Russian Economic Crisis

Russian President Vladimir Putin acknowledged Wednesday that Ukrainian drone attacks deep inside Russia are causing visible damage to infrastructure and the economy, though he insisted the consequences are not critical and do not severely affect economic growth, which he pegged at around 1 percent.

Putin ordered the government to launch a reconstruction programme for warehouses and logistics capacity damaged in the strikes. At least 20 warehouses belonging to e-commerce giant Wildberries have been hit since Ukrainian President Volodymyr Zelenskyy announced the deep-strike campaign on June 25, forcing many small vendors to shut down after losing inventory to fires.

The campaign has also struck oil refineries, triggering fuel shortages. Moscow petrol stations have reimposed purchase limits, and Deputy Prime Minister Alexander Novak said Russia has begun importing fuel and authorised production of lower-grade standards to meet domestic demand. A temporary fuel export ban was introduced in late July, running through January 2027.

Russian bank customers have withdrawn the equivalent of roughly 24 billion euros since the start of the year, with 286.4 billion roubles pulled out in the first two weeks of August alone, according to central bank data. The withdrawals follow a pattern of accelerating outflows through the summer, as June and July combined saw 11 billion euros removed.

The pressure on public finances is mounting. Yields on 10-year Russian government bonds have climbed to 17 percent, and the finance ministry was forced to cancel a planned bond auction in July. The budget deficit from January through July reached approximately 65 billion euros, far exceeding the government's full-year target of 38 billion euros.

Economic growth has stalled, with first-half GDP expanding just 0.3 percent, while drone strikes have knocked out over 30 percent of Russia's oil refining capacity. VEB, the state development corporation, dismissed its chief economist Andrei Klepach amid the turmoil.

Voluntary contributions to Russia's federal budget reached 383.69 billion rubles, over $4.5 billion, by mid-August 2026, a figure already 1.5 times the total for all of 2025. Non-state donations stood at just 15.6 billion rubles before a closed-door meeting between President Vladimir Putin and business leaders in March, after which inflows surged tenfold in April alone and continued climbing monthly through August.

The government has separately raised income and value-added taxes to fund the war and may introduce a windfall tax on the financial sector this autumn. Kremlin spokesman Dmitry Peskov denied reports that Putin personally solicited funds from business leaders.

The donation surge comes as Russia intensifies military operations, with Moscow targeted by 620 drones in a single night and missile strikes continuing across Ukraine.

Gasoline and diesel were available at only 28.1% of Russian petrol stations by the end of last week, down from 41% a week earlier, as fuel shortages returned to parts of the country after Russia received its first Indian gasoline shipment earlier this month.

At least six regions imposed or tightened fuel-sale restrictions between August 10 and 15, with Kaluga and Lipetsk introducing odd-even rationing by licence plate. Long queues have re-emerged at stations in at least 18 regions since the start of August. To boost domestic supply, the St. Petersburg exchange began trading lower environmental-grade gasoline — Euro-2 through Euro-4 — from August 18, a move the Russian Energy Ministry said would remain in place until at least July 2027.

The squeeze is set to deepen in September, when major refineries including TAIF-NK in Tatarstan are scheduled for maintenance, while Belarus's Novopolotsk refinery — a key supplier — is also shutting for planned repairs.

Andrei Klepach, chief economist at Russia's second-largest bank VEB.RF for 12 years, was dismissed on August 16 after delivering a stark assessment of the country's economic trajectory, Klepach confirmed to Forbes.

In a May 21 presentation to the Nikitsky Club, Klepach warned that Russia was falling behind China and the United States economically, and in certain areas trailing Ukraine. He cautioned that Russia would not prevail in a prolonged economic war with its neighbor. The dismissal came on direct orders from the Kremlin, according to The Bell.

The firing follows mounting fiscal pressure. Russia's budget deficit reached 5.87 trillion roubles in the first four months of 2026, already surpassing the government's target for the entire year.