Storm clouds gather over uneasy Russian elite amidst sanctions
The Russian elites and large businesses are experiencing increasing unease due to the ongoing war in Ukraine and the sanctions that have impacted the country's economy. Although the Kremlin continues to paint an optimistic picture of the situation, experts highlight real problems and upcoming tax changes.
The war in Ukraine, which has brought Russia a record number of sanctions and approximately 600,000 casualties, instils fear among the Russian elite. Officials and businesspeople are weary of the conflict, but its resolution also frightens them.
It's unclear how we're supposed to proceed after the special military operation - says a source close to the president's administration.
Stagnation in Russian business
Uncertainty also affects Russian business, which has lost Western markets due to the sanctions. "Friendly" countries like China and Turkey partially adhere to the restrictions, making a return to normality difficult. - But now there’s nothing old left, nothing new emerging, and everything is starting to stagnate - adds a source speaking to Meduza.
Putin’s large economic projects, promising a "sovereign" future, remain on paper. Factories are not producing aircraft, and shipyards are not launching tanker production due to a lack of technology. Import substitution programmes are not yielding results.
Challenges for the economy
Research from the Russian Academy of Sciences shows that every second enterprise cannot find alternatives for imported equipment. The IMF forecasts that from 2025, Russia's GDP growth will fall to 1.3 per cent. The economy's reserves are "practically exhausted," says Central Bank chief Elvira Nabiullina.
The Kremlin plans tax reform to increase budget revenues. In 2025, taxes on profits and personal incomes will rise. The Ministry of Finance estimates that this will bring in €34 billion next year. However, these funds may prove insufficient, the report reads.
Experts warn that the end of the war could be just as painful for the economy as the conflict itself. Defence spending accounts for 6 per cent of GDP, and halting it raises questions about the future of factories and workers. Researcher Elina Rybakova emphasises that continuous aggression is necessary to keep the economy moving.
