How Russia’s Economic War Against Its Own Citizens Is Becoming a Blueprint for Autocracy

In an odd way, the Kremlin’s most successful propaganda tool is a specific type of restaurant in Moscow with cozy lighting, a good wine list, and couples lounging over candlelit tables. It’s packed. The music begins to play. A Ukrainian drone is flying across the night sky somewhere above the city.

The main paradox of Russia in 2026 is that, although the nation appears to be functioning from some perspectives, the very government that purports to be defending it is covertly destroying its economic underpinnings. Contrary to what many in the West had hoped, Russia was not immediately destroyed by the invasion of Ukraine. One policy at a time, it allowed the state to launch an economic war against its own people, which was slower, stranger, and possibly more dangerous.

Four years into the conflict, the statistics reveal more than the crowded dining establishments. In just the first half of 2025, oil and gas revenues fell by 16.9%. The government currently spends more on debt interest than it does on healthcare and education put together. Nearly 8% of GDP is spent on defense, a statistic that would have seemed ridiculous in 2021 but now hardly makes headlines.

Former Russian central bank advisor and fellow at the Carnegie Russia Eurasia Center Alexandra Prokopenko has referred to this situation as a “death zone”—the mountaineer’s term for the altitude at which the body starts consuming itself more quickly than it can recover. The economy is not collapsing. Its own muscle tissue is being metabolized.

In Voronezh, a city of more than a million people, you might hear locals cracking a certain kind of joke if you stroll through any neighborhood. They drily remark, “Now we visit each other in person, drink tea, read books,” in reference to the internet outages that have become commonplace in dozens of Russian regions. Russia had the sixth-best internet accessibility in the world prior to 2022. It recorded 2,129 mobile internet shutdowns in a single month by August 2025, which is more than the global total for the entire year 2024.

The government’s response to Ukrainian drone threats is the shutdowns, but the consequences are entirely on civilians: grocery delivery apps freeze, ATMs go dark, and taxis stop operating. Even the minimal procedural requirements for directing a complete internet blackout were eliminated by a law passed this year. Iran’s experience with complete connectivity shutdowns during protests appears to have been meticulously documented by Russian authorities.

The threat posed by drones is no longer theoretical. There had never been a drone attack on Russian territory prior to 2022. Nearly 8,300 military incidents were reported in Russia and annexed Crimea in 2025 alone. Ukrainian drones are said to have reached as far as Siberia, hitting an oil refinery in the Tyumen region in October. According to Bloomberg, 120 attacks on oil infrastructure were carried out by Ukraine in the previous year.

The loss ratios for “terrorism” and “sabotage” have at least doubled, according to insurance companies. According to one brokerage, drone strikes have caused direct losses in oil and gas of about $1 billion, with indirect losses ten times that amount. For the most part, the state has given the companies the repair bills.

The property question, which might be the most illuminating change of all, comes next. Outright nationalization was uncommon in Russia prior to 2022; it was dramatic, prominent, and exceptional. It’s a line item now. Three times the amount from the previous year, $11 billion in private assets were ordered to be transferred to state ownership by Russian courts in 2025. Last year, forced transfers to the state accounted for more than 25% of all Russian mergers and acquisitions. The process is almost elegant in its simplicity: the Prosecutor General’s Office files a lawsuit alleging some irregularity from the privatization era of the 1990s.

Since the statute of limitations was essentially eliminated at the end of 2024, transactions from thirty years ago are now admissible. The most symbolic case was Domodedovo Airport. For almost twenty years, its owner, Dmitry Kamenshchik, had successfully fended off state pressure. In the end, he made a mistake by having a UAE residency permit, which was used as proof that he was “following the aggressive policies of Western states.” the UAE. No private asset is safe when the legal reasoning becomes that flexible. Furthermore, long-term investment becomes illogical when no private asset is secure.

Every tool of economic control, including corporate ownership, property rights, internet access, and insurance markets, has been subtly redirected to support the state’s wartime priorities. There is more going on here than just a wartime economy. It’s a model. Phrases like “mobilization model” and “militarized economic governance” have been used by researchers and policy analysts observing from outside of Russia, but those terms seem too clean for what’s really going on. This is more spontaneous and opportunistic. A government learning how much it can withstand, crisis by crisis.

Prokopenko and others have argued that Russia is currently stuck, which is the deeper issue. Because of the economy’s structural reliance on military spending, any abrupt cutback would be disastrous. It would be unstable to demobilize hundreds of thousands of soldiers without a viable civilian labor market. Entire regions would be hollowed out if defense contracts were cut.

The Kremlin has positioned itself so that stopping the war could be more detrimental to the economy than continuing it. It’s possible that this was never entirely planned and that it developed as a result of a number of short-term choices, each of which made sense on its own but together produced a system from which no one knows how to get out.

For the larger question, it hardly matters if Russia’s economy falters for another ten years or collapses in the next two. What counts is that other governments, those that are close to authoritarians, cautious about sanctions, and keeping a close eye on things, are taking notes. It’s easy to see the progression: emergency measures are justified by a crisis, emergency measures become permanent, and infrastructure becomes permanent. The eateries continue to operate. The drones continue to fly. And a blueprint is being written somewhere in the machinery of it all.