Why a Weaker Russia Keeps Fighting

Foreign Affairs  |  Alexander Gabuev, Alexandra Prokopenko, Tatiana Stanovaya

Russian President Vladimir Putin is sustaining his war against Ukraine despite deteriorating military and economic conditions that have derailed his strategic plans. Although Ukrainian forces have expanded frontline "kill zones" and disrupted Russian logistics through deep-strike campaigns, Moscow is actively adapting to preserve its combat capabilities and maintain the initiative.

This persistence stems from the Kremlin's ability to insulate its regime from domestic dissatisfaction using sophisticated tools of repression and domestic borrowing. To finance the ballooning budget deficit, the state is cutting civilian expenditures and forcing regional governments to absorb rising defense costs. Meanwhile, the military is doubling ballistic missile production and utilizing devastating glide bombs to target Ukrainian cities and critical infrastructure. Ultimately, the Kremlin intends to inflict maximum civilian terror through systematic energy and port strikes to trigger a massive new migration wave into Europe, ensuring the conflict drags on indefinitely.

Comment

The depletion of the liquid portion of Russia's National Wealth Fund forces the Kremlin to rely increasingly on domestic debt markets to sustain its militarised budget. With the Bank of Russia maintaining high key interest rates to combat inflation, the soaring cost of servicing this domestic debt creates a structural deficit that cannot be easily offset by Urals crude export revenues. This fiscal strain is compounded by the targeted Western sanctions on major financial intermediaries, which restrict Moscow's ability to access alternative capital pools in non-aligned jurisdictions. Consequently, the long-term viability of the Russian war economy remains contingent on the Kremlin's capacity to suppress domestic consumption without triggering systemic banking instability.

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