Driving a taxi within the Russian capital was by no means very profitable for Said, a Tajik migrant residing within the Moscow area, however it paid the payments.
Now, he says, gasoline has jumped by greater than 30 % in latest weeks – from 45 rubles a liter to 60. All informed, his every day take-home pay is simply three-quarters of what he used to web, he says; he can barely cowl residing bills.
“You work, and also you pay your hire, and also you pay to your gasoline — these are all of your bills,” he informed RFE/RL, asking solely to be recognized by his first title.
And the Russian capital isn’t the one locality seeing a spike. “Seems that Russia is on the point of a full-scale gasoline disaster,” one in all Moscow’s largest tabloid papers declared final month, pointing to rising variety of areas reporting shortages and value hikes.
The scarcity is blamed primarily on a decidedly non-economic issue: a focused drone marketing campaign by Ukrainian forces that’s knocked out as a lot as 17 % of Russia’s refining capability.
But it’s rattling Russian shoppers who’re more and more feeling the consequences of a broader slowdown. After years of torrid progress, propelled by authorities spending to gasoline the battle on Ukraine, Russia’s economic system is grinding to a crawl.
For the central financial institution, which once more minimize rates of interest on September 12 because it struggles to tamp down hovering inflation, the hope is it will assist rebalance the economic system. For the Kremlin, the hope is the slowdown doesn’t erode help for the Ukraine battle.
“The disaster is ongoing, it’s growing, it’s rising, it’s intensifying,” Igor Lipsits, a Russian economist, informed RFE/RL’s Tatar-Bashkir Service.
“And it’s changing into unimaginable to cover it fully, and mendacity fully can be not good, as a result of then out of the blue the inhabitants will get up and say: ‘Why did not you inform us that the scenario within the nation is unhealthy’?”
For different economists, the deceleration is neither essential nor unanticipated.
“This is the anticipated slowdown in progress. Currently, it appears to be like very very similar to a gentle touchdown, not an acute disaster of any type,” mentioned Laura Solanko, an economist on the Bank of Finland’s Institute for Emerging Economies.
Economic Downshift
For greater than two years now, Russia’s economic system has chugged ahead like a truck that has a robust engine however wheels which are more and more out of stability.
The truck itself is the product of a nationwide industrial retooling aimed toward waging battle on Ukraine. Fueled by overseas oil and gasoline gross sales, the Kremlin has pumped the economic system stuffed with rubles, prioritizing the manufacturing of tanks, weapons, shells, drones, uniforms, and tools for troopers.
Total spending on protection and safety reached 41 % of all spending in 2025, in response to authorities figures — the very best it’s been for the reason that Cold War.
To maintain the ranks totally manned, in the meantime, the federal government has paid out terribly excessive wages and advantages to entice males to volunteer to struggle.
That’s flooded Russia’s poorer areas with money, however it has additionally distorted labor markets, pushing up wages and pushing inflation to almost 10 %.
That in turned prompted the Central Bank to hike lending charges — which influences issues like automotive loans and mortgages — to tamp down inflation.
The outcome?
In the primary three months of this 12 months, GDP dropped 0.6 % in contrast the earlier three months. That’s the primary contraction since 2022, when, amid a battering by Western sanctions and Western firms pulling in a foreign country within the wake of the invasion, the economic system contracted 1.4 %.
Russian President Vladimir Putin’s prime advisers have publicly warned of a slowdown. Finance Minister Anton Siluanov informed Putin that that the economic system would develop simply 1.5 %.
Days later, economics minister Maksim Reshetnikov warned the economic system was “cooling down sooner than anticipated.”
German Gref, who heads state-run banking large Sberbank, warned of potential “stagnation.”
Putin has tried to tamp down fears of wider slowdown.
“I’m sure that ultimately we’ll reach resolving the problems, to help the required tempo of financial progress whereas protecting inflation at a minimal,” he mentioned throughout a enterprise discussion board in Vladivostok.
“Everyone additionally understands that if inflation overwhelms the economic system, it won’t finish properly.”
Guns, Not Butter
On September 12, the Central Bank introduced a modest minimize to its key fee— its third minimize this 12 months. Inflation was caught at 8.2 %, which is greater than double the financial institution’s goal.
“So, what comes subsequent can be stagnation — primarily zero or 1 % progress — after which a recession will comply with,” mentioned Bogdan Bakaleyko, a former Russian journalist and economics commentator.
If stagflation or recession ends in an uptick in unemployment, Bakaleyko mentioned, it might doubtlessly push extra folks to struggle in Ukraine to reap the benefits of wages and advantages being provided by the Defense Ministry.
Russians “will both be with out cash, with no job, and with out meals, or they will signal a contract with the Defense Ministry as a result of there’ll all the time be cash for that,” he informed Current Time.
“So financial issues truly play proper into Vladimir Putin’s arms.”
Adding Insult To Injury
For Russian finances officers, the slowdown places strain on the federal government finances, which is already going through a deficit on observe to hit 5 trillion rubles ($60 billion) in 2025. But the Kremlin has proven no indicators of wanting to chop again on battle spending.
“Russia’s capability to take care of its wartime footing depends closely on oil costs and the trajectory of the sanctions regime,” the Peterson Institute for International Economics mentioned in a report final month.
“If Russia suffers setbacks on the battlefield whereas grappling with constrained assets, it could be compelled to regulate its strategy, both by scaling again its offensive or exhibiting better openness to negotiations.”
Last month, the Reuters information company, citing unnamed officers, mentioned tax will increase have been inevitable. The Bell, a Russian enterprise publication, reported that policymakers, who count on to hammer out a draft finances plan by the top of September, have been leaning towards mountaineering the nationwide value-added tax by two proportion factors, to 22 %.
That may push up shopper costs, which might be at odd with the Central Bank attempting to push down inflation.
Vladislav Zhukovsky, an impartial economist, additionally predicted a hike within the value-added tax, which was final elevated in 2019 — simply months after Putin was re-elected to his fourth time period.
“This is essentially the most predatory tax, essentially the most strangling for the economic system and the inhabitants, as a result of it’s collected, so to talk, from all financial exercise — from all manufacturing and demand throughout the nation,” he informed Current Time.
“This will undermine Russian business, civilian business, as a result of they may merely be compelled to shift these manufacturing prices…to the top shopper,” he mentioned.
“As a outcome, costs will skyrocket by not less than 10-15 % on prime of that,” Zhukovsky mentioned. “For the inhabitants, this can be a blow to the pockets, a drop in the usual of residing, in the actual buying energy of the inhabitants.”
