July 18, 2025 | Baku
Russia’s economy has entered a prolonged period of stagnation, with no clear signs of growth or contraction. Despite this, the Kremlin continues to divert vast resources toward its military campaign in Ukraine, largely ignoring domestic social demands and established diplomatic norms.
In an exclusive interview with Vesti.az, Vladislav Inozemtsev, a leading economist and director of the Center for Post-Industrial Society Studies, assessed the current state of Russia’s economy, its war-time financial structure, technological setbacks, and the Kremlin’s strained relationships with partners such as Azerbaijan.
“Strictly speaking, we can’t yet say that the Russian economy is in recession,” Inozemtsev said. “But the momentum has clearly slowed. Compared to the final quarter of 2024, Q1 of 2025 showed a modest decline. However, the previous quarter was artificially boosted by massive government spending.”
Inozemtsev predicts that by the end of 2025, Russia’s GDP might grow by only 1–1.5%, signaling an end to the post-2022 wartime economic boom. “We are now in a stagnant phase. And Russia has gotten used to this mode since 2014, after the annexation of Crimea.”
Despite stagnation, the regime faces no immediate threat. “Moscow will find money for war just as it has before,” he noted.
Record Military Spending
The most striking trend is military expenditure. The official war budget for 2025 stands at 13.5 trillion rubles, but Inozemtsev estimates actual spending could exceed 15 trillion. “That’s nearly 3.5 times more than in 2021. And for the first time, these military outlays surpass all oil and gas revenues.”
He warned that while the current spending level can be sustained for another couple of years, further increases would be catastrophic. “The 2025 spending level is the ceiling. The Kremlin’s economic teams are already signaling to Putin that they cannot go any higher.”
Tech Decline and China’s Limitations
Inozemtsev stressed that Western sanctions, particularly repeat measures, have severely impacted Russia’s access to technology. “China cannot replace Western tech. It doesn’t invest in building production in Russia and is unlikely to do so. Russia is shifting into a role as a consumer of Chinese goods, not a tech partner.”
The result: further technological decline. “The gap between Russia and the West will continue to grow. That’s already happening.”
Ukraine, Trump, and the War Outlook
Asked about recent escalations despite Donald Trump’s push for de-escalation, Inozemtsev said Putin expected more from the U.S. president. “He believed Trump would force Ukraine to accept his terms. That didn’t happen. Now the war will continue.”
He argues that Ukraine, backed by Western military support, maintains a technological edge. “If Ukraine were given half the weapons the U.S. left in Afghanistan, the war would already look different. This is a war of attrition, and in the long run, that hurts Moscow.”
Russia-Azerbaijan Tensions
Inozemtsev also commented on the diplomatic chill between Moscow and Baku. “Russia is acting irrationally toward its partners. Following the incident with the Azerbaijani plane, Moscow showed no apology or transparency. Then came arbitrary detentions in Yekaterinburg.”
“Their pattern is always the same: cause harm, then pretend nothing happened.”
Migration Without Policy
On migration, Inozemtsev was blunt: “There is no coherent policy. Migrants are exploited by law enforcement for bribes and paperwork schemes. It’s a bureaucratic business, not a security strategy. And now more are leaving than arriving.”
