Post by Kiel Institute for the World Economy

Endgame: The State of the Russian Economy - four years after Russia’s full-scale invasion of Ukraine, a new Kiel Report by the Kiel Institute and the Stockholm Institute of Transition Economics / Östekonomiska Institutet (SITE) finds a clear shift: Russia’s war economy is entering a structural endgame. Kiel Report No. 9 (👉 https://lnkd.in/edUqAxXk) shows that Moscow’s fiscal buffers are largely depleted, growth has stalled, and economic constraints—financial, technological, and demographic—are tightening simultaneously. Key findings include: 🔸 Sovereign wealth buffers have fallen sharply, from 6.5% to 1.8% of GDP since the start of the war 🔸 Budget deficits are widening faster than planned, while oil and gas revenues have dropped significantly 🔸 War spending is increasingly sustained through credit expansion and off-budget financial mechanisms 🔸 Russia’s dependence on China has deepened substantially, especially for trade and sanctioned dual-use goods But the central message goes beyond fiscal stress: the binding constraints are now real-economy limits—labor shortages, restricted technology access, and declining productive capacity. The report brings together leading contributors across chapters, including: Overview & economic endgame: Moritz Schularick & Torbjörn Becker War financing & energy constraints: Matthew Klein China–Russia asymmetric partnership: Alicia Garcia-Herrero 艾西亞, Elina Ribakova, Lucas Risinger Sanctioned goods and supply chains: Konstantin Egorov Regional dynamics in Russia: Iikka Korhonen Sanctions design and economic interpretation: Torbjörn Becker The policy conclusion is equally clear: Russia’s vulnerabilities are increasing the potential effectiveness of targeted Western action—especially around energy revenues, export controls, and enforcement of existing sanctions (including shadow fleet restrictions). A proposed “Ukraine Support Tariff” (Read more 👉 https://lnkd.in/ea3f8ZH5) could both reduce Russian export earnings and help finance Ukraine’s defense and reconstruction. Bottom line: Russia’s war economy has proven more resilient than expected—but its structural limits are now increasingly visible.