Russian economic experts warn: war costs could trigger social crisis

The British newspaper The Times highlights growing strain within Russia's economy caused by the prolonged war against Ukraine. The paper recalls the scandal surrounding Andrei Klepach, chief economist of state development corporation VEB, who publicly stated at a Moscow Exchange discussion that Russia cannot win a war of attrition and that the widespread belief in Ukraine's collapse is an illusion. After his remarks reached the media, Klepach was dismissed from his position.

According to The Times, Klepach's view is reportedly widespread within Russian banking circles, and his real mistake was not the criticism itself but his comparison of the current mood to the atmosphere in Russia before the 1917 revolution — linking economic hardship to potential social instability.

A widening gap between economy and defense sector

The paper notes an increasingly visible divide within Russia's system between economic technocrats and defense-sector interests. Vladimir Putin is demanding cuts to civilian budget spending in order to funnel more funds toward the war, while some business owners are choosing to move capital abroad rather than openly oppose the government's course.

Russia's official growth forecast for 2026 has already been lowered to 0-1%, with the central bank warning of stagflation risk and a growing budget deficit amid falling energy revenues. Small businesses are especially hard hit, facing commercial loan rates above 24%, while defense-industry companies receive subsidized loans. Personal bankruptcies in the country have reached a record high.

The Times also points to Ukrainian drone strikes on warehouses of the e-commerce platform Wildberries, warning that mass bankruptcies among small businesses could also threaten Russia's banking sector. The promised 'great glory' at the war's end increasingly looks like an illusion believed only by Putin's most loyal supporters.