Russia’s war economy is straining as battlefield costs rise, report says

Russia’s wartime economy is showing sharper signs of strain as the cost of its invasion of Ukraine rises, according to a new brief from the Center for Strategic and International Studies. The Washington think tank said the pressure creates an opening for the United States and Europe to tighten sanctions and increase the financial burden on Moscow.

The CSIS researchers said President Vladimir Putin has kept the war effort going through heavy state spending, labor mobilization and energy sales that continue despite Western restrictions. But they argued that the model is becoming harder to sustain as Russia faces mounting battlefield losses, weaker revenue and slower economic growth.

Russia has pointed to several headline indicators during the war to argue that Western sanctions have not crippled its economy. Reuters has reported that gross domestic product has remained mostly positive since the 2022 invasion, Bruegel has reported that unemployment has fallen, and Bloomberg has reported strong wage growth amid labor shortages. The Moscow Times has reported that inflation eased after reaching double digits in 2023.

CSIS said those figures obscure a deeper dependence on the war. The researchers said Russia’s industrial and technology capacity has been increasingly directed toward military needs, while public money has supported defense-linked manufacturing, soldiers and households affected by the conflict.

Heavy losses, slow gains

CSIS estimated that as many as 450,000 Russians have been killed since the war began and 1.4 million have been wounded. The think tank said the current rate of loss likely exceeds monthly recruitment and has produced limited territorial gains.

According to CSIS, Russian forces in 2026 have advanced in some areas by only 50 to 90 meters a day, among the slowest rates recorded in modern wars. The think tank said Russia’s holdings in Ukraine recently contracted for the first time since August 2024.

The Institute for the Study of War said in a May report that Russia lost control of 116 square kilometers in April and that its pace of advance had been slowing since November 2025. CSIS linked Russia’s battlefield difficulties partly to Ukraine’s improved ability to strike targets behind the front and partly to weaknesses in Russia’s own military system.

State spending carries the load

The Institute for Economics and Peace, an Australian think tank, said last year that Russian public spending injections from 2022 through 2024 exceeded 10% of GDP. Analysts have described the approach as military Keynesianism, with the state using large outlays to support a war-focused economy and cushion households tied to the conflict.

CSIS said that approach is now under pressure. The Kiel Institute has reported that Russia’s fiscal reserves are shrinking, while the Oxford Institute for Energy Studies has reported a sharp fall in oil and gas revenue as buyers have shifted to other suppliers.

Bruegel estimated that Russian GDP growth slowed to about 0.6% in 2025 after expansion above 4% in both 2023 and 2024. The Oxford Institute for Energy Studies said oil and gas accounted for 23% of Russian federal budget revenue in 2025, the lowest share in two decades.

Russia has also faced damage to energy infrastructure from Ukrainian drone attacks, according to CSIS. The think tank said Moscow still benefits from a large labor pool and a so-called shadow fleet of tankers used to keep oil exports moving around sanctions.

CSIS urged the United States and Europe to act on those vulnerabilities, especially by closing loopholes that allow Russian oil to reach buyers through chartered vessels. The researchers wrote that without higher economic and military costs, Putin is likely to continue the war even as the strain on Russia grows.

This story draws on original reporting from Fortune.