Growth, which still stood at 4.3 percent in 2024, fell to just one percent in 2025, while inflation persisted at 8.1 percent in 2025, and the budget deficit reached $46 billion (1.7 percent of GDP) in the first half of 2025—nearly 300 percent more than during the same period in 2024.
The economic model based on armament, which for a long time masked structural weaknesses, is now revealing its flaws. What once seemed like an almost natural strategy—massively financing the military apparatus to stimulate the economy—now increasingly resembles a risky gamble. “Military Keynesianism,” once a theory and then an openly embraced reality, is turning into a trap. Oil and gas revenues, once seen as inexhaustible, fell by 24 percent in 2025, reaching their lowest level since 2020, under the combined effects of sanctions, market fluctuations, and the global energy transition.
Exports of crude oil and refined petroleum products declined, falling to 6.9 million barrels per day in November 2025, a record low since the invasion of Ukraine.
The public treasury, caught between financing the war and preserving living standards, is seeing its room for maneuver steadily shrink.
Economic warfare comes at a cost, and that cost is now paid on a daily basis. Households are hit by rising prices, with inflation reaching 10.19 percent in March 2025 for the most modest households; domestic consumption is weakening, and the economy, deprived of a strong internal dynamic, gives the impression of a stalled engine.
The deficit, once managed with a certain degree of tolerance, is becoming a tangible threat. An urgent question emerges: how long can Russia sustain its war effort without undermining the very foundations of its stability?
The debate now goes beyond the economic sphere. By maintaining artificial growth through public spending, Russia exposes itself to a fundamental contradiction: if war fuels the economy, the economy cannot indefinitely finance the war. The already fragile balance is beginning to crack.
Growth, once boosted by state demand, now depends on external factors and an increasingly hostile international environment. The currency is depreciating; the ruble has fallen from 60 rubles to the dollar in September 2022 to more than 80 rubles per dollar in July 2025; inflationary pressures persist, and the budget is weakening.
The system, sustained by a form of national fatalism, is showing clear signs of exhaustion.
Behind the figures, it is an entire model that is being called into question. Russia had chosen a path in which the state replaced market mechanisms, compensating for the absence of structural reforms through massive public spending.
This strategy made it possible to support employment, keep industry running, and preserve an image of power. But in the long term, it amounts to a dead end, as it rests on a triple dependency: hydrocarbons, state demand, and available financial resources, all of which are now in decline.
The current moment could well mark a turning point. The issue is no longer merely economic, but also political and symbolic: can Russia continue to finance a prolonged war effort without fundamentally reforming its economy?
Or are we witnessing the exhaustion of a model that long served as the foundation of the regime’s legitimacy?
In this context, “military Keynesianism” appears as a survival strategy running out of steam. Russia finds itself at a crossroads: pursue a policy of unlimited spending or redirect its economy toward more sustainable foundations, at the risk of reducing its military influence.
The repercussions of this choice extend far beyond Russia’s borders. In Ukraine, an economic slowdown in Russia could weaken its military arsenal, calling into question its ability to sustain the conflict over the long term.
Equipment, munitions, infrastructure, and soldiers’ salaries require an industrial and financial power that Russia can no longer guarantee without major imbalances.
A reduction in budgetary resources could therefore translate into slower operations, a decline in military production, or increased pressure to negotiate.
Faced with this dilemma, Russia could also choose escalation: intensifying the military effort to offset economic difficulties, at the risk of worsening inflation and further eroding living standards.
This dangerous spiral, in which the economy feeds the war and the war suffocates the economy, threatens to spiral out of control.
The Russian population would then find itself at the heart of a cruel dilemma.
The war, presented as a historical necessity, could become an unbearable burden if wages stagnate, prices explode, and economic prospects darken.
Yet Moscow’s political stability rests largely on its ability to maintain an acceptable standard of living.
If “military Keynesianism” collapses, popular support for the war could erode, and the question of the regime’s legitimacy could resurface with force.
Beyond Ukraine, the Balkans could also feel the repercussions of this crisis.
Russia, which has invested heavily in the region via Serbia, could see its influence wane as its financial capacity diminishes.
Belgrade, dependent on Russian support in energy and infrastructure, could be forced to move closer to the European Union out of economic necessity.
Such a shift would redraw Balkan geopolitics, weakening Russian influence and strengthening European pressure.
For the Balkans, a weakened ruble, a strong dollar, or heightened geopolitical tensions would mean increased economic instability.
Local economies, often fragile and dependent on foreign investment, could suffer from reduced capital inflows and higher financing costs.
Serbia, in particular, would have to choose between maintaining a costly pro-Russian stance or adapting to a new balance in which Europe becomes the dominant economic partner.
The region could thus become a field of indirect rivalries, where every Russian setback translates into a realignment of local alliances.
Ultimately, the possible end of Russian “military Keynesianism” raises a question of destiny.
If Russia abandons this model, it will have to undertake a profound transformation of its economy and foreign policy.
Otherwise, it risks exhaustion.
Whatever the outcome, the shockwave will not stop at its borders but will spread to Ukraine, the Balkans, and beyond, reshaping European balances.
*Author is a former member of the UN senior staff