Russia's economy is haemorrhaging. Why should we assume it will maintain its great power status after the war in Ukraine?
Next month will mark the fourth year of the Russian invasion of Ukraine. In recent months, much discussion has focused on the current world order. Specifically, the roles of the United States, Russia, and China within the greater global context are being described as dominating the world order with great power competition. In Davos at the World Economic Forum, just a few days ago on the 20th of January, Canadian Prime Minister characterised the current world order in striking candor "Call the system what it is: a period of intensifying great power rivalry, where the most powerful pursue their interests using economic integration as a weapon of coercion" [1]. In this speech, Carney addressed the tariffs the U.S. threatened to impose on eight European countries for their opposition to America's bid to control Greenland. However, his analysis illuminates the precarious position of other great powers navigating U.S. unpredictability. Russia, while currently considered a great power, faces an uncertain long-term future following the self-inflicted economic wounds that continue to haemorrhage from its conflict in Ukraine. What will Russia's economy look like post-war with Ukraine – and will it retain its great power status?
Currently, the Russian economy has short-term structural issues that are stagnating any hope of growth. Severe workforce constraints from military mobilisation of hundreds of thousands of soldiers, as well as casualties, are limiting the productivity of sectors beyond the military [2]. The current Russian economy is facing wartime economic constraints, with defence and internal security accounting for over 40% of the federal budget [3]. Inflation as of mid-2025 is around 8% [4], eroding household purchasing power, and Russian oil is trading at significant discounts, with some estimates suggesting prices of $35/barrel or lower after costs imposed by sanctions [3].
In the long term, the Russian economy has significant economic bleeding to address to maintain great-power economic vitality. Experts have drawn comparisons to the late Soviet economy, suggesting that the stagnation Russia experienced after the end of the Cold War is something it is at risk of repeating [3]. The current defence expenditure matches late-Soviet levels at 7.3% of GDP, suggesting that manoeuvring the economy from one reliant on the military-industrial complex to one of civilian production will be no small feat. The government's 2042 long-term budget forecast suggests that Russia will maintain a deficit for that entire period, a hangover from extensive wartime borrowing [4]. The deciding factor will be whether the Russian political system can continue to adapt to pressures that will inevitably evolve over the coming years – a fate the Soviet system succumbed to. Such adaptations could include strict fiscal discipline, welfare support, and preparation for a leadership succession following Putin [5, 6]. Such hard-line policies could foster true economic dynamism – something essential considering the current relationship between technological innovation and global positioning.
So, how will Russia emerge as a great power post-war in Ukraine, as has been so assumed? Academics propose 3 main pathways as potential leverage in their global positioning.
Firstly, to leverage any remaining assets to position itself as the most competitive player in that area. Following the economic downturn in the 1990s, following the end of the Cold War, Russia was the only state with the technological capacity to compete with the U.S. in space exploration and military capabilities [7]. It was these assets which helped secure Russia's 21st-century entry as a great power. Post Ukraine conflict, Russia must look beyond its nuclear weapon capabilities and into another major structural asset to leverage. Any peace deal which would cede the currently occupied Ukrainian territory could give Russia control over the rich mineral deposits of Ukraine, giving it strategically significant resources. This is why Russia will hold on to this territory for as long as they can, relying on this win from the conflict to put them in a significantly better position to leverage than they would be without it.
Secondly, there is the potential to introduce an alternative financial system to the U.S. global financial system. According to academic analysis, Russia is already attempting to introduce alternative digital currencies [8]. Given the U.S.'s growing unpredictability in global systems, the political appetite for alternatives to SWIFT is ripe. This could actually weaken the U.S.'s influence, and would be particularly desired by organisations such as BRICS through a BRICS payment infrastructure [9]. Such a system could also be an interesting model for other regions to adopt, with the goal of one day achieving a more equitable global trading system in an increasingly digitised world. Or else, at least hedge their own interests in their own desired economic regions without the unpredictability of singular great power reliance. Countries such as India and China could assist in the software needed to create such a structure. However, experts predict any true alternative to SWIFT or trading in USD is decades away [9]. And while cross-border payments are critical for Russia at the moment, China is not sufficiently concerned about secondary sanctions to pivot and develop this mechanism [10]. China's reluctance to be involved would be a critical obstacle to introducing an alternative financial system.
And lastly, Russia could further leverage its Global South partnerships to exert economic influence, thereby facilitating its ambitions to maintain great-power status and strategic influence abroad [11]. For many countries in regions such as Africa, Latin America, Asia, and the Middle East, Russia's "anticolonial" position is particularly desirable, as it aligns them with a great power absent from the U.S.'s imperial tones [2]. Russia can use these partnerships to secure access to the vast natural resources of these areas, such as Africa's critical minerals. However, in reality, beyond strategic geopolitical positioning, many of these partnerships lack substantive meaning for enlivening what could be a limp post-war Russian economy [12].
In a multipolar world order, Russia's task ahead of maintaining great-power status amid severe economic strain will be a modern balancing act for policymakers. Russia's post-war economy looks set to be characterised by isolation from global systems and fiscal pressures, as well as a need for severe restructuring of its workforce to keep up with technological developments that have come to define great powers today. Currently frozen in wartime, Russia may not be the same great power we knew it to be for decades to come.
References
[1] Prime Minister of Canada, "'Principled and pragmatic: Canada's path' Prime Minister Carney addresses the World Economic Forum Annual Meeting," Jan. 20, 2026. [Online]. Available: https://www.pm.gc.ca/en/news/speeches/2026/01/20/principled-and-pragmatic-canadas-path-prime-minister-carney-addresses
[2] M. Shagina, "Russia's economic warfare and Global South relations," The Moscow Times, 2024. [Online]. Available: https://www.themoscowtimes.com
[3] A. Aslund, "Russia's economy is slowing down," The Moscow Times, Jan. 15, 2025. [Online]. Available: https://www.themoscowtimes.com
[4] R. Connolly, "Russia's wartime economy: Coping with sanctions and military spending," Chatham House, Jan. 2025. [Online]. Available: https://www.chathamhouse.org
[5] V. Gel'man, "The politics of fear: How Russia's rulers counter their rivals," Russian Politics, vol. 1, no. 1, pp. 27-45, 2016.
[6] N. Petrov, "Russia's authoritarian welfare state and the resilience of the Putin regime," Post-Soviet Affairs, vol. 37, no. 4, pp. 289-306, 2021.
[7] A. N. Stulberg and R. Götz, "Russia's space capabilities and great power status," Eurasian Geography and Economics, vol. 57, no. 6, pp. 695-721, 2016.
[8] B. Mukhamediyev and O. Khvan, "Central bank digital currencies and Russia's sanctions circumvention," International Monetary Fund Working Papers, 2023. [Online]. Available: https://www.imf.org
[9] C. Miller and S. Hsu, "BRICS and the future of the dollar," Center for Strategic and International Studies, 2024. [Online]. Available: https://www.csis.org
[10] M. Ershov and P. Bofinger, "China and Russia's financial cooperation: Limits and prospects," CEPR, 2025. [Online]. Available: https://cepr.org
[11] S. Roberts, "Russia's outreach to the Global South: Rhetoric versus reality," Jordan Russia Center, 2024. [Online]. Available: https://www.jordanrussiacenter.org
[12] R. Verma and S. Verma, "Russia-Africa relations: Assessing substantive partnerships," African Affairs, vol. 123, no. 491, pp. 234-259, 2024.