Vnesheconombank economist warns Russia cannot win war of attrition

Andrei Klepaci, chief economist at the state-owned Vnesheconombank, has warned that Russia is unlikely to win the current war of attrition against Ukraine. Speaking at the Nikitsky Club, Klepaci noted that while the Ukrainian economy has faced destruction and demographic challenges, it continues to survive due to massive Western financial support.

Klepaci highlighted that Russia is losing both technological and economic competition globally, not only to the United States and China but also to Ukraine. He observed that military and domestic expenditures now account for approximately 50% of the Russian budget. Following a military-driven boom in 2023-2024, the Russian economy has entered a decline, with investments dropping sharply and civilian sectors—including aviation, construction materials, and food production—entering recession.

The economist also attributed at least half of this economic downturn to the strict monetary policy maintained by the Central Bank of Russia. He cautioned that the conflict, involving NATO participation, has already lasted longer than the Great Patriotic War, with no clear end in sight as both sides intensify attacks on infrastructure, including ports, oil, and gas sectors.