Is Russia’s economy really on the verge of collapse?

December 30, 2025

TL;DR

Western predictions of the Russian economy's collapse have historically been inaccurate.
The Russian central bank is heavily involved in providing liquidity to banks through repurchase agreements (repo).
This repo usage is presented as a core operational tool rather than emergency support, indicating liquidity stress.
The Russian financial system operates as a closed loop, with the central bank facilitating government debt absorption by domestic banks.
This system is compared to quantitative easing (QE) in G7 economies, highlighting functional similarities in state reliance on domestic banking and central bank balance sheets.
Russia's approach avoids inflating asset prices, potentially making its system more insulated from external shocks and easier to normalize than QE-driven economies.
The Russian economy is characterized as a war economy, with high government spending and inflation as inherent consequences.
Despite strains, the conditions typically triggering acute financial crises are absent due to Russia's self-contained financial system, lack of foreign debt, and controlled capital flows.
Similar to Japan and Europe, Russia's financial system, heavily involving the central bank, can exhibit long-term stability.
While not sustainable indefinitely and carrying inflationary risks, the current arrangement is not necessarily unstable as long as inflation is managed.

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