The temper in regards to the battle in Ukraine has modified in contemporary months. Ukrainian drones have struck Russian oil infrastructure, inflicting gasoline shortages throughout Russia. And the Ukrainian president, Volodymyr Zelensky, is exuberant about completing the battle from a “position of strength”.
The hope is that an financial disaster in Russia ends up in social unrest and political instability, perhaps ensuing within the cave in of the ruling regime. This might now not be an exceptional match in Russian historical past. The Soviet Union swiftly unravelled amid financial and political disaster in 1991. However how most likely is that this state of affairs for Russia as of late?
I’ve travelled to Russia annually since 2022 and there was a transparent exchange within the temper. In 2022, it was once all about survival and adapting to the brand new fact of sanctions and battle. Over the following couple of years, there was once stabilisation and rising optimism in regards to the financial system’s skill to conform. On the other hand, via 2026 there was once communicate of an financial recession, even earlier than the present gasoline shortages hit.
With the financial system at complete capability and army spending last untouchable, shrinking the civilian sector thru prime rates of interest and taxes is the one technique to tame inflation and steadiness the funds. VAT was once greater from 20% to 22% in January 2026, whilst taxes on small and medium-sized enterprises have been raised.
On the St Petersburg World Financial Discussion board in June, it was once recommended that onerous occasions are more likely to proceed for a minimum of 3 years. The query now could be whether or not those financial difficulties will result in mass protests and a cut up some of the elites as took place in overdue Soviet occasions.
Soviet cave in
The Soviet Union collapsed underneath the management of Mikhail Gorbachev, who carried out reforms to liberalise the financial system and political gadget. His resolution to decentralise financial decision-making undermined the Soviet deliberate financial system and ended in serious meals shortages.
The advent of partly democratic elections in 1989 then gave opposition figures, equivalent to Gorbachev’s arch-rival Boris Yeltsin, a platform – which most effective expanded in 1990 when Gorbachev devolved energy to the Soviet republics. Mixed with a deepening financial disaster, this ended in Gorbachev swiftly dropping energy and to the dissolution of the Soviet Union itself.
The placement in as of late’s Russia is other. Since 2000, Vladimir Putin has presided over authoritarian consolidation. He has weakened the delicate democratic establishments he inherited from Yeltsin, his predecessor, and has greater regulate over the media. In the meantime, he has marginalised and eradicated political fighters equivalent to Alexei Navalny.
Putin has additionally cowed large trade. This possibly maximum particularly took place throughout the 2003 Yukos affair when Russia’s richest guy, Mikhail Khodorkovsky, was once imprisoned for tax evasion and his oil corporate was once seized. The Kremlin’s stage of regulate over politics and society has most effective reinforced for the reason that battle in Ukraine started in 2022.
All unauthorised opposition in Russia has been eradicated, both thru imprisonment or emigration. The trade elite are an increasing number of underneath Kremlin regulate, now not least since sanctions have pressured lots of them to go back from the west to Russia.
And the battle has consolidated the affect of the siloviki (Russia’s law-enforcement businesses), in addition to the military-industrial sector and military, all of which can be invested within the steadiness of the regime.
Mikhail Gorbachev departing from a state talk over with to Washington in 1990.
Mark Reinstein / Shutterstock
Photographs of queues at Russian petrol stations tempt the realization of a big financial disaster very similar to that which introduced down the Soviet Union. However, having witnessed each, I will be able to say this isn’t the case.
The recent Russian financial system continues to be practical. After 4 years of battle and financial sanctions, day by day lifestyles in maximum of Russia has rarely modified. The gasoline shortages that started in June 2026 have been almost definitely the primary actual disaster to have an effect on the vast majority of the inhabitants for the reason that battle began.
Russia’s government even have some room for manoeuvre. They are able to decrease rates of interest, which had already come down from 21% in 2024 to fourteen.25% via June. They are able to additionally devalue the rouble to spice up source of revenue from power exports. Russia’s financial system has already gained a brief reprieve within the type of upper oil revenues from the Iran battle.
There may be financial pressure, however now not at a degree that will purpose the Kremlin to simply accept a whole exchange in fact.
On the identical time, the full steadiness of energy in a battle of attrition may be made up our minds via the relative weak spot of the opposite aspect. And whilst Ukraine is taking part in a excellent flip within the battle, its financial system is most effective functioning because of western monetary improve.
Its largest donor, the USA, stopped investment after Donald Trump got here to energy in 2025. The EU has had to pick out up the tab, agreeing to supply €90 billion (£77 billion) of investment over the following two years. However Ukraine wishes extra.
These days, Russia and Ukraine are responding to one another’s movements with countermeasures. Russia has proven in early July the devastating pressure with which it will probably strike Ukraine, wearing out a wave of assaults at the capital, Kyiv. Ukraine’s navy has, in reaction, struck oil refineries in Russia’s Yaroslavl and Leningrad areas.
Ukraine’s provide of US Patriot missile defence techniques has dried up and replacements are briefly provide because of the Iran battle. Zelensky has requested the USA for a licence to fabricate their very own interceptor missiles for the Patriot gadget. However this sort of manufacturing, if it ever went forward, would unquestionably be focused instantly via Russian moves.
Years of Russian bombing have additionally seriously weakened Ukraine’s power infrastructure. And there’s a actual chance that Russia may render Ukrainian towns equivalent to Kyiv, Kharkiv and Dnipro uninhabitable this iciness via knocking out electrical energy and heating, as nearly took place in 2025.
Given all this, this can be very not likely that Putin will give in to drive and withdraw from Ukraine. With each side satisfied they are able to win, there’s little prospect of the battle finishing any time quickly.
