Russia’s economy has entered the death zone

Subscribe to enjoy similar stories. AS RUSSIA’S WAR against Ukraine enters its fifth year, the economy that sustains it has been transformed in ways that will be difficult—perhaps impossible—to reverse without another crisis. Westerners keep waiting for the Russian economy to collapse.

It won’t. But nor will it recover. It has entered what mountaineers call the death zone: the altitude above 8,000 metres at which the human body consumes itself faster than it can be repaired.

Russia’s economy is stuck in what might be described as negative equilibrium: holding itself together while steadily destroying its own future capacity. Export revenues are falling, and economic weakness means budget gaps cannot be filled with additional tax revenues. The economy grew by just 1% in 2025.

The forecast for this year is worse. Over the past four years the Russian economy has bifurcated into two distinct metabolic systems. The first comprises military and military-adjacent industries: the vital organs that receive priority blood flow.

These sectors are growing, hiring and investing. They get first access to labour, capital and imports. The second system contains everything else: private enterprise, small businesses, consumer industries.

These are the extremities left in the cold. Russia’s overall manufacturing sector has expanded by a hefty 18.3% over the past three years. But every bit of that growth—and more—has come from the military sector.

Defence-connected manufacturing expanded enough on its own to give a 20% boost to the headline numbers, meaning civilian industry has shrunk in the same period. The most dangerous feature of this new structure is the fuel it burns. Russia’s economy now runs on what might be called “military rent":