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Russia's War Economy: New Middle Class Amid Financial Strain

10/5/2025

34 3 Full Breakdown

Summary

Russia's Economic Strain

Russia's war economy creates a new middle class dependent on military salaries.
Ukrainian drone strikes reduce Russia's oil exports by 30% and cost Moscow $720 million monthly.
The Kremlin plans tax increases, including value-added tax (VAT), to finance the war, hitting small businesses and consumers.
Interest rates at 17% curb growth; 2026 budget drops from $163 billion to $156 billion.

History

Historical Context

The Russian economic crisis of 1998 stemmed from declining productivity, a high fixed exchange rate, and the financial toll of the Chechen War, costing Russia $5.5 billion. On August 17, the government defaulted on $40 billion in domestic debt and devalued the ruble, leading to widespread financial instability and social unrest, echoing the economic struggles of the late 1990s.

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Russia's Economic Strain

Russia's war economy creates a new middle class dependent on military salaries.
Ukrainian drone strikes reduce Russia's oil exports by 30% and cost Moscow $720 million monthly.
The Kremlin plans tax increases, including value-added tax (VAT), to finance the war, hitting small businesses and consumers.
Interest rates at 17% curb growth; 2026 budget drops from $163 billion to $156 billion.

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