Russia's economic future looks grim even after the potential end of its war in Ukraine, according to a recent analysis by the Center of European Policy Action (CEPA). The think tank suggests that Moscow has become overly reliant on military spending to prop up its economy, a dependency that may prove difficult to overcome.

The Russian government has allocated a record 13.5 trillion rubles for military expenditure in 2025, up from 10.8 trillion rubles in the previous year. While this spending has contributed to recent economic growth, with GDP rising around 4% last year, it masks deeper structural problems within the Russian economy.

One of the most pressing issues is the severe labor shortage, estimated at around five million workers in 2023. This shortage is partly due to the exodus of educated Russians following the invasion of Ukraine in 2022. The brain drain has not only depleted the workforce but also hampered Russia's technological progress, with patent filings dropping significantly.

Further complicating matters are the ongoing Western sanctions, which have restricted Russia's access to global financial markets and reduced revenues from its crucial oil and gas exports. Energy revenues plunged by nearly a quarter in 2023, and the Kremlin expects this downward trend to continue until at least 2027.

The 2025 federal budget prioritizes defense spending at the expense of science, education, and healthcare, potentially exacerbating long-term economic challenges. This focus on military expenditure may create a cycle of dependency that could be difficult to break, even after the war ends.

Alexander Kolyandr, a senior fellow at CEPA, warns that Russia may be heading towards a crisis similar to that experienced by the Soviet Union in the 1980s. The combination of sanctions, demographic issues, and technological backwardness could create a perfect storm for the Russian economy in the coming years.

As the war in Ukraine continues, the long-term economic consequences for Russia appear increasingly severe. The country's ability to transition away from its current military-focused economic model and address its structural weaknesses will be crucial in determining its post-war economic trajectory.