Russian elites uneasy: Sanctions squeeze economy tighter
The Russian elites and big businesses are feeling increasing unease due to the ongoing war in Ukraine and the sanctions that have struck the country's economy. Although the Kremlin continues to promote an optimistic picture of the situation, experts point out real problems and upcoming tax changes.
11:49 AM EDT, October 31, 2024
The war in Ukraine, which has subjected Russia to a record number of sanctions and resulted in 600,000 casualties, instills fear among the Russian elites. Officials and businessmen are weary of the conflict, yet its conclusion also terrifies 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 businesses, which have lost Western markets due to sanctions. "Friendly" countries like China and Turkey partially adhere to the restrictions, making a return to normalcy 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, which promise 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 programs 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 starting in 2025, Russia's GDP growth will fall to 1.3 percent. 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 37 billion dollars next year. However, the report indicates that these funds may prove insufficient.
Experts warn that the war's end could be as painful for the economy as the conflict. Defense spending accounts for 6 percent of GDP, and halting it raises questions about the future of factories and workers. "Continuous aggression is necessary to keep the economy moving," emphasizes researcher Elina Rybakova.
