(MOSCOW) – Russia’s full scale invasion of Ukraine is inflicting severe and worsening damage on the Russian economy, with a senior state bank economist publicly warning that Moscow is losing the economic war of attrition before being sacked for his remarks.
Andre Klepach, chief economist at VEB.RF, a state owned bank financing national infrastructure projects, delivered the stark assessment in May. His speech was reported and made public on 14th August. He was dismissed on 16th August, officially for disciplinary reasons. Russian sources have disputed this, saying the dismissal occurred because he voiced truths the Kremlin did not wish to hear.
“We won’t win the competition in this war of attrition. We’re under the illusion that everything in Ukraine will collapse. It hasn’t, and it won’t. Our costs are mounting,” Klepach said.
He added that Russia is falling behind in global technological and economic competition, losing ground not only to China and the United States but in some respects to Ukraine itself. He noted that Ukraine’s economy, despite being partially destroyed and suffering a demographic disaster, is surviving due to enormous financial assistance. He said Ukraine’s budget for military spending and national expenses is roughly fifty percent of Russia’s budget.
Before the full scale invasion in 2021, Russia’s annual spending was approximately seven times greater than Ukraine’s. That multiple has now narrowed to around two, according to the economist’s assessment.
Klepach said Ukrainian military strikes on Russian infrastructure, ports, oil and gas facilities, chemical plants and logistics networks are mounting and becoming a significant macroeconomic barrier to Russian economic growth.
“The conflict in Ukraine involving NATO has lasted longer than the Great Patriotic War,” Klepach said, referring to the Second World War. “And there’s no end in sight. Both sides are escalating their attacks, including one on each other’s economies.”
Russian nationalist commentators have acknowledged the severity of the situation. One account, Swodki, commented: “He was fired officially for disciplinary reasons, unofficially for speaking his mind, for saying out loud what is kept silent at meetings. Klepach is not a traitor. He is a doctor at the bedside of a sick patient who is obligated to name the diagnosis, even if it’s cancer. And his dismissal is not a fight against the truth. It is a fear of the truth.”
Military developments are compounding the economic pressures. The Azov First National Guard Corps released footage showing strikes on fuel targets and fuel storage facilities inside occupied territories of Donetsk region. The unit described the operation as affecting facilities involved in the storage and supply of fuel to Russian forces.
“A month ago, we warned the occupiers. Azov seized their movements and will strike at the right moment,” the unit said. “Unlike the enemy, the first national guard brigade Azov does not target civilian gas stations and does not attack the civilian population. However, the infrastructure of the occupying forces will be destroyed without pity.”
Russian commentator Yuri Baranchik said attacks on Russian refineries and the port of Novorossiysk can no longer be considered separate campaigns. “Combined, they create a much more unpleasant system. First, one method of realising the extracted oil refining is disabled and then the second, export, is restricted,” he said.
Fuel shortages inside Russia are persisting across multiple regions. Russian commentator Maxim Kalashnikov said the situation could create a convergence of crises. “In short, the enemy has found a weak spot and is exploiting it, fueling a fuel crisis. At the same time, the Russian elite is showing remarkable apathy,” he said.
Klepach drew historical parallels in his speech, referencing the February Revolution and the collapse of the Soviet Union. “No one expected the February revolution. Lenin wrote in December 1916 that we won’t live to see it, but he did just a few months later. The situation in the Soviet Union in 1991, we had been moving towards it for a long time and consistently and everyone understood we were heading towards a crisis, but there was no fatal inevitability that the union would actually collapse,” he said.
He concluded: “I believe Russia will not collapse, but I’m almost certain we will reach a social crisis. We won’t collapse economically, but our lag will widen with all the ensuing consequences.”
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