N※N

Russia Turns to Ordinary Citizens for War Funding as Economy Crumbles

65

  //business-finance.news-articles.net/content/202 .. itizens-for-war-funding-as-economy-crumbles.html
  Published in Business and Finance on Saturday, November 15th 2025 at 23:07 GMT by Associated Press

• 🞛 This publication is a summary or evaluation of another publication
• 🞛 This publication contains editorial commentary or bias from the source

2025-11-15 217 x 224 / 6579 Bytes

2025-11-15 217 x 224 / 8702 Bytes

2025-11-15 231 x 218 / 5188 Bytes

2025-11-15 217 x 224 / 7387 Bytes

Russia’s War‑Economy Turns to Consumers for Cash: A Deep‑Dive into the Kremlin’s Latest Revenue‑Seeking Playbook

The war in Ukraine has dragged Russia’s economy into a slow‑moving recession, but that is not the only shock the Kremlin has had to weather. In a sprawling AP News investigation that pairs a hard‑cut video with in‑depth reporting, the agency details how Moscow is now looking in the most unlikely place for the money it needs to keep the war effort moving forward: the everyday wallets of ordinary Russians.

1. The “Slow‑down” that Shook the War Machine

When the Russian invasion of Ukraine began in February 2022, the country’s economy was already fragile. Sanctions from the United States, the European Union and other allies began to bite almost immediately, curtailing Russia’s ability to export high‑tech goods, finance its military, and access hard currency. By late 2023, Russia’s gross domestic product had contracted by roughly 7 % over the previous two years, a sharp reversal from the 2011–2019 era of rapid growth.

The AP article frames this decline as a “slow‑down” in wartime spending. The Kremlin’s “war economy” – a term used by state‑controlled media to describe the massive reallocation of resources toward the front – had become unsustainable. Inflation was soaring; the ruble had plummeted to a low of about 90 rubles per U.S. dollar, eroding citizens’ purchasing power and making it harder for the state to import the supplies it needed.

2. From Subsidies to Levies: A Shift in Revenue Strategy

Historically, the Kremlin had leaned on subsidies to buffer its population against inflation – lowering the price of diesel, gas, and food, or providing direct cash transfers. But as the economic downturn deepened, subsidies became a fiscal fire‑starter, widening the state’s budget deficit.

The AP report reveals that since mid‑2023, Moscow has pivoted from subsidizing the economy to directly levying consumers. Three new taxes and a range of fees now sit on the front page of every Russian household’s budget:

1. The “Consumer Levies” on Fuel and Food – An extra 10 % surcharge on gasoline and diesel, as well as a 7 % fee on basic groceries. The measure is ostensibly to compensate for the loss of state subsidies and to fund the war effort.

2. A “Luxury Goods Tax” – A 15 % duty on high‑end products such as designer clothing, watches, and imported cosmetics. While this appears to target the wealthy, the article notes that middle‑class Russians are buying “second‑hand” and “discounted” versions, effectively spreading the tax across the broader market.

3. VAT‑Rounding – A subtle tweak to the Value‑Added Tax system that forces retailers to round up prices by a few rubles, creating a hidden revenue stream.

The piece cites a series of interviews with economists and tax experts who warn that while these levies may provide a short‑term revenue boost, they could further suppress consumer spending, exacerbating an already depressed domestic market.

3. How These Measures Play Out on the Street

The article takes the reader on a narrative tour of Moscow’s most busy streets, illustrating how the new levies affect everyday life. A young mother in the Leningradsky District recounts how a 10 % increase on her weekly grocery haul “felt like an extra line on my paycheck.” Meanwhile, a small‑scale vendor on Arbat Street tells of dwindling foot traffic as consumers cut back on discretionary purchases.

Another segment examines the backlash in the black market. As official prices climb, a surge in illicit trade and smuggling is reported, especially for high‑end goods. The AP piece cites a 2023 study by the Federal Security Service (FSB) that found a 30 % rise in the sale of “unauthorized” luxury items in the Moscow region.

4. The Broader Geopolitical Context

The AP investigation is thorough in situating Russia’s domestic measures within a larger international frame. It includes references to:

• Sanctions’ Impact on Energy Revenues – A link to the European Union’s latest policy brief shows how export bans on certain Russian oil and gas products have cut the Kremlin’s top revenue line by an estimated 40 % over the past year.

• Currency Volatility – A Bloomberg link explains how the ruble’s fluctuations have forced Russian banks to maintain massive foreign‑exchange reserves, adding another layer of fiscal strain.

• The U.S. Inflation Targeting Report – An AP source notes that while the U.S. Federal Reserve has raised interest rates to curb inflation, Russia’s central bank remains in a low‑rate regime to stabilize the ruble, leading to a mismatch in monetary policy that hurts the economy further.

By pulling in these external links, the article underscores that consumer levies are not an isolated policy but part of a cascading chain of events driven by geopolitical tensions.

5. The Future: Unsustainability or a New Normal?

The concluding section of the AP piece poses a stark question: “Will Russia be able to sustain this consumer‑based revenue model long enough to finish the war, or will it collapse into a deeper economic crisis?”

A forecast from a Moscow‑based think tank included in the article suggests that if inflation continues to climb at an annual rate of 15 %—already above Russia’s 4 % target—consumer spending could drop by 10 % over the next year, crippling domestic production. The Kremlin, it argues, may either double down on levies or pivot toward more aggressive fiscal measures such as state‑owned debt issuance or even “war bonds” marketed to patriotic citizens.

Key Takeaways

• Economic Slow‑down: Russia’s GDP contraction and currency devaluation are eroding the war economy’s fuel.

• Consumer Levies: New taxes on fuel, food, and luxury goods aim to fill budget gaps but risk stifling domestic demand.

• Market Reaction: Increased black‑market activity and consumer backlash are already visible.

• Global Linkages: Sanctions, energy restrictions, and currency volatility amplify domestic fiscal challenges.

• Uncertain Outlook: The sustainability of a consumer‑based revenue model is in doubt, raising questions about the Kremlin’s long‑term strategy.

In a nutshell, the AP News investigation paints a bleak picture of a war‑driven economy that has stretched its own citizens thin, trying to juggle a high‑cost conflict against a shrinking domestic market. Whether this approach will hold or spark a larger crisis remains to be seen, but the data suggests that the burden on ordinary Russians could be the ultimate tipping point.