Russia’s war economy at an inflection: scenarios to 2030, and lessons from history

Russia’s industrial furloughs and shortened workweeks reported in October 2025 are not isolated blips, but signs of cumulative strain spreading beyond defence-linked factories into cars, mining, metals, coal, cement and rail. The proximate drivers are weakening domestic demand, squeezed exports, and inputs and finance constrained by sanctions and high interest rates. Wage arrears have risen, while the state weighs fresh revenue measures to plug widening budget gaps. Together these pressures mark a shift from the early-war “resilience narrative” toward visible underemployment and sectoral contraction. 

To map the forward trajectory of the Russian economy, we set out three structured scenarios for 2026–2030, incorporating the data and sectoral detail implied by the October 2025 picture.

2026–2030 scenarios

1. Baseline stressed stagnation

Overview: Under this path, Russia keeps the war at roughly the current scale, maintains priority funding for the defence industry, but cannot reverse weakness in civilian sectors. Industrial firms continue to prefer furloughs and four-day weeks to mass layoffs, masking slack in the labour market. Purchasing manager readings oscillate around contractionary territory; private-sector activity stays subdued. Fiscal policy vacillates between targeted support and revenue raising, including a possible VAT hike, to keep the deficit from drifting. 

Macroeconomic ranges, 2026–2030: Real growth hovers near zero in non-military sectors; headline GDP ekes out low single digits as defence outlays prop up measured activity. Inflation remains sticky given energy and food pass-through, and the signalling role of petrol prices; the central bank keeps rates high by historic standards to anchor expectations, citing fuel as a key “marker” commodity. Budget deficits persist in the 1.5–3.0 percent-of-GDP range, financed domestically as external borrowing remains constrained. 

Sectoral trajectories:

• Automotive and heavy machinery: Suppressed household purchasing power, expensive credit and parts bottlenecks keep volumes low; the sector leans on reduced schedules to retain skilled labour. Selected truck and utility lines with military adjacency fare less badly, but broad recovery is elusive. 

• Mining, metals and coal: Export margins stay thin; some non-profitable pits remain mothballed; capital expenditure is rationed. Metals face weak global prices and discounting pressures; productivity erodes where maintenance and spares rely on restricted imports. 

• Energy and refining: Refinery outages and a sporadic export ban policy keep the domestic fuel market tight; refining reliability is structurally lower after repeated strikes, forcing higher precautionary stocks (setting aside a proportion of investment funds to hedge against economic downturn) and capital expenditure, for hardening (price increases where supply struggles to keep up with demand). 

• Rail and logistic: Cargo volumes remain under pressure from commodity and construction slowdowns; rolling-stock modernisation lags. Cost containment takes precedence over expansion of the country's much-needed logistics extension eastward. 

• Defence industry: Protected budgets and priority inputs sustain output, but cost inflation and electronics constraints cap further step-ups. Over time, the protected share of industry rises, crowding out civilian investment. 

Risk markers to watch: Persistent underemployment via shortened weeks, new financial arrears in industry clusters beyond current hotspots, and incremental revenue grabs such as indirect tax hikes. 

2. Siege economy, tighter sanctions

Overview: If sanctions intensify (for example, the EU's latest round of sanctions passes the European Council) and enforcement tightens on shipping, finance and technology, and if Ukrainian strikes further degrade refineries and logistics nodes, then Russia slides from stagnation toward recession in the civilian economy. Fuel supply remains volatile; the authorities extend or repeat export bans to curb domestic price spikes, complicating refinery economics and heightening inflation expectations. 

Macroeconomic ranges, 2026–2030: Real GDP fluctuates between mild recession and flat growth; inflation proves volatile; the rouble requires heavier Central Bank support. The budget gap widens unless offset by higher taxes, spending cuts outside defence, or increased quasi-fiscal pressure on state firms and regions. 

Sectoral trajectories:

• The automotive sector and durables contract further; import competition from cheaper Asian models intensifies in lower price bands; localisation efforts are hampered by electronics and tooling constraints. 

• Mining and coal see more closures of marginal assets; metals shift to deeper discounts to move tonnage, with knock-on stress for rail. 

• Energy and refining bear repeated disruptions; domestic retail price controls or rationing episodes become likelier; capital expenditure is diverted from greenfield to repair and hardening. 

• Defence draws an ever-larger share of scarce skilled labour and capital goods, aggravating civilian shortages. 

3. De-escalation or armistice dividend

Overview: A material de-escalation in the Ukraine conflict stabilises expectations and allows a re-tilt from munitions to maintenance and consumer-facing activity. Sanctions relief would be partial and phased even in a best case, but the mere prospect of lower geopolitical risk could unlock private capital expenditure and reduce the need for quasi-fiscal supports (e.g. increased indirect taxation).

Macroeconomic ranges, 2026–2030: A one-off level effect of 1–2 percentage points on growth in the first post-de-escalation year is plausible as inventories normalise and underused capacity is reactivated; thereafter the medium-term limit for economic growth is capped by damaged capital stock, skills attrition and financing constraints. Even in this scenario, Russia’s level of output likely remains below a non-war estimate, assessed by some optimistic analysts at double-digit percentages. 

Sectoral trajectories:

• Automotive sector, construction materials and consumer durables lead the cyclical rebound if rates fall and households regain confidence. However imported parts dependence and curtailed Western market access keep a ceiling on volumes.

• Energy and refining rebalance toward more predictable throughput if attacks fall away. However the system requires multi-year investment to restore resilience; sanctions relief would determine how quickly Russia re-integrates into premium markets. 

• Defence ramps down gradually; reabsorption of labour and machine tools into civilian lines is administratively complex and historically takes years.

Cross-scenario constants

Across all three paths, three constraints recur. First, sanctions and over-compliance keep finance, shipping and high-end inputs tight. Second, fuel remains a swing variable for inflation and rates. Third, the social compact depends on hiding unemployment via short weeks and furloughs rather than letting headline joblessness spike. These constants appear already in the 2025 evidence base. 

How does Russia’s 2025 war economy compare with historical wartime models?

Today’s Russian approach mixes fiscal prioritisation of defence with governmental improvisation and selective hard controls imposed upon domestic production sectors. It lacks the deep, formal mobilisation institutions that characterised the classic twentieth-century war economies, and this matters for productivity, substitution and post-war reconversion.

1. United States, 1942–45

The Roosevelt administration stood up the War Production Board (WPB) to coordinate conversion, allocate scarce inputs, set priorities and ration non-essentials; an Office of War Mobilisation later synchronised proliferating agencies. The WPB’s formal remit enabled rapid, system-wide repurposing of capacity and a surge to world-leading munitions output while keeping civilian living standards roughly level. Russia today has prioritisation and controls, but not an equivalent, economy-wide conversion authority with the same depth of capital markets, coordinated supplier systems and allied inputs. 

2. Soviet Union, 1941–45

The USSR mobilised an extraordinary defence share of measured output and sustained it through coercive planning, evacuation eastward, and massive Allied material support. The economics literature emphasises both the scale of mobilisation and the post-war costs of capital depletion and repression in re-establishing peacetime control. The modern Russian state retains instruments of command, but faces a different constraint set: no Lend-Lease analogue; restricted access to frontier machinery and finance; and a demography and industrial geography not configured for wholesale evacuation or greenfield movement of industrial assets. 

3. Germany, 1939–45

Historians of the Third Reich’s economy stress the frictions and rivalries of overlapping authorities. Rationalisation under Albert Speer (latterly Nazi Germany's Minister of Armaments and War Production) came late and from a low organisational base. The lesson is that political incoherence and contested jurisdictions can throttle war production even in a large industrial state. Contemporary Russia shows fewer overt institutional rivalries, but the reliance on ad hoc workarounds, opaque procurement chains and import-substitution improvisations risks a similar drag on productivity. 

What the parallels imply:

• Formal mobilisation capacity: The countries that scaled most efficiently during total war scenarios built institutions that could reassign labour and capital quickly under clear priority regimes. Russia’s partial controls deliver staying power, but at lower efficiency and with higher long-run scarring.

• External inputs: The United States fought as the arsenal of democracy; the USSR’s survival and rebound were aided decisively by Allied material flows. Contemporary Russia faces the reverse: sanctions constrain high-end inputs and financing, and substitution via grey channels is costly and unreliable. 

• Reconversion costs. Historical experience shows reconversion takes years and is harder when capital has been run hot (i.e. moved around between sectors in pursuit of higher returns), maintenance deferred, and skills diverted. Russia’s widespread furloughs and cut-hours point to human capital underuse that will slow any post-war rebound if not addressed. 

Conclusion

As of October 2025, Russia’s war economy exhibits the classic symptoms of endurance under constraint: protected defence lines; weakening civilian industry cushioned by administrative fixes; tight money (i.e. obtained only at high interest rates) to offset inflation spikes driven by fuel shortages; and fiscal improvisation to contain deficits. The Reuters-documented furloughs and four-day weeks are evidence that the margin of adjustment, to maintain a semblance of economic stability, is now reduction of human time rather than seeking new capital or expansion into new markets.

Looking forward to 2030, a narrow path of stressed stagnation is the default. A siege variant unfolds if sanctions enforcement ratchets up and energy infrastructure remains vulnerable. A de-escalation dividend exists in the event of some peace settlement with Ukraine, but it would be capped by lost capital, skills and market access. Historical wartime economies suggest that scale, coherent institutions and external inputs are the three levers that separate mere survival from efficient mobilisation. On all three, modern Russia is disadvantaged relative to the historical parallels. The longer the war lasts at its current intensity, the more these disadvantages will accumulate into structural scarring that will be difficult to reverse even in a friendlier geopolitical climate.