I was offered the use of a new economic model not yet in the public domain, with all the latest official and unofficial economic data available, and it produced some fascinating results. These are the salient points that came out of that model. I’d like to thank those who made it available and wish them the best of luck in their endeavors.
Russia is in an interesting position.
If things carry on as they are right now July 24 2026, the model suggests that Russia can continue to operate at this level for up to two years.
If the tempo of the war was to subside, it could go much longer but that seems unlikely to happen.
As long as Russia finds a way to fund the war, can avoid immediate insolvency, and continue to function as official and unofficial inflation continue to rise, high interest rates persist and a high deficit becomes permanent, then its erosion of the civil and industrial sectors may be low enough to prolong the fight.
However, variables such as Ukraine’s long range campaigns against revenue generating industries such as oil and gas, and now their assault on vital retail sectors which include hugely important companies like Ozon and Wildberries, with their extraordinary 77% market dominance, will have a marked effect. Small businesses that supply via these outlets will go bankrupt, be unable to pay taxes and VAT and further erode the governments domestic income stream.
Overall the Russian economy is still more or less functioning, but it is slowing very hard, very fast. The official 2026 growth forecast was cut to 0.4% which seems like nonsense, in reality Russia is almost certainly in recession. While official inflation has been running around 5.3% to 6.0% and the key interest rate is still 14.00% (as of this morning it was cut 25 basis points). The federal budget deficit reached 5.73 trillion rubles in January-June 2026, or 2.5% of GDP, and spending rose 16.1% year-on-year in that period. That is not a collapse, but it is the profile of a state under persistent war pressure.
The model suggests Russia has several buffers: a still-substantial-ish National Wealth Fund, a war economy that prioritises defence, and a government system that can suppress some of the political pain. The National Wealth Fund’s liquid assets were still around 3.4–3.9 trillion rubles in mid-2026, though that is only about 1.5%–1.7% of forecast GDP and has been declining fast. In other words, Moscow still has room to fund the war, but far less room to absorb shocks than it had earlier in the conflict.
The weaknesses lie in the biggest medium-term problem: the combination of high military spending and weak growth. Reports this year indicate defense outlays have absorbed an extraordinary share of the budget, (including state security and related forces, plus frontline military expenditure around 54%), while revenues have not kept pace. Inflation has also picked up again to officially 6.02% in June, and elevated interest rates make it harder for the civilian economy, firms, and banks to expand normally. Arguably too, the decrease in interest rates is likely to fuel inflationary pressure. That means Russia can keep paying for war before it runs out of cash, but doing so increasingly damages the broader economy that supports the war effort. It’s a bit like burning the candle at both ends, but one end is slower than the other. Eventually they will meet in the middle – its about how long they can stop that happening.
Sustaining the current war without a major change in behavior, Russia likely can do so through 2026 and into 2027. Sustaining it without sharper economic degradation, severe reserve depletion, or additional mobilization of society, the window is far shorter and could start to narrow materially over the next 12–24 months. A battlefield stalemate helps Moscow because it avoids a sudden need for escalation, but a prolonged war of attrition steadily increases the cost of continuing. Essentially if Russia sits and does nothing it’s better off than doing something. Putin is obsessed with doing something to gain the entire Donetsk region so he’s effectively shortening his capacity to continue the war. Much as Germany did in 1944, by blowing the last reserves and capabilities in the Ardennes Offensive, they effectively shortened the war by four to six months.
If Russia goes for a full mobilization of 500,000 men or more, the economic dislocation is difficult to quantify but will be considerable. The estimated cost is around $30 billion in initial mobilization then the transfer to the state budget of paying, supplying and using these recruits, a huge cost. This will shorten the period Russia can prolong the war for by as much as a year. If oil prices rise it will help Russia to some degree, if they fall, it won’t but at this stage it’s almost irrelevant.
The real question at this point in time is can Russia keep fighting? The answer is yes.
If the question is can Russia keep fighting easily and without increasing risk of economic or military collapse? Then an emphatic no must be the answer.
The Analyst
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The Military Analyst 