Why hasn't the Russian economy collapsed? - The Indicator from Planet Money Recap

Podcast: The Indicator from Planet Money

Published: 2026-03-24T07:00:00.000Z

Duration: 571

Guests: Alina Rybakova, Timothy Ash, Vladislav Inozemtev

What Happened

Despite facing heavy sanctions and a massive debt load, the Russian economy has not collapsed as many predicted. Russia's economy ranks between the 11th and 4th largest globally, depending on the measurement used. One key reason is Russia's significant natural resources, such as oil, gas, and metals, which continue to be in demand globally.

The sanctions against Russia have been less effective than intended, due to their slow implementation and the ability of Russia to find ways around them. Timothy Ash from Chatham House notes that Russia has developed stronger ties with China, which has become its largest trading partner. This relationship allows Russia to receive both military support and consumer goods, thereby freeing up Russian industries to focus on military production.

Vladimir Putin's strategic economic policies, developed since the 2014 Crimea invasion, have also played a crucial role in sustaining the economy. Russia's cautious fiscal and monetary policies, along with stockpiling of foreign currency, have provided the economy with resilience against economic shocks.

Putin has also shifted the ownership of foreign businesses to Russian hands, creating a loyal class of business supporters. This redistribution of assets has helped consolidate Putin's support among the business elite, who are now incentivized to support his policies regardless of the economic situation.

Vladislav Inozemtev points out that Putin has also ensured support from the lower economic classes by offering financial incentives to soldiers and their families. This includes increased pay, signing bonuses, and substantial death benefits for soldiers fighting in Ukraine, which has created a macabre form of economic stimulus known as shmertonomica.

The Russian government has gone as far as forgiving debts for soldiers who default, providing a form of financial relief that keeps the lower classes economically engaged with the regime. This system of economic incentives makes protests less likely, as the economic risks of opposing the regime are minimized for the lower classes.

Ultimately, the Russian economy is propped up by a combination of natural resource exports, strategic international alliances, and internal economic policies that distribute wealth in a way that maintains support for the regime. However, the sustainability of this model is uncertain, as it relies heavily on continued external demand for Russian resources and internal political stability.

Key Insights

• Russia's export of natural resources like oil and gas continues to sustain its economy despite international sanctions. These resources are still highly demanded globally, providing a significant revenue stream.
• Sanctions imposed on Russia have been ineffective due to their slow implementation and Russia's ability to form alliances, particularly with China. This has allowed Russia to circumvent economic restrictions and maintain its economic stability.
• Vladimir Putin's long-term economic strategy, which includes building economic buffers and transferring foreign assets to Russian control, has fortified the economy against external shocks.
• Financial incentives for soldiers, such as increased pay and bonuses, have created a system known as shmertonomica, which helps stabilize the Russian economy by reducing the risk of public dissent.