The Inertia of Russia’s War

Russia’s invasion of Ukraine has entrenched the war into the country’s economic and social fabric, creating a self-sustaining system that limits President Vladimir Putin’s ability to end the conflict. The Kremlin has reorganized Russia’s shadow economy, labor markets, and regional budgets around military spending, with entire sectors now dependent on defense funding. Combat pay and defense wages have provided income gains for millions in struggling regions, while a thriving shadow economy—fueled by smuggling and lax customs—keeps consumer goods flowing despite sanctions. The war has also deepened inequality, with the top five percent of Russians holding about 75 percent of the country’s wealth. While real wages rose by 8 percent in 2023 and 9 percent in 2024, median monthly earnings remain around 56,000 rubles ($600), and growth slowed to 4.4 percent in 2025. Inflation, officially recorded at 7.4 percent in 2023 and 9.5 percent in 2024, has further eroded purchasing power, as wartime spending benefits primarily military-linked industries. Stopping the war now would risk economic dislocation, social unrest, and political backlash, as veterans and war-dependent regions face job losses and instability. The regime has avoided reversing these changes, fearing exposure of systemic inequality and the rise of an aimless, unemployed veteran class. Meanwhile, the shadow economy’s commercial networks—built around evading sanctions—cannot easily be dismantled without disrupting trade flows. Geographer Natalia Zubarevich describes Russia’s wartime economic gains as the ‘law of small numbers,’ where modest percentage increases appear significant only because starting points were so low. The promise of wartime prosperity has failed to deliver broadly, with ordinary Russians bearing the burden of higher taxes—such as a VAT increase to 22 percent in 2026—to fund nearly half the federal budget. The state has also avoided inheritance and property taxes, shifting the tax load onto lower-income citizens. Despite public fatigue with the war, ending it now would require dismantling a war economy that has become indispensable to Russia’s political and economic survival. The conflict has trapped Moscow in a cycle where peace would mean reckoning with inequality, unemployment, and the collapse of a system built on military spending.