September 22, 2025

Russia’s war against Ukraine has reshaped its economy, leaving the country trapped in militarization over the past three years, Ukraine’s Foreign Intelligence Service (SZRU) reported.

Defense spending in Russia has surged to nearly 8% of GDP, with the military-industrial complex becoming the main driver of demand. While this has allowed the Kremlin to maintain growth in strategic sectors, it has destroyed balance, sidelining private business and civilian industries.

The SZRU stressed that Russia’s economy will not be able to return to a peacetime model without a sharp collapse.

“After the war, Moscow will begin cutting defense spending. As a result, millions employed in the defense industry will lose their jobs, and entire regions where defense enterprises are concentrated will be left without an economic base. In addition, the demobilization of hundreds of thousands of contract soldiers will also shock the labor market,” Ukrainian intelligence noted.

Russia’s budget is already showing signs of strain. In the first half of 2025, federal revenues fell by nearly 17%, largely due to declining oil and gas income, which is now sold at a steep discount. The Finance Ministry has been forced to raise taxes and introduce new levies, adding more pressure on business.

Sanctions and restrictions on importing technology are eroding civilian production, with Russian companies forced to produce cheaper, simpler goods, undermining competitiveness. In the long term, this will prevent Russia from reentering global markets with high-tech products.

“Russia has fallen into a ‘military rent trap.’ The Kremlin cannot sharply reduce military spending without collapse, but sustaining the war effort is becoming increasingly difficult. This means a new economic crisis is inevitable, and escaping it will require a long and painful restructuring of the entire system,” the SZRU concluded.

https://english.nv.ua/business/ukrainian-intelligence-russia-trapped-in-militarized-economy-crisis-inevitable-50546948.html