Russia losing ability to simultaneously sustain war, ensure economic stability - ISW

Analysts with the Institute for the Study of War (ISW) think tank foresee that the growing economic pressure on Russia due to the war it unleashed in Ukraine, as well as systemic corruption, labor shortages, and inefficiency of the defense industry will lead to increased war spending, which will further undermine the ability to simultaneously ensure the effective operation of the defense sector and maintain economic stability.

That’s according to ISW’s latest report, seen by Ukrinform.

“Russia continues to face staggering costs required to maintain its war effort against Ukraine, with mounting economic strain, labor shortages, and systemic corruption threatening the sustainability of the Russian defense industrial base,” the report says.

U.S. Defense Secretary Lloyd Austin previously reported that Russia has spent more than $200 billion on the war in Ukraine and has lost at least 700,000 troops killed and wounded since February 2022, with recent daily casualties averaging 1,000.

On December 9, the Ukrainian Center for Countering Disinformation reported that Russia's liquid assets in the National Welfare Fund had declined from $140 billion in February 2022 to $53.8 billion as of December 1, 2024.

The Center noted that Russia increasingly relies on Chinese yuan reserves and gold sales to cover its budget deficit and is committing a third of its national budget for 2025-2027 to defense spending, indicating an unsustainable prioritization of the war at the expense of economic stability.

At the same time, Russia’s Prosecutor General Igor Krasnov reported that the rate of corruption crimes, including bribery, increased by almost 30% in 2024 on year. In 2024, more than 30,000 officials were brought to justice for corruption violations.

“Russia's mounting economic pressures stemming from the war, paired with widespread corruption, labor shortages, and inefficiencies in Russia's DIB, will likely compound the cost of Russia's war and further undermine its ability to effectively sustain DIB operations while maintaining economic stability,” ISW analysts believe.

ISW has previously noted similar trends and statistics in the Russian economy, which indicate that Russia’s economic trajectory is unsustainable in the medium and long term and will increasingly strain its ability to wage war against Ukraine, the report notes.

As reported earlier, the Russian leader signed a law on the country’s federal budget for 2025-2027 with record military spending.