Russia Problems 12-1-25

In December 2025, Russia's primary problems revolve around the unsustainable strain on its economy caused by high military spending and international sanctions, ongoing military and geopolitical challenges related to the war in Ukraine, and internal social issues.  

Economic Problems

Russia's economy is increasingly a "two-speed" system, where the military-industrial complex thrives while the civilian sector stagnates. 

Stagflation and Inflation: The country faces a high risk of stagflation (high inflation and low growth). Inflation is high, reaching 9.5% in December 2025, eroding the real incomes of ordinary citizens and non-military businesses.

High Interest Rates and Credit Crisis: To combat inflation, the Russian Central Bank has maintained record-high interest rates (around 21%), which stifle civilian sector investment and lending, increasing corporate debt and the risk of a banking crisis.

Budget Deficit: Russia is running a large and growing budget deficit due to massive military expenditures and potentially lower-than-expected oil revenues. A significant drop in global oil prices could severely exacerbate this problem.

Labor Shortages: The military draft and the emigration of workers have created a significant labor shortage in the civilian economy, leading to rising wages that further fuel inflation.

Sanctions and Isolation: Western sanctions continue to impact the economy, limiting access to international capital markets, technology, and certain trade routes. Russian companies face difficulties with import costs and some Chinese financial institutions are reportedly distancing themselves to avoid secondary sanctions. 

Military and Geopolitical Issues

The war in Ukraine remains the central problem, shaping all other aspects of Russian policy.

War of Attrition: Russia is engaged in a long war of attrition with heavy losses, and its recent offensives have yielded minimal gains at a disproportionate cost.

Manpower and Force Generation: Russia continues to struggle with manpower shortages, reportedly using North Korean troops on its border with Ukraine to free up other forces for the front line, which highlights a lack of available ground forces.

Domestic Security: The Kremlin has faced domestic security challenges, including cross-border incursions into its territory (e.g., the Kursk region) and concerns about domestic terrorism.

International Standing: Russia's international standing is diminished, with increased dependence on countries like China and political isolation from the West. Its traditional influence is waning in some areas, as seen with the recent ousting of its ally Bashar al-Assad in Syria. 

Social and Domestic Issues

The burdens of the war economy are increasingly borne by the Russian populace. 

Declining Living Standards: Real household incomes for those not tied to the war economy are shrinking, and social spending is being cut in favor of defense.

Censorship and Human Rights: The government continues to tighten control over information, with widespread internet censorship and the use of "foreign agents" laws to suppress opposition and civil rights.

Public Discontent: While controlled by state propaganda, there are signs of growing discontent among the elite and general populace regarding the economic situation and the war's trajectory. 

In December 2025, Russia's primary problems revolve around the unsustainable strain of its war-driven economy, leading to a combination of high inflation and slowing growth (stagflation), severe labor shortages, and increasing fiscal deficits. The ongoing war in Ukraine exacerbates these issues, while international sanctions and geopolitical isolation compound the economic and social challenges. 

Economic Problems

Stagflation and High Inflation: Russia is facing a scenario of stagflation, where high inflation persists despite slowing economic growth. The central bank has been forced to maintain a high key interest rate to combat inflation, which in turn stifles investment and lending in the non-military civilian sector. Inflation is eroding the purchasing power and real incomes of many ordinary Russians not tied to the defense industry.

Labor Shortages: The military mobilization and high demand for workers in defense factories have created a severe labor deficit across key civilian industries, including manufacturing, logistics, and IT. This scarcity drives up wages for available workers but also leads to production bottlenecks and a decline in output in non-military sectors.

Budget Deficit and Financial Strain: Despite increased tax revenue measures, Russia's military spending (accounting for nearly 40% of the federal budget) is leading to a widening budget deficit. Financing this deficit is difficult due to sanctions barring international borrowing, limited domestic capacity, and high interest rates.

Dependence on Oil and Gas Revenue: The budget remains heavily reliant on oil and gas exports. Vulnerability to fluctuating global oil prices and tightening G7 sanctions on its shadow fleet poses a significant risk to the state's finances and its ability to fund the war effort.

Technological Degradation: Due to isolation from Western technology and sanctions on critical components, Russia faces long-term technological degradation, impacting its ability to innovate and compete in advanced fields like AI. 

Geopolitical and Social Problems

The War in Ukraine: The primary driver of Russia's current problems remains the full-scale invasion of Ukraine and the resulting international isolation. The Kremlin views the war as a top priority, continuing to pour resources into the conflict at the expense of its civilian economy and social services.

International Sanctions: Broad and deepening Western sanctions continue to restrict Russia's access to foreign currency, technology, and export markets. Chinese financial institutions are also increasingly cautious about dealing with Russian entities, further limiting economic options.

Domestic Instability and Human Rights: The government maintains a highly repressive stance on internal dissent and freedom of expression. There are reports of rising domestic discontent among business elites and the general populace regarding economic conditions. Russia also faces ongoing security challenges, including an occupied border region with Ukraine (Kursk) and threats from domestic terrorism.

Dependence on China and North Korea: Russia's increased reliance on China for trade and its use of North Korean troops in the conflict highlight its diminishing global standing and lack of available domestic resources. 

Overall, while the Russian economy has shown some resilience, most experts agree that its current trajectory is unsustainable, with many expecting continued stagnation or a potential crisis in the coming years if the current policies persist. 

https://www.google.com/search?q=what+are+russia%27s+problems+in+december+2025

Norb Leahy, Dunwoody GA Tea Party Leader