Russia’s Economic Strain Is Becoming Impossible to Ignore

How falling reserves and targeted strikes may push Moscow toward a halt in 2026.

I’ve spent a long time trying to understand how this war might end. Not because I expected a tidy answer, but because the assumptions that shaped the early stages of the conflict have eroded year after year. In 2022, when Russian forces withdrew from Kyiv and Ukraine demonstrated a level of cohesion and competence that surprised much of the world, it was still reasonable to imagine that momentum could produce a clear victory. Ukraine had unity, resolve, and a sense of purpose that few nations ever manage under invasion.

That period didn’t last. As the war moved from maneuver to attrition, Russia brought advantages that were harder to counter: population size, industrial capacity, and a willingness to absorb losses on a scale Ukraine could not mirror. The West supplied weapons, but the arithmetic of manpower and manufacturing weighed heavily. By late 2023, the conversation shifted from whether Ukraine could win outright to how the war might settle into something less dramatic but more durable.

What has changed recently—and what matters for the next phase—is not the battlefield but the economic terrain behind it. Russia is not collapsing; it is still functioning, still financing the war, and still capable of replacing much of what it loses. But the strain is visible in ways the Kremlin can’t fully hide. The clearest signal came when the Central Bank began selling physical gold. Gold has always been the reserve of last resort. When a government starts converting bullion into liquidity, it’s acknowledging pressure that cannot be managed through standard tools.

The National Wealth Fund has been shrinking quickly, and not through investment. Regional budgets are running deficits that require federal bailouts. State-linked companies are being asked to make “voluntary contributions,” a phrase that means exactly what it sounds like. None of this represents imminent disaster, but it is a picture of a system operating with less room to maneuver than at any point since the start of the war.

Inflation, despite official numbers, continues to seep into places Russians can feel: construction materials, imported electronics, automotive parts, pharmaceuticals, and industrial components. Parallel imports help, but at higher prices and with inconsistent quality. And behind these market pressures is a deeper structural issue: Russia has lost a significant portion of its workforce to mobilization, casualties, and emigration. A country cannot easily maintain a modern industrial base while also sending welders, machinists, and drivers to the front.

Even the areas that appear strong—manufacturing output, war production, drone assembly—are more fragile than they look. Much of the growth relies on refurbishing Soviet-era equipment, cannibalizing grounded aircraft for parts, or substituting advanced components with cheaper imports from China. This keeps the machinery running, but it does not build long-term resilience. Russia’s economy is adapting, but at the cost of hollowing itself out.

A new variable complicates things further for Moscow. Ukraine has begun shifting its targeting strategy toward Russian economic infrastructure: refineries, oil terminals, transport nodes, and industrial facilities linked to the war effort. These strikes will not break Russia’s economy, but they will force the Kremlin to spend more on repairs, rerouting, and protective measures. At a moment when reserves are already under pressure, this creates another drain—incremental, cumulative, and costly.

All of this points toward a likely trajectory in 2026. The war is unlikely to end with a clear military decision, because neither side has the capacity to impose one. Instead, the deciding factor may be economic endurance. Russia can recruit, mobilize, and manufacture at scale, but it cannot indefinitely finance a war that burns resources faster than they can be replaced. Energy revenues are lower than they were before the invasion. Oil sells at a discount. Gas exports to Europe have collapsed. LNG expansion is constrained by the loss of Western technology. China and India still buy Russian crude, but on terms that favor them, not Moscow.

This does not mean the Kremlin will suddenly shift course. Vladimir Putin has made the war central to his political identity, and the Russian government has shown it will tolerate significant domestic hardship to maintain its position. But governments do not escape basic arithmetic. When budgets tighten, reserves fall, and the cost of continuing rises faster than the perceived benefits, even authoritarian systems start looking for off-ramps.

That off-ramp won’t look like victory or defeat. More likely, the war will drift toward a negotiated freeze—lines that resemble today’s front, a demilitarized zone, and a political settlement that satisfies no one but stops the bleeding. It’s not the ending many hoped for, and it’s not the ending Ukraine deserves. But it is one shaped by the logic of a long war and the economic pressure accumulating behind Russia’s façade of stability.

For the first time in years, the signals inside Russia’s economy are strong enough to suggest that the war’s trajectory is shifting. Gold sales, shrinking reserves, workforce losses, and targeted strikes create a different strategic environment than the one that existed in 2022 or 2023. Wars rarely end the way they begin. In this case, the end may come not from a breakthrough on the battlefield, but from the simple fact that even large states eventually reach the limits of what they can afford.