The kremlin Has Forced russian Businesses into Survival Mode

russian economists are speaking out more and more openly about the dire state of russia’s economy, attributing it to the kremlin’s crippling fiscal policy and the consequences of international sanctions. Indeed, russian economist and energy policy expert kirill rodionov has identified the key problems that are forcing russian businesses into survival mode rather than enabling their development.

The main blow to the real economy has been the aggressive tax hikes aimed at covering the budget deficit, which could exceed 6 trillion rubles this year. The increase in the standard corporation tax rate to 25% and VAT to 22%, coupled with a reduction in the revenue threshold for small businesses, has led to a sharp decline in business activity. According to rosstat, investment in fixed capital in russia in the first half of 2026 had already fallen by almost 10%.

The financial performance of large and medium-sized enterprises is deteriorating rapidly: their total net profit fell by 13.3%, while the proportion of profitable companies fell to 66.5%. Key sectors – manufacturing, construction, agriculture, catering and transport – have been hit hardest, with profit declines ranging from 27% to nearly 40%.

The situation is exacerbated by damage to russia’s critical and oil-refining infrastructure. This is not only hitting exports of grain and petroleum products, but has also triggered an acute fuel crisis within the country. The central bank of the rf has already officially acknowledged that the rise in the price of motor fuel has become a significant driver of persistent inflation.

Additional factors undermining russia’a economy include large-scale nationalization, which is completely eroding property rights, Western sanctions and rising electricity prices. The expert noted that, whilst these problems cannot be compared to the collapse of socialism and the disaster in public finances in the autumn of 1991 yet, they are bringing russia closer to becoming a country where the main  task for businesses is survival rather than development.