Three years ago, when Russia made its imperialist intentions clear with the invasion of Ukraine, it was with the belief that the Ukrainian people really had no country of their own. As it turned out, to Russia’s dismay, the Ukrainians thought otherwise, enough for them to have withstood over a thousand days of brutal warfare with the sort of national will that would challenge any nation to have done the same. In the process, they have inflicted heavy losses upon Russia’s military, enough so that it is now struggling to maintain an effective offensive while its war economy is threatened with collapse should it continue on its present course.
Inflationary pressure with its high interest rates coupled with labor shortages and decreased domestic productivity is propelling Russia toward stagflation. Sole decision-making for this catastrophic set of circumstances rests with Vladimir Putin, a low-level KGB officer turned dictator whose leadership of a country in ruin appears perpetual. In this state-of-affairs, how would people in currently Russian-occupied Ukrainian territory feel about having to join a failed state after its illegal invasion and continuing abuses?
Much of eastern Ukraine was inhabited by Russian speakers who regarded neighboring Russia favorably before its invasion. As part of his litany of tortured justifications for this invasion, Putin falsely accused Ukraine’s government of persecuting ethnic Russians, much like Adolph Hitler had of ethnic Germans before invading Czechoslovakia in 1938. Despite Putin’s apparent good intentions on behalf of these Russians, he proceeded to obliterate whole villages and towns, and devastate cities where ethnic Russians resided with indiscriminate shelling.
By 2024 year-end, most of the 12,456 civilian deaths in Ukraine caused by Russian incursions had taken place in eastern Ukraine. His soldiers have raped and executed civilians, kidnapped children, stolen possessions and otherwise terrorized the population.
In May 2022, barely three months into the war, 82% of the populace had a negative attitude toward Russia and its regime while 81% favored joining the European Union (EU) and 71% desired increased security by joining NATO. To the surprise of no one, in September 2022, Russia felt obliged to annex the partially occupied territories (i.e., oblasts) of Zaporizhia and Kherson in southeastern Ukraine. This followed public ballot voting that reported 93% and 87%, respectively, of the people who had just been assaulted, favoring annexation. Similar antics took place in the eastern territories of Luhansk and Donetsk during the same time where even more exuberant outcomes of 98% and 99% were announced. These numbers are of the sort that remind us of Putin’s own several sham electoral successes spanning 25 years that secured his dictatorial rule in Russia. His highly centralized authority has given rise to an increasingly repressive regime that has subordinated the judiciary, disabled independent media and concentrated wealth within an elite group of society. It is the same authority that has now led a bewildered Russia into a criminal act of aggression.
The invasion itself has had its difficulties. Estimates of Russian troop casualties (i.e., killed, missing, and wounded) over these past three years now exceed 870,000 whereas equipment losses include more than 10,180 tanks, 21,170 armored fighting vehicles, 23,670 artillery systems, 370 planes, 331 helicopters and much more including more than a third of Russia’s Black Sea fleet, all of which have had little return on investment for their manufacture. The territorial gains made in Ukraine are subject to change and to-date have paled in comparison to the effort put forward to acquire them. In the past year, the Ukrainians have overtaken Russian territory in Kursk, humiliating the Kremlin with casualties there amounting to 40,000, among them 16,000 killed, while their North Korean allies have sacrificed 4,000 killed, losing an entire brigade and leaving the remaining two without combat capability.
The situation back home in Russia has been less then exemplary for its societal neglect. Russia’s income inequality ranks one the worst in the world with the top 10% of Russians cornering almost half of the nation’s pre-tax national income. In fact, by 2017, Russia’s richest 10% owned 87% of the wealth within the Russian Federation (RF). In a survey that same year, 45% of Russians saw poverty as the country’s leading problem with nearly 20 million Russians without sufficient money to live on.
Russia’s invasion of Ukraine has concentrated further political power within a reconfigured elite class while international sanctions only served to increase the income inequality that was already well-established. The advent of new politically connected family run businesses in which wealth was distributed increasingly among family members and not subject to public scrutiny in Russia has predictably resulted in reduced innovation and productivity that has created economic stagnation in a number of sectors. By 2022, the income gap had noticeably widened so that Russians earning over $2075 per month accounted for 0.5% of the population when 68% of the population earned under $415 per month.
Putin’s war economy has Russia’s current military spending boosted to 6.3% of its GDP for 2025, hiking defense spending by 25% to $145 billion and accounting for nearly a third of its total 2025 budget expenditure of $446 billion. An additional $38 billion is required for financing military and security support agencies increasing the total expenditure related to the war industry to nearly 41% or $183 billion. The price of Russia’s war has escalated substantially from the $59 billion expenditure during 2022, its first year of the conflict. Comparatively, the 2025 expenditure for healthcare will amount to a paltry 0.87% of GDP or $20 billion. Over the course of the war in Ukraine, reports of increased numbers of infectious disease cases have occurred throughout the RF including COVID, cholera, tuberculosis, and HIV/AIDS in a healthcare system that remains underdeveloped. This lack of domestic investment, in turn, erodes the public’s acceptance of present-day economic inequalities for which they have forfeited their personal freedoms to the regime and will fuel discontent on the homefront.
Russia’s 2022-2025 revenue from its primary export of fossil fuel apparently totaled nearly $876 billion although much of the publicly available information regarding its energy sector has been cloaked from view and only determined by indirect means. According to such measures, an increase of 28% in revenues year-on-year for 2024 was determined with oil and gas now accounting for 30% of total budget revenue. This outcome is difficult to reconcile with reports of almost a 10% drop in oil export attributed to the numerous Ukrainian strikes on Russia’s oil refineries and the further tightening of Western sanctions.
The elusive factor appears to have been trade in gold. Russia ranks second in the world for gold production behind China and has been increasing production. Its ruble was shifted to a gold standard in early 2022 around the time of the invasion. Russia’s gold reserves have been used in domestic and foreign transactions trading gold on various bullion exchanges, insulating Russia from global financial manipulations. As with other commodities, gold prices fluctuate. The idea of relying on gold for global transactions to avoid international sanctions is more a mark of desperation with Russia’s far-flung hope that gold overtakes the U.S. dollar as the preferred global trading currency in the near future.
Whether one chooses to accept Putin’s pronouncements regarding the resilience of Russia’s economy in the face of international sanctions or question their veracity given the Kremlin’s reluctance to publish critical economic data, prospects for the near future are less than tenuous. Russia’s wartime economy has been financed by mortgaging its future so that a reckoning can be expected. Worker salaries in the military industry have greatly accelerated while labor shortages have left domestic industries operating below capacity and unable to meet demand. The resulting increased foreign imports have downgraded the ruble and fueled inflation. The liquid reserves of the National Wealth Fund have dropped from $117 billion in 2021 to $31 billion by year-end 2024. Wages and benefits of public sector workers and pensioners are conflated with official inflation rates of 9% rather than with domestic prices which have exceeded 20%. Ironically, the housing market has been sustained by the massive payouts given to military personnel with enlistment bonuses of $11,000 and annual incomes of $34,000 to $53,000.
The Trump administration has chosen to align itself now in large part with Russia and its axis of authoritarian regimes, ostensibly to gain leverage over China. There are doubtless other reasons for what most regard as a bizarre move for a U.S. president. Trump’s attempt to extort President Zelensky for Ukraine’s mineral rights has shed light on his desire to profit from another nation’s dire circumstances. Trump’s odd choice of calling Zelensky a “dictator” and attempting to force a presidential election when Ukraine is preoccupied with a war echoes Putin’s rhetoric. Of course, a presidential election in Ukraine would provide Putin the opportunity to meddle and so influence an outcome favorable to Russia. It is also clear that Putin has no intention of giving up the partially occupied territories of eastern and southeastern Ukraine, including Crimea, a measure that Trump himself appears to support.
If a resolution of the conflict does come about as Russia quickly approaches an economic tipping point, spending on military personnel would certainly cease. Inflation would quickly deplete the benefits accumulated by these veterans who, in turn, would find themselves in a society without the public welfare that was once available to them in the prewar years. As for those living in war-torn, Russian-occupied eastern Ukraine who could find themselves now subject to ongoing Russian influence, the matter would be far worse for they would not have funding readily available to rebuild their society. This would contrast with circumstances in the remainder of Ukraine where reparations are already planned. The situation will be very much like that which befell Germany when it found itself divided into a western Allied bloc and an eastern Soviet one after a war 80 years previously.
So, the question here remains whether it may not be advisable to conduct a referendum managed by a United Nations (UN)-sanctioned international commission that allows the people in those Ukrainian territories illegally annexed by Russia, their right to exist as they wish. That right, according to the UN Charter, calls for self-determination and that right must be declared over the whims of tyrants.
Copyright @Kost Elisevich, MD, PhD 2025. All rights reserved. Any illegal reproduction of this content will result in immediate legal action.
