The effects of the war with Ukraine are hitting Russia's economy the hardest now, at a time when the United States is putting the strongest pressure on ending the conflict. The latest sanctions on the Russian energy sector may only accelerate the collapse of the economy, although, as an expert quoted by Bloomberg predicts, it will be a slow agony rather than a sudden crisis.
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“Based on overall economic indicators, it would be in Russia's interest to end the war now,” Alexander Gabuyev, director of the Berlin-based Carnegie Russia Eurasia Center, told Bloomberg. “Still, to want to end the war, you have to see the edge of the cliff. Russia hasn't gotten there yet.”
Russians panic. “Prices are rising faster than wages”
The economic effects of the war are felt most severely by the people of Russia. “Prices are now rising faster than wages,” Elena, a 27-year-old manager of an events company from the Moscow area, told Bloomberg. She says she had to change her shopping habits, buys fewer clothes and mostly chooses domestic brands. In turn, the family of 40-year-old Denis – a manager from Tambov in central Russia – was forced to reduce food expenses and give up expensive fruit and vegetables. “The average weekly grocery bill has more than doubled in recent years,” he said.
According to an analysis by the Kommersant newspaper, sales of milk, pork, buckwheat and rice fell by 8-10 percent in September and October this year. compared to last year. X5 Group, the largest food chain in Russia, recorded a net profit that was almost 20% lower due to a decline in demand. Clothing sales are also falling. Fashion stores accounted for as much as 45%. closures that occurred in the third quarter of the year. In turn, the electronics market is recording the sharpest decline in demand in 30 years. Car sales fell by almost a quarter in the first three quarters of the year. The steel industry is also going through a crisis.
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“The resilience of the Russian economy has been seriously weakened,” said Oleg Buklemishev, head of the Economic Policy Research Center at Lomonosov Moscow State University. He added that although he does not expect a sudden crisis in 2026, there will be a systematic deterioration of the economy and living conditions.
“If Russian authorities want the economy to function normally, special military operations must be curtailed,” Buklemishev told Bloomberg. “The realization that they have to make a decision hasn't set in yet, but alarm bells are already ringing,” he added.
