Russia's war economy limits Putin's options, deepening reliance on military spending

Analysts outline three possible paths for President Vladimir Putin: negotiate peace, continue the war to break Ukrainian resistance, or confront the West in a broader conflict. Each option carries risks for his domestic standing and Russia's international position.

At the St Petersburg Economic Forum, Russian business leaders signaled a preference for maintaining Kremlin privileges and financing the war rather than risking loss of influence, even as the event attracted fewer high‑profile international guests than in previous years.

Research for *Foreign Affairs* argues that the Russian economy and society have been reorganised around the war. Fiscal revenues now depend heavily on defence spending, with military payrolls and related industries employing millions and providing the sole source of rising incomes for many. Wealth has become increasingly concentrated among a tiny elite, while a burgeoning gray‑market sector sustains sanctions‑evading trade. The eventual end of hostilities could trigger massive unemployment among war‑industry workers and veterans, posing a further challenge for the Kremlin.