Why Russian economy warnings might be the only thing out of Moscow you can actually believe

In a rare public sign that all is not well in Russia, two high-ranking Moscow officials last week issued separate warnings about the state of the country's economy.

Russian Central Bank Governor Elvira Nabiullina and Economy Minister Maxim Reshetnikov both highlighted that amid the Kremlin's full-scale war against Ukraine, the tools Moscow once relied on to maintain wartime growth are nearly exhausted.

Almost immediately, Russian President Vladimir Putin on June 20 dismissed the concerns, claiming that Russia's economy remained strong despite sanctions and war.

But experts say the Kremlin's internal messaging diverges sharply from the emerging reality. And in a country known for official lines that diverge wildy from truth and reality, Nabiullina and Reshetnikov's warnings are likely accurate.

"These Russian officials  realize their responsibility for the failure of this entire policy," Vladimir Milov, a Russian opposition politician who was an economic advisor for the Russian government in the early 2000s, told the Kyiv Independent.

"They understand that they will have to face the consequences and cannot ignore reality — the moment had to come when they would openly talk about it. So they did."

The Russian economic warnings

Nabiullina said on June 20 that the momentum behind Russia's wartime economic expansion is rapidly fading.

She pointed to the depletion of key internal resources that had underpinned growth since 2022 — including labor, industrial capacity, bank capital reserves, and liquid assets from the National Wealth Fund (NWF).

Reshetnikov a day earlier echoed the warning, saying the Russian economy is "on the verge of a transition to recession," and that the next phase would be decisive.

Despite Putin's insistence that all is well, the dual warnings come as cracks in Russia's so-called economic resilience are becoming more visible, and years of high military spending, sanctions, and trade isolation take their toll.

Speaking out — but only when the Kremlin allows it

An authoritarian system like Russia's allows a certain degree of rhetorical leeway for senior technocrats, but it's strictly limited to the economic sphere, exiled Russian political scientist Ekaterina Schulmann told the Kyiv Independent.

"Our autocracy relies on the expertise of capable managers, particularly those concentrated in the financial and economic bloc of the government," Schulmann said.

"In order for them to function, they are given a certain degree of autonomy… and this package of what they are allowed to do includes a certain degree of rhetorical freedom when speaking on their allotted subjects."

National Wealth Fund depleted as economic illusion fades

One of the clearest signs of economic stress is the sharp depletion of Russia's National Wealth Fund.

Once a vital cushion for government spending, the NWF's liquid assets have plummeted from 8.43 trillion rubles ($107 billion) in January 2022 to just 2.8 trillion rubles ($35.5 billion) in May, according to the Russian Finance Ministry.

Milov said the illusion of post-2022 economic stability was built on a single factor — massive state spending fueled by reserves accumulated prior to the invasion.

"All of Russia's so-called economic miracle after the full-scale invasion and sanctions came down to a single factor — the government burned through its accumulated financial reserves to prop up the economy," Milov told the Kyiv Independent.

Those resources are running out. Russia is depleting its financial reserves to offset a growing budget deficit driven by soaring government expenditures and falling revenues.

Since the war began, the structure of the NWF has also shifted.

Once held largely in freely convertible currencies, the fund now consists mostly of less liquid assets such as Chinese yuan and gold, further limiting Moscow's flexibility.

Milov also said that Russian leaders' earlier promises to develop domestic industry and reduce dependency on imports have failed to materialize.

According to Milov, only sectors receiving direct government support are showing growth, and that support is increasingly under strain.

"There had to come a moment when these resources would become so scarce that everyone would start talking about it very seriously," Milov said.

"Investments are not coming to Russia; everything is developing only at the expense of budget funds, and budget funds are being reduced."

Militarization risks stagnation

Another issue with Russia's economy is its militarization.

Russian military spending has increased to 6% of GDP in 2025, its highest level since the Cold War, while the federal budget deficit continues to grow.

Economist Andrei Movchan, founder of Movchan's Group, says it is undermining overall performance by diverting labor and capital away from the civilian sector.

"At first, such a shift leads to a sharp increase in military production, which boosts overall economic indicators despite the downturn in the civilian sector," Movchan said.

"But once the military-industrial complex hits a plateau, and it's impossible to expand it endlessly, even for military needs, the economy is left without a main growth engine."

"Costs remain high across the board, civilian sector investment is constrained, and the country inevitably drifts toward stagnation or even recession."

Still, Movchan warned that the civilian downturn alone will not necessarily trigger a full-blown collapse, as long as global energy prices remain elevated.

Russia continues to depend heavily on hydrocarbon exports to finance its war.

"Yes, the two-to-threefold increase in military spending — or even fourfold, according to some estimates — will have to be paid for with a recession in the civilian sector and overall stagnation. But that's not a disaster," he said.

Rising oil prices may not save Russia's war economy

Oil revenues remain a vital part of Russia's economy.

On June 13, prices surged after Israeli air strikes targeted Iranian nuclear sites, sparking fears of a wider regional conflict and disruptions to shipping routes.

President Volodymyr Zelensky warned that high oil prices could embolden the Kremlin, which has long relied on oil windfalls to fund its military campaign.

But Milov said even rising oil prices may no longer be enough to shield Russia's finances.

"The initial version of this year's federal budget, which has already been amended, assumed that it would still be heavily in deficit even at a price of $70 per barrel," he said.

"It depends greatly on how the situation develops further... But we see that the global oil market is digesting this war paradigm. There is no sharp increase to $100 per barrel or anything like that."

"Based on the current scenario, at this moment, we can say that this does not represent any kind of salvation for Putin."

Unpaid wages, empty shelves may shake Putin's image of control

As economic difficulties deepen, the crucial issue becomes how much they will erode the regime's hold on power.

Schulmann said in autocratic systems, both citizens and elites tend to judge power not by its legitimacy, effectiveness, or even benefits to themselves, but by one key question — whether it is strong or weak.

"A sharp economic downturn, a sudden deterioration in living standards, seen in things like unpaid wages and pensions, shortages of essential goods… will be interpreted as a sign of weakness from those in power," she said.

"On the other hand, a gradual deterioration rather engages the people in an ongoing individualistic survival game, leaving them no time to even ask themselves whose fault it is."

Schulmann noted that rising prices alone do not typically trigger mass discontent. But if dysfunction becomes visible, when shelves are empty, utilities fail, or salaries go unpaid, that sends a clear signal to citizens and elites alike — the system is no longer coping.

"If things deteriorate so quickly that signs of dysfunction become visible — signs that the system is no longer coping — that becomes a dangerous signal for the regime's stability," she said.

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