Experts disagree on the assessment of the Russian economy. This also applies to Russian experts living outside Russia. Some believe that Russia is coping surprisingly well with Western sanctions, the loss of revenue from oil and gas exports, and the increase in war spending, which accounts for over 40% of the country’s budget. The Russian budget shows a deficit, but it is not excessively large. According to official data, it amounted to 1.7% of GDP last year.

Despite the fact that many European countries have stopped buying Russian gas, Russia still has a surplus in foreign trade, and therefore significant foreign reserves. The ruble to dollar exchange rate, which some experts consider a measure of economic stability, was 70:1 at the end of 2021, and since the invasion of Ukraine began, it has fluctuated from 50:1 in June 2022 to 113:1 in December 2024. It is currently around 80:1.

The International Monetary Fund (IMF) predicts that Russia’s GDP will grow by 1.4% this year, which is not an impressive result. But this does not mean that the global superpower will enter a recession. The most visible symptom of tensions in the economy is inflation, which in 2024 officially amounted to 9.5%, and independent measurements indicate 15-18%.

Yet for an obvious reason, the current state of Russia’s economy should not be compared with other countries. The Russian economy is a war economy, meaning that it operates according to principles other than market ones. And the macroeconomic indicators it achieves result from specific mechanisms that are difficult to maintain in the long term.

Outside market laws

A study of the war economy’s functioning was presented by British historian Adam Tooze in his 2006 book The Wages of Destruction: The Making And Breaking Of The Nazi Economy. Of course, the situation of Russian President Vladimir Putin’s state is in many respects different from German dictator Adolf Hitler’s state. The shift of the economy to war, which began in Germany in 1936, went further there than it did in Russia after 2022.

Russia, unlike Germany, is a country rich in raw materials, which allowed it — and is still allowing it — to achieve surpluses in foreign trade and to acquire foreign currencies. It also receives help from bordering China, while Germany was isolated and had to reckon with an economic blockade and shortages of many basic raw materials and products.

What is common is that in both Hitler’s and Putin’s economies, the allocation of resources is largely carried out not through market mechanisms but through political decisions. Less efficient solutions are chosen, but which are necessary for the war effort. Germany developed the production of motor fuels from coal on a gigantic scale in order to become independent from foreign supplies. The gasoline produced in this way was five times more expensive than that produced from crude oil.

From an economic point of view, this was absurd. But thanks to this technology, Germany’s supplies not only became independent from countries that could potentially be on the side of an unfriendly coalition, but it also saved foreign currencies, which scarcity was a constant problem for the Nazi economy.