Russia will not be able to win the competition in the "war of attrition" when Ukraine is supported by the Western world. This was stated at a session of the Nikitsky Club by Andrey Klepach, chief economist of Vnesheconombank (VEB.RF), a key Russian state bank that finances the Kremlin's national projects and has the status of a "state development corporation".

[Original link in Russian, automated translation with minimal edits.]

According to Klepach, the costs to the Russian economy from sanctions and the Western blockade are rising, the damage from Ukrainian strikes on ports, infrastructure, chemical and oil plants is increasing, and Russia is increasingly lagging behind the world in technological development.

“We are lagging behind. We are losing both technological and economic competition in the world. Moreover, as I have already said, we are not only losing it to China and the United States, but in some respects, we are losing it to Ukraine. Ukraine's economy, of course, is partly destroyed, and there is a demographic catastrophe. But, again, the Ukrainian economy, despite everything, is surviving. Of course, there is huge financial assistance <...> With such assistance for military expenses and their own expenses, this is about almost 50% of our budget," said Klepach.

"We will not win the competition in this war of attrition. We have the illusion that everything will collapse there. It hasn't collapsed and it won't collapse. Our costs are increasing," Klepach continued.

He recalled that after the military boom of 2023–24, the Russian economy shifted to a decline this year, investment fell sharply, and civilian industries slipped into recession — from the aviation industry and the production of building materials to the light and food industries. The situation is exacerbated by the ultra-tight policy of the Central Bank of the Russian Federation, which, according to Klepach, is responsible for at least half of the economic downturn.

"The conflict in Ukraine with NATO's involvement has already lasted longer than the Great Patriotic War, and there is no end in sight yet. Both sides are increasing the intensity of their strikes, including on each other's economies. The losses from the AFU strikes on our infrastructure — ports, oil and gas, chemical complexes, logistics — are increasing and are already becoming a noticeable macroeconomic barrier to the growth of the Russian economy," said Klepach.

The tightening of US sanctions at the end of 2025 led to India and China starting to reduce their purchases of Russian oil, "despite all the repeated statements that they are not complying with the sanctions," he recalled. Taking into account the likely new wave of sanctions and "increasing losses from AFU strikes", the potential growth rate of the Russian economy may not exceed 1–1.5%.

According to Klepach, all this will inevitably lead Russia to a "social crisis", and "when no one really expects it".

"But let me remind you that no one expected the February Revolution either. Lenin wrote in December 1916 that 'we will not live to see it', but he lived to see it a few months later. The situation in the Soviet Union in 1991 — we were moving towards it for a long time and consistently, and everyone understood that we were heading for a crisis, but there was no fatal inevitability that the Soviet Union would collapse," said Klepach.

"I believe that Russia will not collapse, but I am almost certain that we will face a social crisis. We will not collapse economically, but our backwardness will also increase with all the ensuing consequences," he concluded.

Archived