The points of the so-called “Witkoff peace plan” published in the media have alarmed those who have been leading the fight against the aggressor through sanctions. In particular, points 19–21 promise Russia a gradual lifting of sanctions, a return to the G8, and long-term economic cooperation with the United States. Point 17 effectively returns most of Russia’s frozen assets under the pretext of “joint US–Russian projects.”
This comes just a month after the United States imposed truly impactful sanctions on Moscow, Russian oil revenues hit their lowest level in years, and the aggressor’s economy was edging toward recession.
Allowing Russia back into the global economic community would let it rebuild its capacity quickly — far faster than Ukraine could manage, even with external support. If sanctions are lifted, access to Western markets restored, and hostilities paused, Russia could invest tens of billions of dollars in preparing for a new offensive against Ukraine and/or Europe. Within three to five years, the Kremlin could be ready for a fresh round of military aggression — but this time, it would be far better prepared.
On the other hand, Russia’s refusal to compromise is likely to sink the “peace plan”, and economic pressure on Moscow will continue. That brings us back to a question raised since the first days of the full-scale war: when will the long‑promised collapse of the aggressor’s economy finally arrive?
Watching war through a peacetime lens
Years into the full-scale war, Russia’s economic growth continues to outpace most peaceful European countries, including Germany and the United Kingdom, despite dire predictions following nearly every one of the 19 sanctions packages.
Joeri Schasfoort of the University of Groningen argues that these failed forecasts come from analysts trying to gauge Russia’s wartime economy using peacetime metrics. By definition, a wartime economy diverts national resources from civilian needs to sustaining the war effort.
While this model cannot guarantee long-term growth, it can provide a significant short-term boost. History offers clear examples: Germany and Britain on the eve of the Second World War, and the USSR and the United States after the conflict began.
In the early phase of a wartime economy, citizens often see their wealth increase. This has also been the case in Russia, particularly in regions with a high concentration of defence industry. The paradox is stark: hundreds of thousands killed on the front, unprecedented sanctions in place, yet ordinary Russians are growing wealthier and more satisfied with their standard of living. This becomes clear when looking at resource mobilisation. Before the full-scale war, many Russians were out of work, and factories ran below capacity — the economy operating far below its potential.
Such a situation is unsustainable for a wartime economy. With a sharp increase in government spending, Russia quickly reduced unemployment and boosted industrial output. Between 2022 and 2025 alone, around $63 billion was drawn from the liquid portion of the National Wealth Fund. Yet this large-scale injection of funds did not trigger runaway inflation, as production expanded alongside the growing money supply.
Elvira Nabiullina’s strategy
There is little doubt that Russia’s successful shift to a wartime economy relied on years of careful preparation. Joeri Schasfoort traces its origins to the appointment of Elvira Nabiullina as head of the Russian Central Bank (RCB) in 2013. Under her leadership, the “Fortress Russia” strategy (Krepost Rossiya in Russian) was developed, laying out a series of measures designed to maintain financial stability under extreme conditions. The RCB initially strengthened its role in the domestic banking market, buying up surplus foreign currency to build reserves intended to protect the rouble from potential international sanctions.
The strategy’s success hinged on a single key factor: a steady inflow of foreign currency. To achieve this, Russia needed to boost exports or curb imports, ensuring it remained a net exporter of goods and services. The Kremlin chose the path of “import substitution,” implementing measures ranging from cuts in public spending to higher interest rates.
Not everything went according to plan. The biggest setback came when EU member states and several other countries froze around $300 billion of Russia’s foreign reserves. This sparked a rapid outflow of capital from Russia in February–March 2022, leading to a sharp fall in the rouble. To stabilise the currency, Nabiullina took an unconventional step: imposing capital controls. By directly regulating the movement of assets, the Russian Central Bank managed to prevent the rouble from collapsing.
Why economies collapsed in the past
History shows that an economy can collapse for one of four reasons. The first is a sudden outflow of capital. Russia experienced this in 1998, the Eurozone in 2011, and Iran under sanctions in 2012. But this is unlikely today, as Moscow has imposed strict capital controls.
The second is a collapse caused by losing access to imported goods, for example through a blockade. Germany faced this in 1918, when Allied actions led to severe food shortages that contributed to revolution and the Kaiser’s abdication. Such a scenario is unlikely for Russia today, which has ample domestic resources and reliable partners, including China and India, to supply essential goods.
The third cause is an internal collapse driven by excessive debt, encompassing all economic actors from households to the state. A clear example is the 2008 financial crisis, when widespread borrowing against rising house prices created a bubble. When the bubble burst, banks failed and dragged the wider economy down with them.
There is no obvious debt crisis in Russia today, although the conditions for one are in place — particularly due to the misuse of the so‑called “credit scheme,” which pressures commercial banks into providing subsidised loans to defence companies. Official data indicate that household and public debt have not risen significantly since 2021.
The fourth and final trigger for economic collapse is public discontent reaching a breaking point and forcing a shift in political direction. The Vietnam War offers a clear example: the United States, despite its considerable economic strength, was compelled to halt military operations amid domestic protests over mounting casualties and inflation.
But given the nature of Russian society, such a scenario appears unlikely. Russians are likely to endure forced mobilisation and economic strain for a long time, as they have for generations.
In this context, a more promising avenue lies in working with the nations subjugated by Russia, whose territories provide the natural resources Moscow exploits. They hold the key to weakening — and ultimately dismantling — the Russian empire, though the process could take many years.
Russia’s economy still far from collapse
Despite this, the war‑time economy model is inherently unsustainable over the long term, and Russia is already showing signs of further strain. GDP growth fell to 0.6% in the third quarter of 2025, down from 3.3% in the same quarter of 2024. Yet the economy remains far from freefall. Joeri Schasfoort names three factors that help explain this resilience.
First, Russia’s military spending as a share of GDP remains relatively low. It is below U.S. levels during the Vietnam War, far lower than Soviet spending during the Cold War, and well below German expenditure in World War II — assuming official statistics are accurate.
Second, countries aiming for a full wartime economy have historically relied on strict economic controls, mainly over prices and wages. In Russia today, this includes the capital controls already in place and occasional restrictions on fuel exports. Security forces are not yet requiring large numbers of citizens to work triple shifts in military factories, and inflation has not reached levels that would necessitate strict price controls. For now, “peacetime” sectors of the economy are largely intact and not being sacrificed for “wartime” needs.
Finally, public support for the Kremlin’s current policies provides another cushion. Surveys suggest that up to three‑quarters of Russians approve of the war against Ukraine, giving Putin and his inner circle considerable room to draw further resources from the population to sustain the conflict.
Strengthen Ukraine, not Russia
Yet the situation could shift rapidly. New U.S. sanctions may hit harder than expected, particularly the “secondary” measures targeting those still trading with Russia. A sharp drop in oil prices — for example, following a change of government in Venezuela — could also deal a blow.
But relying on such scenarios is risky. The reality is that Moscow has the internal resources and external partners to sustain a large‑scale war for years to come.
That does not mean the Russian economy is immune to damage. The recent U.S. sanctions show their impact, and when combined with adequate funding for Ukraine’s defence forces and regular Ukrainian strikes on oil terminals and other industrial sites, sanctions remain a potent tool on the road to Russia’s eventual defeat.
If the international community genuinely wants to deter the aggressor and safeguard its own security, it must significantly strengthen both sanctions on Russia and support for Ukraine, rather than pursue “peace plans” that would only allow Moscow to recover quickly.
