The Indicator from Planet Money - Why hasn't the Russian economy collapsed?

Episode Date: March 24, 2026

How has Russia’s economy not completely collapsed after four years of war, sanctions and billions in debt? One economist says it is the war that has been propping up Russia's economy, not the other way around. He calls it smertonomika or death economics.On today’s show, six reasons why Russia’s economy is still chugging along despite burning money by the billions waging war on Ukraine.Come see Planet Money live on stage in April! 12 cities. Details and tix here: https://tix.to/pm-book-tour. Related episodes: How your favorite fish sticks might be funding Russia's warWho’s propping up Russian oil?The economic war against Russia, a year laterFor sponsor-free episodes of The Indicator from Planet Money, subscribe to Planet Money+ via Apple Podcasts or at plus.npr.org. Fact-checking by Sierra Juarez. Music by Drop Electric. Find us: TikTok, Instagram, Facebook, Newsletter.See pcm.adswizz.com for information about our collection and use of personal data for sponsorship and to manage your podcast sponsorship preferences.NPR Privacy Policy

NPR. This is the indicator from Planet Money. I'm Waylon Wong. And I'm Patty Hirsch. When Russia commenced its second invasion of Ukraine in 2022 and the world responded with sanctions, most economists said it wouldn't be long before the Russian economy collapsed. But it hasn't turned out that way. Russia may have become bogged down in a war of attrition, and it may be almost $320 billion in debt.

But its economy, soldiers on. Today, depending on how you measure it, Russia's economy, is now either the 11th or the fourth largest in the world. So on today's show, we'll give you six reasons why Russia has managed to keep its economy up and running, despite a war, a sanctions regime, and its ballooning debt. And we'll learn about one of the most significant and grizzly factors in Russia's resilience, Schmertonomica or death economics. That's coming up after the break.

No one would say that Russia's economy is doing well exactly. The country's burning between half a billion to a billion dollars a day on its war in Ukraine. Its debt load is increased in the last year to $320 billion, and its growth rate has slowed from roughly 4% in 2024 than less than 1% in the third quarter of last year. Still, Russia's economy is puttering blithely along. Alina Rybukova is an economist and a Russia specialist fellow at the Peterson Institute. She says the biggest reason for this is that Russia has something the rest of us, want. We still consume sufficient number of energy, oil, gas, and also some metals and mining, and we use it for fertilizers as well, that the global economy still needs.

The most important of these commodities is, of course, oil. It's Russia's biggest earner, which is why we sanctioned it. At first, I mean, sort of. Sanctions have been, you know, we've just not been very clever. That's the reality. Timothy Ash focuses on Russian and Eurasian economics at the London think tank Chatham House. Tim says the second reason Russia's economy isn't on its knees is that the sanctions, which were supposed to strangle Russia, have failed to do the job. We haven't done enough. We've been too slow. We've been too well telegraphed. We've given the Russians lots of time to figure out ways to get around sanctions. Perhaps the most notable way they've gotten around sanctions by developing relations with China. Alina says China is the third big reason that Russia's economy is still afloat.

After oil, that's the most important pillar propping up Russia's war economy. China provides direct military support to Russia. And also by providing some of the consumer goods, it frees up Russian industry to focus again on the military output. China is now Russia's biggest trading partner replacing Europe. China buys oil, gas, agricultural goods and chemical products. It's not that China's been helping Russia out of the goodness of its heart, though. Tim says the way the relationship has developed, it's turned Russia into something of a dependent. But it's been helpful to Russia's economy in the short term.

And where China has led the way in defying Western sanctions, many others have followed. Including the US government, by the way, which has purchased Russian oil that's been refined in other countries. But there have been no consequences. Secondary sanctions, which is basically enforcement, again, has been very weak. No one's gone to jail. No one gets fined. There's no penalty, really, for helping Russia get around sanctions, and actually sanctions pay. Tim says the sanctions did give Russia a jolt when they were first put in place in 2022. He says about $100 billion float out of the country as Russia's wealthy rushed to repatriate their fortunes.

But, and this is the fourth reason the Russian economy is still ticking, Russian President Vladimir Putin was ready. There was a lot of durability and buffers built in right at the outset. You saw a very cautious economic policy from Russia, tight fiscal policy, tight monetary policy, de-leveraging, reducing vulnerabilities and building up buffers. Tim says Putin was likely planning for sanctions as far back as the invasion of Crimea in 2014. He put skilled technocrats in charge of the economy who've managed things well. They stopped money flowing out. They stockpiled dollars. Alina says they forced foreign companies to sell their operations, often at fire sale prices.

The Kiev School of Economics estimated in March 25 last year that foreign businesses suffered over $170 billion in direct losses. She says the sales of these foreign companies gave Putin a golden opportunity to shift key assets into Russian hands and to build a loyal base of supporters at the same time. To create the new, even more loyal class of wealthy people, I think that was important to give them something. And in order to give something, you need to take something. And this is the fifth reason the Russian economy has resisted implosion. Putin has built a network of near fanatical supporters in the business classes, a new breed of almost oligarchs who owe everything to the president and who will go along with the president no matter what he does to the economy.

When there are shocks, for example, like you have in Iran, there will be people who will just basically close the ranks around the regime. And this is also not just because of this wonderful loyalty, but also because it's rational, right? As long as sanctions are in place, the war is in place, I continue to make money. Putin just hasn't bought backing at the top of the Russian economic tree. He's found a way to consolidate support at the bottom of the tree too. Yes, Vladislav Inozemsev is a Russian economist

who co-founded a think tank called the Center for Analysis and Strategies in Europe. He says when Russia invaded Ukraine a second time in 2022, Putin initiated a partial military mobilization that called up reserve It was not popular. Facing the real discontent in the Russian society that followed mobilization as a forced event, Putin decided somehow to sweeten this medicine for the Russian society. Putin's sweetener was money. Billions of rubles paid to regular soldiers and new recruits in the form of pay increases, signing bonuses and death benefits.

Vladislav calls this Schmertonomica, or death economics. And it's the sixth reason Russia's economy is still trucking along despite, or in this case, because of the war. He says monthly pay for soldiers is now six times what it was in 2022. Signing bonuses have risen from zero to between $20,000 and $40,000. Death benefits are anywhere between $130,000 and $180,000. If someone aged around 35 years old, getting medium, wage enlists into the army, fights in Ukraine for around one year, and is killed on the front line, his relatives will get more money in cash that he would be able to earn till the rest of his life.

Vladislav says these cash benefits are the price that the Russian government is paying to sustain its losses in Ukraine, 30,000 soldiers every month. In a kind of grotesque dynamic pricing, these benefits vary according to the military's need for human lives. And, according to the will of local governments, that compete to recruit troops so that they can look good to the Kremlin. It's not just government money that's buying these lives. Putin has ordered banks to forgive the debts of recruits who have defaulted, up to the equivalent of $120,000 and without compensation from the government.

It's kind of a helicopter money. And therefore, actually, is the best way, I would say, to use government money, because no one steals it. There is no corruption. There is no mismatchew. Because most of the people who sign up for these benefits are poor and desperate and come from deprived regions, the payments are a kind of macabre Keynesianism, spurring growth and wealth in areas of the country that might otherwise stagnate. The system of Smartonomica has divided Russian society. Bladislav says there's now so much demand for that government money from the poor and disenfranchised

that Russia doesn't need forced deployments anymore. Wealthy people then no longer worry about being sent to war, which means they worry a lot of less about the war. So when I'm asking why the Russian do not protest, because they don't care. Why should they care if they are not affected by the danger of mobilization? And this is the most important thing. It keeps the society quiet and allows Putin to do what he wants. And what he wants is to keep the war going, because when it stops, the war economy will stop and the real economy will kick in. Only then will Russia find out the real effects of decimating its workforce, degrading entire sectors of its economy, and spending up to half of its government budget on

so-called defense. Russia's been mortgaging its future to keep its economy rolling. But eventually, the debt will have to be paid. This episode was produced by Corey Bridges and engineered by Jimmy Keeley. It was fact-checked by Sierra Juarez. Kaking Cannon is our editor and the indicator is a production of NPR. Thank you.