As the war in Ukraine drags deep into its third year, Russia’s vast military machine faces a test that no missile or drone strike can deflect — the limits of its own economy. A new analysis by Forbes contributor David Kirichenko warns that Moscow may soon find it increasingly difficult to sustain the staggering costs of its war, particularly the pay and benefits owed to the hundreds of thousands of soldiers fighting in Ukraine. The looming financial pressure, he argues, could trigger deeper political and economic turmoil inside Russia than any battlefield defeat.
An Expensive War Built on Borrowed Strength
When Vladimir Putin launched his full-scale invasion of Ukraine in February 2022, he expected a swift victory financed by Russia’s seemingly bottomless oil and gas revenues. Yet, nearly four years later, the costs of sustaining a long war have ballooned beyond what even the Kremlin anticipated.
Russia’s annual defense spending has soared to an estimated 6–7% of GDP, levels not seen since the Cold War. Much of this budget is consumed by personnel costs — salaries, combat bonuses, death compensations, and pensions for soldiers and their families. Early in the war, Moscow offered recruits unprecedented incentives, with signing bonuses ranging from $10,000 to $30,000, especially for those willing to serve on the front lines.
But those incentives, meant to fill the ranks quickly, are now draining the state’s coffers. According to Kirichenko, “Russia’s war economy has become addicted to cash handouts,” and these payouts are proving unsustainable as revenues shrink and costs climb.
The Revenue Crunch: Oil, Sanctions, and Drone Strikes
Russia’s main source of wartime income — oil and gas exports — is under intense strain. Western sanctions and price caps have limited Moscow’s ability to sell crude at premium rates. Meanwhile, Ukrainian drone attacks on Russian refineries and energy infrastructure have sharply reduced domestic output and export capacity, directly slashing state revenue.
These attacks, Kirichenko notes, “have transformed Ukraine’s drone campaign into an economic weapon,” striking at the very heart of Putin’s war financing model. Every destroyed refinery, he argues, costs the Kremlin millions in lost export taxes and production disruptions.
While Russia has managed to reroute much of its energy trade toward China, India, and other non-Western buyers, discounts and logistical costs have eaten away at profits. The result is a shrinking fiscal cushion just as war expenses peak.
A Fragile Economy Balancing on State Control
Despite these headwinds, Russia’s economy has demonstrated an unexpected resilience, largely due to tight state control and wartime central planning. Civilian spending has been cut sharply to prioritize defense and security. Regional budgets are being squeezed, and inflation is eroding real incomes for ordinary citizens.
But this approach has limits. Economists warn that as Russia channels more money toward the military, it risks hollowing out the rest of its economy. Basic infrastructure, healthcare, and education are deteriorating, while private investment has all but vanished. “This is not a sustainable balance,” Kirichenko writes. “The Kremlin can delay the pain, but it cannot escape it.”
The danger is that Russia’s system — built on propaganda, coercion, and financial incentives — could falter if the money stops flowing. For soldiers and their families, pay delays or benefit cuts could breed disillusionment, desertions, or quiet resistance.
Morale, Money, and the Cost of Loyalty
In Russia’s war effort, money has become as vital as ammunition. Troops have endured horrific conditions and staggering losses, often for the promise of high pay or compensation to their families. Reports from Russian regions reveal that payouts to wounded soldiers and families of the dead are increasingly delayed or quietly reduced.
The government has already begun trimming certain benefits. In some cases, compensation for non-fatal injuries is being restricted to only the most severe cases. Local administrators have struggled to process claims, leaving thousands of veterans unpaid.
This erosion of trust poses a real threat to Putin’s control. The Kremlin depends heavily on loyalty — both from its soldiers and from the regional governors who oversee recruitment. If the money dries up, so might that loyalty.
The Hidden Cost of Sanctions and Isolation
While Russia’s headline economic indicators — such as GDP growth — appear stable, they mask deep structural problems. The economy is increasingly militarized, reliant on state contracts and imports from China. Consumer goods are scarcer, inflation remains high, and the ruble’s real purchasing power continues to fall.
Western sanctions have cut Russia off from global financial markets, forcing it to rely on its sovereign wealth fund and shadow trade networks. But even these reserves are finite. As energy revenues fall and war costs rise, the Kremlin faces tough choices: continue paying soldiers or preserve domestic stability.
Kirichenko warns that this “guns over butter” policy may be reaching its limit. “Putin can’t cut military pay without risking mutiny,” he writes, “but he also can’t keep printing money without risking inflation and public unrest.”
A Political Powder Keg in the Making
The financial strain on the war effort could eventually translate into political instability. If soldiers stop receiving regular pay, or if wounded veterans are abandoned by the state, resentment could spread — especially among the working-class families who have borne the brunt of recruitment.
Russia’s domestic propaganda machine has so far succeeded in portraying the war as a patriotic duty, but material incentives remain a crucial glue holding the system together. Losing that glue could expose cracks in the regime’s foundation.
Even loyal elites, many of whom benefit from defense contracts and state patronage, may begin to question Putin’s strategy if the fiscal burden becomes unsustainable.
War Without End, or a Forced Reckoning
For now, Russia can likely sustain its war machine for another year or two through financial engineering, reallocation, and repression. But the structural damage is compounding. The longer the war drags on, the less flexible Russia’s economy becomes — and the more fragile its social contract grows.
If the Kremlin begins missing payments to troops or delaying benefits to veterans, it will signal that the economic foundations of Putin’s war are starting to crack.
As Kirichenko concludes, “Putin’s greatest vulnerability may not lie on the battlefield but in the balance sheet.”
Russia’s war in Ukraine has evolved from a military confrontation into a full-scale economic endurance test. While Putin has shown a remarkable ability to adapt under pressure, the arithmetic of war is unyielding: when the money runs out, even the most tightly controlled regime begins to unravel.
About The Author
