Russia’s economy is much worse than it seems, and elites are alarmed

The Swedish government has presented economic figures on Russia that are drastically different from the official ones, which make the Kremlin’s data look like a facade.

In an opinion piece published in the New York Times, Foreign Minister Maria Malmer Stenergard warned the West against overestimating Russia and said the economy is more fragile than it appears.

Also read:

While Russia claims GDP grew by around 13% between 2020 and 2024, Swedish analysis based on nighttime brightness suggests the economy actually shrank by 8% over that period.

Moscow would also have significantly underestimated inflation, according to Stenergard, who highlighted that Russia’s official inflation rate in 2024 was 10%, while the central bank raised interest rates to 21% that year.

Similarly, Sweden’s military intelligence chief estimated that current inflation is likely closer to the 15% base lending rate than the government’s official reading of 5.2%.

“This would mean that Russia is overestimating its purchasing power and that its military spending capacity is weaker than it appears,” Stenergard wrote.

The war between the United States and Israel against Iran has given Russia some relief by raising oil prices and easing sanctions — allowing the Kremlin to generate more revenue.

But Swedish intelligence believes Russia would need the average price of Urals oil to remain above $100 per barrel for the remainder of the year to generate a material benefit to the government’s finances, Stenergard said. Last week, the average Urals price reached $94.87 per barrel, the highest level since 2023.

If the United States and Iran reach a ceasefire agreement that reopens the Strait of Hormuz and lifts sanctions on Iranian oil, global crude oil prices will plummet.

At the same time, more advanced and longer-range Ukrainian drones have managed to evade air defenses and attack Russian oil export terminals, limiting gains from higher oil prices.

“Not everyone agrees with Sweden’s assessment of the economic data released by Russia, but there is a growing consensus on the overall fragility of the economy,” Stenergard added. “Within the country, elites are increasingly alarmed.”

Even Russian President Vladimir Putin admitted that the economy contracted earlier this year, while think tanks, bankers and officials close to the Kremlin have been warning for months that a financial crisis is on the horizon.

Meanwhile, Ukraine has been making gains on the battlefield in recent months and has caused Russia 1.2 million casualties since the start of the war, with new recruits becoming increasingly difficult to find.

Stenergard highlighted Russia’s delicate condition to defend tougher sanctions on the country’s energy sector, especially a ban on the provision of maritime services, such as insurance, access to ports and financing.

“Russia’s economy, in nominal terms, is barely bigger than New York State, smaller than Texas, and fragile,” he said. “Russian families are feeling the brunt of the rising cost of living, and most of the national sovereign wealth fund’s net assets — its financial reserve — have been consumed to finance the war.”

Indeed, a poll by a Russian state institute showed that Putin’s approval rating had fallen to 65.6%, down from 77.8% at the start of the year and levels above 80% before the war.

This is because ordinary Russians have become so worn down by inflation and disruptions to daily life, such as a strict internet restriction, that they have even begun to publicly express their dissatisfaction.

More companies are also defaulting, and Russian cities far from the front lines are being hit by Ukrainian drones; one of them, near the Black Sea, suffered toxic rain after an oil refinery was hit.

Inflationary pressures will continue for years amid demographic decline, military mobilizations and strong demand for labor in the defense industry.

The Russian government has estimated that the job market will need an additional 3.1 million workers by 2030, according to Interfax. And, in the next five years, the total deficit will reach 11 million vacancies when considering the increase in pensions.

A former senior Kremlin official wrote in the Economist this month that the country is tired of Putin, including members of the elite who have shown increasing discomfort with repeated state seizures of their assets.

“The irony is that Putin started the war to preserve the power and system he created,” the former official said. “Now, for the first time since the conflict began, Russians are beginning to imagine a future without him.”

2026 Fortune Media IP Limited