If you ask how Russia’s economy is faring, the answer depends on who answers you. The New York Times recently reported on tensions among Russia’s elites as economic growth slows. Sanctions and the war in Ukraine have taken their toll, but Moscow insists it is weathering the storm. Sweden, however, turned to unconventional means to find evidence of Russia’s economic struggles.
Signs of stagnation and slowdown. Russia’s wartime economy, ramped up after the invasion of Ukraine, is showing signs of significant slowdown. As the Times reported, this has caused tensions among the country’s business elite as the conflict enters its fourth year.
Recent official data shows that many civilian sectors have stopped growing or are contracting, adding to economic uncertainty. In October, the ruble fell to its lowest level in two years. Businesses are struggling to secure new loans or receive payments, reflecting a tightening financial climate.
Rising interest rates. The Central Bank of Russia has responded with aggressive measures, raising key interest rates to 21% in October—the highest level since the collapse of the Soviet Union. Despite attempts to curb inflation, 2025 growth forecasts have been revised downward to between 0.5% and 1.5%, far below the 3.5% to 4% recorded in 2024.
The slowdown persists despite record government spending to fund the war, suggesting diminishing returns from such stimulus. Economists warn of stagflation—a combination of rising prices and stagnant economic growth.
Sanctions and Russia’s response. Western sanctions, imposed after the invasion of Ukraine, have limited Russia’s ability to sustain its war-driven economy. The Kremlin claims resilience, but slowing growth and rising inflation suggest otherwise.
Civilian industries are bearing the brunt of the crisis. For instance, Russian Railways, the nation’s largest employer, reported a 9% drop in freight volume year-over-year as of October. The company plans to raise prices by over 10% and cut investment for 2025 by a third. Despite these challenges, experts say the economic downturn hasn’t yet forced President Vladimir Putin to reconsider his war objectives.
Tensions among elites. Within Russia’s business elite, conflicts are growing between the Central Bank of Russia and leading industrialists. Central Bank Governor Elvira Nabiullina has defended her tight monetary policy, arguing that macroeconomic stability must take precedence over accelerated growth.
However, Nabiullina’s stance is increasingly isolated. Business leaders criticize record-high interest rates, claiming they stifle growth and worsen economic uncertainty.
Skepticism of official data. Western officials remain skeptical of Russia’s economic data, arguing it doesn’t reflect the country’s true economic situation. At the World Economic Forum in Davos, Swedish Finance Minister Elisabeth Svantesson called the Kremlin’s economic statistics unreliable.
For example, official inflation was reported at 9.5%, but Svantesson noted this is inconsistent with the Central Bank’s 21% interest rate. Continued capital flight and other indicators further challenge the Kremlin’s narrative of economic resilience.
Turning to space for clues. Doubtful of Russian data, Western officials have turned to unconventional methods, including analyzing night-time satellite images of Moscow.
Svantesson highlighted that Moscow’s lights appeared dimmer in 2023 than in 2021, indicating lower energy consumption and a possible decline in economic activity. Comparative photographs, such as those published by Business Insider, reveal a noticeable reduction in lit areas, particularly in suburban Moscow. While factors like cloud cover and time of day can influence perceptions, the overall trend suggests a decline in living standards and potential power shortages.
A manipulated narrative. Svantesson argued that the Kremlin is manipulating its economic narrative to convince Ukraine and its allies that sanctions have been ineffective. However, both official data and alternative analyses, like night-light imagery, point to a different reality.
“We don’t know” the true state of Russia’s economy, Svantesson concluded, “but what we know is that his narrative and his truth is not true.”
Image | NASA
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