US media: When the "war dividend" runs out, Russia is facing its coldest economic winter

As the Ukraine-Russia conflict enters its fourth year, the ear-piercing air raid alarms for many residents in Russian border cities and even central cities may have become a routine. However, this winter, a threat that is more pervasive and harder to defend against than drones is sweeping across Russia — it's an economic pain that has come late but is intense.

A harsh reality: The illusion of "wartime economic prosperity" maintained by Russia's massive military spending is beginning to crumble.

I. Consumption downgrade: From "not buying a car" to "eating less meat"

If the economic resilience at the beginning of the war was supported by state fiscal infusions and military orders, then the cracks now are directly exposed on people's dining tables.

Over the past year, Russian wages have indeed increased (they once rose by 20% in 2024), but prices have risen even faster. Elena, an activity manager in Moscow, said helplessly, "The prices are running faster than the wages." She has stopped buying expensive imported brands and switched to alternatives.

More alarming data comes from the food sector. For any society, cutting food expenses is the last line of defense for living standards, and this line is now being lost.

According to data from Sberbank, Russians are cutting their food expenses.

Analysis shows that in September and October this year, the sales of milk, pork, rice, and buckwheat decreased by 8% to 10%.

A manager from Tambov admitted that his family now has to reduce the purchase of fruits and vegetables.

This is not just an inflation issue, but a decline in demand. Although the largest grocery chain in Russia, X5 Group, has a good revenue (inflated), its net profit has plummeted by nearly 20%.

II. 21% interest rate: This strong medicine is poisoning the economic engine

To curb the overheated wartime economy and inflation, Russia took extreme monetary policies, pushing the benchmark interest rate to an unprecedented 21%. While this medicine has cooled inflation to some extent, it has also produced serious side effects — it is suffocating the civilian economy.

Retail industry winter: Nearly half of the stores closed in the third quarter were fashion retail stores. The electronics market experienced the worst demand drop in 30 years.

Automotive industry brake: Due to high borrowing costs and a recycling tax imposed by the government to increase revenue, car sales fell by nearly a quarter in the first nine months of this year.

As Oleg Buklemishev, director of the Center for Economic Policy Research at Moscow State University, said, "Russia's economic immunity has been severely weakened."

III. Industry and energy: Double blow

Outside of the consumption side, Russia's economic pillars — energy and heavy industry — are also facing their darkest hour.

On one hand, physical attacks. Ukrainian drones are now entering areas as if they were unguarded, frequently attacking oil refineries and ports from the Black Sea to the Baltic Sea, even penetrating into Siberia. This directly caused a crisis in Russia's domestic fuel market, with prices surging and supply shortages in some areas.

On the other hand, sanctions are tightening. At this moment, the U.S. (Trump administration) is intensifying diplomatic efforts to force Russia to stop the war by cutting Moscow's oil and gas revenues.

In the first ten months of this year, Russia's crucial oil and gas revenues fell by more than 20%.

In October, the U.S. unexpectedly sanctioned top Russian oil producers Rosneft and Lukoil, which further worsened the already damaged energy income due to falling oil prices and exchange rate fluctuations.

The traditional steel industry has also not been spared. According to Severstal data, total steel consumption this year has fallen by 14%, with construction steel demand down 10%, and machinery steel demand plummeting by 32%.

IV. The only way out?

Facing an expanding budget deficit (expected to reach 2.6% of GDP by year-end), the Kremlin has fewer choices. The government is violating its "no tax increase" promise, preparing to raise value-added tax next year, expand the tax base, and even impose new taxes on electronic components and car purchases.

The Moscow Strategy Center has issued a warning: "There is almost no chance of avoiding an economic recession."

Alexander Gabuev, director of the Carnegie Endowment for International Peace's Russia and Eurasia Center, perhaps best summarized the current situation: "From all economic indicators, it is most in Russia's interest to stop the war now. But to end the war, decision-makers must see the edge of the cliff. Although Russia hasn't fallen yet, they are accelerating toward it."

The alarm bell has sounded. For Russia, this winter will be particularly cold.

Experts: What alarm bell? These small issues could never affect the big picture. The whole article is a misjudgment. The U.S. media is too childish. The big picture is not about selling oil and natural gas; it's about fists and videos, easily handling these small issues. (FanwaiLB)

Original: www.toutiao.com/article/1850101886748675/

Statement: This article represents the views of the author.