Russian’s anxiety about the safety of their money has increased.
Russians fear the seizure of their assets. Ordinary Russians are pulling trillions of rubles out of the bank. According to Russian Central Bank data, nearly $3.4 billion (286.4 billion rubles) was withdrawn in the first two weeks of August, on top of the $7.3 billion withdrawn in July and more than $4.5 billion in June. These banks, many of whom have invested this money elsewhere, are struggling with demands to hand it all back.
Most concerning for the stability of Russia’s finances is the billionaire money pouring over the border. Bloomberg estimates that tens of billions of dollars have left Russia outside official statistics. Many billionaires are rerouting their money to other countries. Dubai has become a key destination for real estate and crypto investment, while some Russian oligarchs are moving instead to avoid Western sanctions by storing their money in Armenia, Kazakhstan and Kyrgyzstan.
Just last year, Russia seized 1.1 trillion roubles ($21.1 billion) of assets in anti-corruption cases, according to Moscow-based law firm Nektorov, Saveliev & Partners (NSP). That’s about eight times higher than in 2024 and represents about a third of the total asset confiscations carried out by the state in 2025. This is proving to be a key method for the Kremlin to recoup its losses. Many of Russia’s oligarchs have been involved in the government, and have enriched themselves as such, and so their crimes are easy to prosecute and use as rationale for asset seizures. Even besides, Russia has proven itself not to have any qualms about prosecuting political enemies for sham crimes. Further fueling the fears of oligarchs were the arrests and asset seizures of Russian billionaires Vadim Moshkovich, Dmitry Kamenschik, and Konstantin Strukov. The three owned one of Russia’s biggest agricultural holdings, Domodevo airport in Moscow, and of the country’s biggest gold mines, respectively. It was the biggest asset seizure in Russia since the start of the full-scale invasion. Moshkovich was charged with large–scale fraud and money laundering. It has been made clear to big money Russians that now is the time for them to cozy up to the state. Bloomberg reported that Suleiman Kerimov, whose fortune is estimated at $11.6 billion by the Bloomberg Billionaires Index, offered during a closed-door meeting with Putin in March to contribute 100 billion rubles ($1.38 billion) to the state budget. Russia’s oligarchs are being forced to make a difficult decision: either stay in Russia and give up a substantial portion of their fortune to the government, hide their money away elsewhere and face potential criminal charges, or risk having their assets seized by the west.
Further contributing to financial anxieties is Ukraine’s expanded drone campaign against Russian oil facilities. Since spring, Ukraine has eliminated more than 30 percent of the country’s refining capacity and created the worst fuel crisis since the fall of the Soviet Union. In Moscow and surrounding regions, Russian gas stations have restricted gasoline sales, leading to long lines at filling stations. Since oil makes up a significant portion of Russia’s foreign exports, and is crucial to funding their war effort, the situation is obviously dire.
While the Russian government continues to assert its financial dominance, there have been cracks in the facade. Recently, Andrei Klepach, the chief economist at Russia’s second–largest bank, was fired after making many critical remarks about the state of the Russian economy. He warned that Russia will not be able to win a war of attrition with Ukraine, and added that, “We have an illusion that everything will collapse there. It hasn’t collapsed, and it won’t. Our costs are growing.”
Russia’s public morale has hit the lowest level it’s been at since the fall of the Soviet Union in 1991. The vast majority of Russian citizens expect serious economic and social difficulties ahead. In July 2026, 66% of Russians said they believe “difficult times” are still ahead for their country. Since the beginning of the year, the share of those expecting difficulties has risen by one-third, or 16 percentage points. According to a state poll conducted by the Russian Public Opinion Research Center (VCIOM), similar figures (66–67%) were recorded only in 1991, several months before the collapse of the Soviet Union, and in 1992, during a period of 2,500% hyperinflation.
Fears of conscription are also adding to tensions in the Russian. The Kremlin, in response to a lack of willing military recruits, has turned to expanding the draft. Hundreds of thousands of Russian men are conscripted into the army annually. Many men, fearing the draft, have fled the country. An exact estimate of the amount of Russian refugees in other countries is difficult to pin down. However, following the declaration of mobilization in September 2022, more than 500,000 Russians came to Armenia on tourist visas in the first six months of 2023. Every year after, the numbers fell, reaching nearly 340,000 last year. But between January and June this year they’re up again, to 417,000 people. From January to May 2026, the number of Russian citizens arriving in Armenia was 7,000 higher than the number leaving.
Due to high emigration, military conscription and low birth rates, Russia is facing a severe labor shortage. The Bank of Russia estimates the shortage to be somewhere between 1.5 to 2.5 million workers. By 2030, Russia will need to bring 10.9 million people into the workforce, according to Labor Minister Anton Kotyakov, with more than 90 percent replacing retiring workers and roughly 800,000 filling newly created positions. Many workers have been drawn into military defense due to strong investment through the war, and other economic sectors are suffering. Businesses have had to raise wages in order to attract new employees, putting further strain on already suffering profit margins. One avenue that Russia has attempted to find labor to fill their demands are media campaigns across friendly nations in the East and attempts to ease restrictions on relocation for qualified workers.
Russia is suffering from a form of imperial overreach. The war in Ukraine, which was initially intended as a quick land grab for economic and political purposes, has transformed into a form of proxy war. Russia is fighting with the support of China and the East, while the West is standing behind Ukraine. The difference in financial resources is stark. Ukraine is no world power. Alone, it would not have stood a chance against Russia. However, with the backing of the most powerful economies in the world, including the United States and the European bloc, it has a chance to fight on as long as Russia can. Russia is showing signs of weakness, and morale is falling. There is no fix for the Russian economic conundrum. How long is Russia willing to fight on for victory? Even then, what would winning mean? Both sides seem completely unwilling to compromise on their territory. Any territorial gain by Russia is unlikely to be recognized by the West. The potential outcomes are looking bleak for both sides, and Russia’s economy continues to fall apart.
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