Why a Weaker Russia Keeps Fighting

Foreign Affairs  |  Alexander Gabuev, Alexandra Prokopenko, Tatiana Stanovaya

Russian President Vladimir Putin declared in late June 2026 that Russia would win its war against Ukraine as the Russian army advances along the 800-mile frontline and occupies more Ukrainian territory daily. Although Ukrainian drone strikes have targeted Russian oil refineries and critical infrastructure deep behind enemy lines, Putin maintained that these actions will not alter the military outcome.

Russian forces continue to adapt to Ukrainian deep-strike operations while maintaining operational pressure across the active theater. Moscow perceives minimal incentive to negotiate a cease-fire or compromise, believing time favours its attrition strategy over Kyiv's resistance capabilities. Long-term economic costs and structural domestic vulnerabilities continue to accumulate within Russia, yet the Kremlin remains committed to sustaining high-intensity combat operations. Russia adapts. Consequently, Western sanctions and targeted Ukrainian sabotage campaigns have failed to force a fundamental reassessment in Moscow's strategic decision-making. The Kremlin calculates that Western political resolve will fracture before Russian military endurance expires.

Comment

Russia's reliance on energy export revenues to fund state defence orders creates severe structural friction within its broader macroeconomic model. While state conglomerate Rostec continues delivering armour to the 800-mile frontline, capital diversion toward military production accelerates inflation across civil sectors. The Central Bank of Russia faces severe limits in counteracting these pressures without constraining war credit.

This fiscal distortion systematically erodes Moscow's sovereign financial buffer as reserves diminish. Liquid holdings in the National Wealth Fund continue to shrink to cover federal budget deficits. Consequently, liquid assets in the National Wealth Fund face exhaustion if military outlays for Rostec continue at current rates.

Strategic Question for Discussion

Which factor poses a more immediate threat to Moscow's prolonged war effort — the depletion of liquid assets in the National Wealth Fund or inflation driven by Rostec's defence production — and at what point does that trade-off force a change in frontline commitments?

The available evidence points toward National Wealth Fund depletion as the more acute constraint, as sovereign liquid reserves directly back Russia's macroeconomic stability. While Rostec can sustain hardware throughput under state credit guarantees, unhedged inflation risks destabilising the domestic banking system before weapons output stalls. My assessment is that fiscal pressures will force the Kremlin to choose between currency stabilization and defence production targets well before frontline military endurance collapses.

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