The Russian Economy in the Fog of War | Video

Torbjörn Becker, Director of the Stockholm Institute of Transition Economics (SITE) at the Stockholm School of Economics, participated in a seminar to present the report, The Russian Economy in the Fog of War. Commissioned by the National Institute of Economic Research (NIER), this report provides a detailed analysis of Russia’s economic situation amid the ongoing war in Ukraine. It also examines the impact of international sanctions on Russia’s economy.

“We aim to understand the state of the Russian economy using all available analytical tools,” says Torbjörn Becker. “However, we must also adapt to grasp the full scope of the propaganda war surrounding the data provided by Russian institutions.”

Russia’s Pre-War Economy: An Oil-Dependent Powerhouse on a Fragile Foundation

Before Russia’s full-scale invasion of Ukraine, its economy relied heavily on oil and gas exports. These exports accounted for a significant portion of Russia’s GDP. Despite its global political influence, Russia’s economic power was modest, trailing other BRICS nations such as Brazil, India, and China. According to SITE researchers, this reliance on oil prices made Russia vulnerable to global market fluctuations. Moreover, the government strictly controlled economic narratives, shaping public perception through a centralized, politicized economic structure.

The State of the Russian Economy: Official Data vs. Reality

After the invasion, Russia stopped publishing some key economic indicators, only later resuming with limited transparency. Official statistics suggest moderate declines in GDP and rising inflation. However, SITE’s independent analysis suggests that the actual economic impact may be far more severe. Inflation, exchange rates, and GDP growth metrics are likely manipulated to create an optimistic narrative both domestically and internationally.

Economic Sanctions and Their Impact on Russia’s Economic Capabilities

Western sanctions target Russia’s energy exports and restrict essential technology imports. These exports and imports are critical for Russia’s economic survival. As a result, reduced oil and gas revenues have forced Russia to rely on less efficient trade alternatives. This shift further strains its economy. SITE notes that these sanctions contribute to a downward economic trajectory, limiting Russia’s fiscal resources and reducing its capacity to sustain military operations.

Medium- and Long-Term Economic Outlook: Structural Challenges and a Bleak Future

Looking forward, the SITE report warns of long-term challenges for Russia’s economic stability. Structural issues—like reduced foreign investment, a shrinking labor force, and declining productivity—severely affect the country’s growth prospects. Additionally, the exodus of educated youth and business leaders, paired with a growing dependence on military spending, leaves Russia in a precarious position. Declining oil prices, as forecasted, would likely worsen these pressures, weakening government budgets and increasing inflation.

The full report, The Russian Economy in the Fog of War, available on NIER’s website, paints a stark picture of the economic struggles Russia faces today and in the coming years. SITE researchers reveal a path forward for Russia that appears riddled with economic hardship, worsened by ongoing sanctions and an increasingly isolated position in global finance.

More About Torbjörn Becker

Torbjörn Becker has been the Director of the Stockholm Institute of Transition Economics (SITE) at the Stockholm School of Economics (SSE) in Sweden since 2006 and is a board member of several economics research institutes in Eastern Europe.

Read more policy briefs authored by Torbjörn Becker on the FREE Network website.