Kremlin Silences the Bear of Bad News: Russia's Economic Deadlock

Andrei Klepach, the chief economist of Russia's second-largest bank VEB, has been dismissed following a scathing speech where he laid bare the harsh realities of the wartime economy. Klepach’s warnings that Moscow could not win a prolonged economic war with Ukraine have tested the Kremlin's tolerance for dissent and deepened concerns over the nation's fiscal stability.

A Giant Lagging Behind Rivals

Klepach’s address to fellow economists in May—later leaked to the press—stripped away the veneer of official propaganda to reveal the true state of Russia's economic stagnation.

■He admitted that Russia’s economy was "falling behind" China and the US, and trailing Ukraine "in some respects."

■He warned that pressures from the war would inevitably trigger a "social crisis" that would erupt "when no one particularly expects it."

■He dismissed expectations of an imminent Ukrainian economic collapse as an illusion, stating that Russia would not win a war of attrition as its own costs were spiraling.

These comments directly contradicted Vladimir Putin’s narrative that Moscow was successfully weathering economic pressures, highlighting the Kremlin's growing insistence on loyalty over accuracy within its upper ranks.

The Pendulum of Budget Deficit and Oil Waves

Russia's finances are buckling under the dual strain of massive wartime expenditures and Western sanctions. The budget deficit for the first four months of 2026 has nearly doubled the annual target, signaling a fiscal emergency.

■The budget deficit hit 5.87 trillion rubles ($81bn) in just the first four months of the year.

■This figure is well above the government’s full-year target of 3.79 trillion rubles.

■While the surge in oil prices following the US war in Iran provided Moscow with billions in additional revenue, it remains insufficient to cover the ballooning costs of war.

Close advisers to Putin have privately warned that the current level of wartime spending is becoming unsustainable, pushing the Kremlin to raise taxes on smaller businesses and pressure oligarchs for increased contributions.

Strikes on Logistics Hubs

The economic war has inflicted tangible damage on supply chains, with recent Ukrainian strikes targeting critical commercial infrastructure. Dozens of warehouses belonging to Wildberries, Russia’s largest e-commerce retailer, were destroyed, wiping out billions of dollars in inventory.

■The attacks have cast doubt on the financial stability of the company and devastated thousands of independent sellers relying on the platform.

■The loss of infrastructure is fragmenting domestic logistics networks and disrupting supply flows.

■Such strikes are altering the risk profile of commercial operations, driving up insurance costs and operational risks.

As an air cargo expert, I view this development not merely as a macroeconomic dataset but as a critical supply chain risk. The strikes on Wildberries warehouses and the exploding budget deficit are obliterating the reliability of Russia's domestic supply chain. Such infrastructure losses in e-commerce logistics will inevitably increase pressure on air bridge capacities while causing insurance premiums to skyrocket. Operational efficiency is becoming a primary casualty of this economic warfare.