On 24 February 2022, when Russia launched its full-scale invasion of Ukraine, the Kremlin also launched a domestic experiment: could a large, commodity-based economy absorb sanctions, isolation, mobilisation, and a permanent rise in military spending without breaking? Four years later, the “shock” phase is over. Russia did not collapse in 2022–2023. Instead, it rebuilt itself around a short-term budget impulse — economic steroids: powerful in the moment, destructive when the dose has to grow just to keep the tempo. By February 2026, the same mechanism that cushioned the first years of the war is delivering a different outcome: slower growth, thinner buffers, and a deeper split between the military and civilian parts of the economy.
From rebound to a low ceiling
Russia’s post-invasion path has moved from shock to rebound to stagnation. The IMF’s January 2026 update puts Russia’s real GDP growth at 4.3% in 2024, slowing to 0.6% in 2025 and 0.8% in 2026, with just 1.0% projected for 2027. The Kremlin’s own tone is similar: Deputy Prime Minister Alexander Novak described 2025 growth as about 1%, and 2026 as 1–1.3%.
That reframes “resilience.” A war economy can lift output by shifting production and demand toward defence and state orders, even while productivity and civilian capacity erode. Once growth converges toward 1%, the question becomes: what kind of economy has been built—and how does it function when the injections fade?
A growing budgetary deficit
Fiscal policy is where the transformation becomes visible. The official 2026–2028 framework assumes a 2026 deficit of about 3.8 trillion roubles (around 1.6% of GDP), covered through borrowing. But calculations by a government-affiliated think tank suggest that the deficit could swell to 3.5–4.4% of GDP as oil revenues underperform and spending pressures persist. Reuters also noted Russia has fiscal reserves of about 4.1 trillion roubles, with analysts warning these could be largely exhausted within a year at the current pace.
This is the logic of “steroids” in macro terms. Early doses—reserve spending, reallocations, emergency procurement—stabilise activity. Later doses are less effective because constraints shift from money to capacity: labour shortages, import bottlenecks, and the rising cost of debt. As Alexandra Prokopenko, a fellow at the Carnegie Russia Eurasia Center and a former adviser at the Central Bank of Russia, has argued, the system becomes able to “function” only by continuously forcing resources into priority areas, even as the underlying civilian economy loses oxygen.
Oil and gas: smaller share, bigger vulnerability
Russia’s fiscal model is still chained to energy, even if the share of oil-and-gas revenues has fallen. In January 2026, Finance Ministry data showed oil-and-gas revenues roughly halved year-on-year to their lowest level since July 2020. Oil and gas now account for about a quarter of federal income.
The vulnerability is not only price. It is the new geography of trade. Europe was a high-margin market; the pivot to Asia comes with deeper discounts, longer logistics and new chokepoints. Experts linked the latest fiscal deterioration partly to reduced Indian purchases and growing trade discounts. When a buyer’s behaviour can swing the deficit outlook by percentage points of GDP, “adaptation” starts to resemble dependency.
A two-circuit economy: war gets credit, civilians get leftovers
By year four, Russia operates as a two-circuit system. One circuit is militarised—defence procurement, repair, logistics, adjacent manufacturing. The other is civilian—and increasingly squeezed by high interest rates, weaker investment, and degraded supply chains.
Today military-related sectors are behind Russia’s industrial output spike. Aviation is the clearest symbol. Russia repeatedly revised down its commercial jet targets, cutting the 2024–2025 delivery plan to 21 aircraft from 171, with officials citing high interest rates and costly financing. This is more than a delay: it signals technological regression, pushing the sector toward older designs and patchwork localisation rather than competitive new platforms.
Incomes: averages rise, society splits
Rosstat reported real disposable income growth of 5.8% in 2023 and 8.6% in January–September 2024. But the mechanism behind that surge is wartime redistribution: payments linked to the army, defence contracts, and a wage race driven by labour scarcity—not a productivity boom.
Natalia Zubarevich, a Russian economic geographer and a leading regional inequality expert at Moscow State University, has repeatedly stressed that war-linked money reshuffles incomes geographically and socially: places tied to mobilisation and defence production benefit disproportionately, while many others face higher taxes, more expensive credit, and thinner opportunities. The result is a visible layer of beneficiaries and a larger, quieter layer absorbing inflation, worse services, and fewer prospects. Over time, this is how “wartime growth” turns into social polarisation.
The bill comes due
By 2026, the bill is arriving on several fronts at once. Experts noted that liquid assets in the National Wealth Fund at about 4.1 trillion roubles (around 2% of GDP) as of end-September 2025, and officials signaled a desire to preserve what remains for shocks. But shocks are already here: weaker energy revenues, a high cost of borrowing, and sanctions that slow investment and undermine quality.
The demographic drag is the hardest to reverse. Mobilisation, casualties, and emigration tighten labour supply and hollow out the skilled workforce, while the war reallocates young male labour from civilian sectors into the military circuit. The technological drag is similarly structural: import substitution can keep factories running, but it often does so at lower quality and higher cost, with fewer pathways back to the frontier. And the trade pivot deepens dependence on a smaller set of buyers and suppliers—exactly the opposite of the strategic autonomy Moscow claims to be building.
Zadornov’s old joke, updated: just like the USSR, Russia is its own worst enemy
In the 1990s, satirist Mikhail Zadornov joked that the West did not need to destroy the Soviet Union – just “support it,” because the system would do the damage itself. Four years after February 2022, that line reads less like comedy and more like diagnosis. Russia’s decisive economic shock did not come from a foreign plot. It came from a political choice in February 2022—and the insistence on repeating it, year after year, until the economy began to function differently, and worse.
