Three years into the Ukraine war, Russia’s wartime economy appears not only to be surviving Western sanctions, but thriving — driven by oil revenues, surging military production, and a broader economic reorientation toward war. While much of the world expected Russia to collapse under the weight of its full-scale invasion of Ukraine, the opposite occurred: the Russian economy grew by 3.6% in 2023 and an even higher 4.1% in 2024, outpacing most Western nations. Yet this is not a sustainable economic model for the long term. Growth is heavily militarized and sustained by wartime spending, making it fiscally unsustainable. Inflation has also ticked upward amid rampant state spending, creating a cost-of-living crisis that won’t be easily reversed.
Transitioning the Russian wartime economy to peacetime prosperity remains a daunting challenge, and one that will be heavily determined by the direction of global energy prices. But perhaps this isn’t the plan. Instead, Russia’s wartime industries could be repurposed and directed outward, profiting off worsening geopolitical tensions and shoring up the Russian economy in the process.
New Year, New Predictions
Analysts are predicting that 2025 could be the year Russia’s economy finally buckles under the weight of sanctions, wartime spending, and a loss of available young people due to conscription or emigration, which in turn fuels inflation. Recent history gives pause to those inclined to see an impending Russian economic collapse. However, such predictions are accurate in that they point out the mounting contradictions at the heart of the Russian economy.