Financial Suicide

Putin is fleecing everyone! The outlook grows ever bleaker

Putin is digging deep into the pockets of the Russian people.(Bild: AFP/ALEXANDER NEMENOV)

Tax hikes, expropriations, and labor shortages: Kremlin leader Vladimir Putin is increasingly grappling with financial problems. His war economy is becoming increasingly fragile—and the calls for an end to the “special operation” are growing unmistakably louder.

The war in Ukraine is tearing a deep hole in Russia’s state coffers. To plug it, the Russian dictator is now fleecing all social classes—and even targeting his own elite.

An unprecedented wave of expropriation is sweeping the country; observers speak of a new harshness in dealing with the super-rich. According to Bloomberg, the Russian state seized assets worth 1.1 trillion rubles (approx. 12.9 billion euros) last year alone as part of corruption proceedings—eight times as much as the year before.

A trembling elite is now paying “voluntarily”
A prominent example is agricultural billionaire Vadim Moskovich. The judiciary accuses him of exploiting his former position as a senator to secure advantages for his Rusagro conglomerate. A court promptly ordered his assets frozen.

Oligarch Moschkowitsch in handcuffs(Bild: AFP/Moscow City Court press service)

The legal basis for this was established by a 2024 ruling of the Constitutional Court: The standard ten-year statute of limitations for corruption does not apply to the property of public officials. The case of Konstantin Strukov shows that even loyalty to the regime offers no protection. The businessman, considered loyal and a former board member of Putin’s “United Russia” party, was also stripped of his assets in 2025. The charge: illegal accumulation of wealth.

Putin apparently feels compelled to remind the country’s most powerful figures who is in charge. Since then, many of the super-rich have turned to Moscow with “voluntary” donations to bolster the ailing state budget. According to the state budget portal, amounts totaling around 220 billion rubles (approx. 2.6 billion euros) have already been contributed—that is about 130 times what the Kremlin had budgeted for “donations.”

Small business owners are going bankrupt
But the general population is also suffering financially from Putin’s “special operation” in Ukraine. At the start of the year, the value-added tax on countless goods was raised from 20% to 22%, and tax breaks for small and medium-sized businesses were eliminated. At the same time, the ban on social media and messaging apps is depriving private companies of the ability to advertise cheaply and easily attract customers.

Payment transactions, delivery services, and other digital services are also severely restricted. The result: a wave of bankruptcies! The effects of the reform are particularly visible in major Russian cities. Restaurants and bars are being forced to close—reportedly more than during the COVID-19 pandemic. Loans are also exceptionally expensive, with interest rates currently at 17 percent. 

Denis Maximov, a baker from Moscow, publicly criticized the new tax policy and became a star in Russia. “We used to pay 120,000 rubles a year in taxes. And now it’s about 400,000 rubles—in a single month,” he told ZDF.

At his annual press conference, Putin promised to address the problem. And the next day, he made a media-friendly appearance tasting the bakery’s delicacies. But the “problems” run much deeper, as recent studies clearly show.

After years, the facade is crumbling
A good four years after the invasion of Ukraine, the Russian economy is showing clear signs of structural exhaustion. The liquid assets of the Russian sovereign wealth fund have fallen from 6.5 percent of gross domestic product (GDP) at the start of the war to 1.8 percent currently, according to a study published Thursday by the Kiel Institute for the World Economy (IfW) and the Stockholm Institute of Transition Economics. If this buffer continues to be depleted, payment shortages could loom in the medium term.

“In the first years of the war against Ukraine, the Russian economy proved to be more resilient than many had expected. But now the reserves are depleted,” said IfW President Moritz Schularick.

Growth has come to a standstill. “At the same time, higher oil prices resulting from the war in the Gulf are likely to have only temporary fiscal effects,” Schularick emphasized.

Moscow is also grappling with a shortage of skilled workers—especially at the start of the invasion, when tens of thousands of highly educated Russians abruptly left the country. “The fundamental constraint Russia faces today is not access to money, but access to labor, technology, and production capacity,” added co-author Matthew Klein. Given record-high labor shortages and sanctions, a higher-spending policy increasingly carries the risk of fueling inflation rather than boosting military capabilities.

China Acts as a Pacemaker
So the supposedly brilliant warlord in the Kremlin has miscalculated—but his biggest mistake may lie outside Russia. According to the analysis, the Kremlin is increasingly dependent on China. The People’s Republic now accounts for about 35 percent of Russia’s foreign trade.

The differences in stature between Putin and Xi now go beyond mere physical attributes...(Bild: AFP/SUO TAKEKUMA)

Beijing supplies the vast majority of critical goods—both civilian and military—as well as military-relevant components that still enter the country. Accordingly, China is responsible for roughly three-quarters of the increase in Russian imports of sanctioned, critical military components since 2022.

“The concept of a ‘boundless partnership’ obscures a growing asymmetry,” emphasized co-author Alicia Garcia-Herrero. Beijing dictates the terms and effectively acts as the pacemaker for Putin’s war economy.

The fact that the Kremlin leader is now increasingly speaking publicly of a “soon-to-come end” to the war in Ukraine is, of course, linked to domestic discontent. Domestic political pressure is taking its toll: “We are hearing reports of additional air defense systems around Putin’s residences. There are long periods during which he does not appear in public at all. (...) He is spending more and more time in bunkers and is literally hiding from everyone,” Putin’s close rival Vladimir Kara-Mursa recently told the “Krone.”

Whether an economically driven ceasefire will actually materialize remains to be seen. After all, the arms industry is one of the few engines still running. And Putin remains one thing above all else: a trained liar. But it’s hard to sugarcoat the fact that Russians are dissatisfied and increasingly broke. “You can’t exactly eat tanks,” a Russian politician recently explained...