Putin’s Russia – War Economy: How Is Life Changing Under Sanctions and Isolation?

How did an unremarkable KGB officer become one of the most powerful and controversial leaders in the world? In this special series of the 4 Minutes podcast, we closely follow Vladimir Putin’s rise to power – from his childhood in Soviet Leningrad to his intelligence career and the key moments of his rule that reshaped Russia and the world. What events shaped his policies? What are the roots of the current conflict? And what does the future hold for Russia?

Join us for this compelling series and understand how Putin’s Russia came to be. 🎙️

Transcript

In this episode, we focus on how the Russian economy has changed under the influence of war, sanctions, and international isolation – and what it means for ordinary citizens. Since February 2022, the Russian Federation has found itself in an extraordinary economic situation. While official propaganda describes the system as “stable,” the reality is much more complex. The changes go deeper than they may initially seem: not only are industry and trade transforming, but so too are everyday life, work, and the future of the entire society.

Shortly after the invasion began, the West imposed one of the toughest sanction packages in modern history. Russia's foreign currency reserves were frozen, access to the SWIFT banking system was cut, and access to key technologies and components was blocked. Exports of modern products, software, and electronics to Russia were restricted, as were imports of Russian oil, gas, and coal to Europe. Hundreds of foreign companies left the Russian market – from McDonald's and Siemens to aircraft and automobile manufacturers. The market was shaken, and entire sectors found themselves in a crisis that domestic industry could not quickly compensate for.

The Russian government responded by redirecting the economy. Oil and gas exports shifted toward China, India, and other countries of the Global South. Parallel payment systems were introduced, domestic production was promoted, and substitute products began to appear – often of lower quality. Official figures may not show a dramatic crisis – the recession was not deep. But behind these numbers lies a fundamental transformation toward a closed, state-controlled economy.

A major driver of this transformation is the militarization of industry. Military contracts make up an increasingly large share of the national budget. Factories that once made home appliances are now producing ammunition and drones. Spending on defense and internal security is rising, while funding for healthcare, education, and infrastructure is stagnating. State contracts are awarded mainly to companies connected to the regime. A new class of “war entrepreneurs” has emerged – individuals who gain wealth through ties to state power, not through innovation or quality.

Ordinary people feel the effects of this shift directly. Prices for basic goods are rising, access to medicines and electronics is declining, and households are cutting back on consumption. The middle class in larger cities and young people are suffering most. They have lost access to international education, career opportunities, and an open internet. Many have left Russia – in 2022 and 2023, hundreds of thousands emigrated, often from the most productive sectors of society. The departure of programmers, researchers, and entrepreneurs weakens the country’s future.

In rural areas, the situation is often even worse. Local economies depend on state subsidies, job opportunities are disappearing, and young people are moving to larger cities or abroad. Regional disparities are growing. While Moscow maintains a certain level of luxury, many areas are experiencing poverty and a loss of perspective.

And although the regime has so far managed to keep the public calm through propaganda, repression, and nationalist rhetoric, tension is building beneath the surface. People have learned to avoid political topics, to save, and to survive. But the question remains – how long can an economy oriented toward war and control function without innovation, competition, and trust?

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That brings us to the end of this week. The series Putin's Russia will conclude next week with its final chapters, in which we explore what comes after Putin, the state of Russian society, and the possible scenarios for the country's future.

Thank you for listening.