economy

December 30, 2025

Putin’s polycrisis. The war won’t end until the West strengthens sanctions, better arms Kyiv and incentivises a Russian brain drain

Vladimir Putin visits the St. Peter and Paul Cathedral in St. Petersburg, Russia, 7 October 2025. Photo: EPA / MIKHAIL METZEL / SPUTNIK / KREMLIN

Putin’s polycrisis. The war won’t end until the West strengthens sanctions, better arms Kyiv and incentivises a Russian brain drain

TL;DR

  • Russia's GDP growth slowed to 0.4% in Q2 2025 after a 0.6% decline in Q1.
  • Inflation persists, leading the Russian Central Bank to lower its policy rate to 17%.
  • The budget deficit reached 1.9% of GDP in the first eight months of 2025 and is projected to grow.
  • An estimated 1 million troops have been killed or wounded, and a similar number have fled Russia.
  • Oil and gas tax revenues fell by 20% year-on-year, depleting the sovereign wealth fund.
  • Putin announced substantial tax hikes for 2026-28 to address fiscal challenges.
  • Russia faces a demographic crisis compounded by war casualties and emigration.
  • Western sanctions limit Russia's access to crucial technologies.
  • A recent poll indicates 66% of Russians favor peace negotiations.
  • Putin appears focused on battlefield gains, believing they are essential for future settlement negotiations.
  • Sanctions have limited Russia's access to advanced military technology.
  • The Kremlin may need to offer higher bonuses for recruits and increase wages for defense industry workers.
  • The strategy involves prioritizing military spending over sectors like education, health, and infrastructure.

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