25 December 2025
Tightening sanctions, rising interest rates, and a sharp economic slowdown following the war boom have pushed Russian industry to the brink of a severe crisis.
According to top managers of major industrial companies, sales this year are the worst since 1998, according to a survey conducted by the Institute of Economic Forecasting of the Russian Academy of Sciences.
Demand estimates by large businesses have broken the lows of 2009 and 2015, when the global financial crisis raged in the first case, and when the first sanctions for the annexation of Crimea were imposed on Russia in the second.
“Industry endured the initial period of the artificial cooling of the Russian economy with understanding, but in 2025, its patience ran out,” Kommersant quotes a study by the Institute of Economic Forecasting of the Russian Academy of Sciences. Production plans for factories and plants across the country have been reduced this year to their lowest level in 16 years. The overall industrial optimism index also fell to its lowest since 2009, the survey showed.
After two years of a military boom, when the budget poured tens of trillions of rubles into megaprojects and defense enterprises, the Russian economy has fallen into depression. GDP growth has slowed to almost zero, and industry has slid into recession. In November, according to Rosstat, production volumes in Russia fell by 0.7% year-on-year: metallurgy fell by 4.1%, chemicals by 1.7%, and mechanical engineering by 5.4%. For the first time in 15 years, food production began to decline, down 0.8%.
Some industries experienced a full-blown collapse: tractor production plummeted by 61.6%, bulldozers by 53.7%, elevators by 37.2%, and passenger cars by half. The auto industry also slid to its worst levels in 2022, with production plummeting by 34.1%.
Despite the Kremlin’s optimistic statements, Russia’s military economy is undergoing reverse deindustrialization, write economists at the Jamestown Foundation: “High-tech sectors are giving way to labor-intensive, low-productivity industries, while the civilian economy stagnates and military production takes priority.” Economist Alexandra Prokopenko notes
that the cost of sanctions for the economy is rising, regardless of the government’s claims. The economy is “frozen” and unstable, she believes: “The closest analogy is a car idling in neutral, its engine overheating. … The car doesn’t move forward or backward, but the longer it sits, the more damage accumulates under the hood.”
I remember reading a report on the mafia economy right as it started its wartime economy. It said that this would keep the country afloat for a while, but that its economy would eventually collapse, which is what we’re now seeing. Things could continue deteriorating in a steady, slow rate, or it could accelerate, or the collapse could be fast and hard. We’ll see how things will go. One thing is for sure, things for mafia land will not improve.
It’s very nice of Ukraine to show its humanitarian side by keeping the sheep warm on those cold winter nights.
Yes, isn’t it? 😄