The price of war

Russia’s war economy is no longer being lifted by a surge in defense spending. Four years after the full-scale invasion of Ukraine, growth has slowed to a crawl, inflation is stubborn, and Ukrainian strikes on Russian refineries have caused fuel shortages in one of the world’s biggest energy producers. Reuters Moscow correspondent Andrew Osborn tells host Carmel Krimmins that beneath the surface of a seemingly normal Moscow summer — with its metro expansions, park renovations, and dacha season — the pressure is building.

The arc of the war economy

In the first year of the war, 2022, Western sanctions caused Russia’s economy to shrink. But then the government ramped up defense production, and the economy grew strongly — above 4% in both 2023 and 2024. That boom has now run its course. Growth dropped to just 1% last year, and the forecast for 2026 is a modest 0.4%. Russian officials themselves acknowledge that production has reached a peak and cannot be pushed further. “We moved the economy onto a war footing,” Osborn says, summarizing the official line. “At the moment that production has reached a peak and we can’t push it any further.”

The triple squeeze: interest rates, labor, and fuel