More than four years since the start of the invasion in Ukraine, the economic effects of the war are increasingly felt in the everyday life of Russians. While the defense industry is fueled with billions of dollars from the state budget, thousands of small businesses are facing declining sales, higher taxes, and continually rising costs.
In the suburb of Mytishchi, near Moscow, empty shop windows and “For Rent” signs are becoming increasingly common. Shop owners, salons, and restaurants say that the number of customers is decreasing month by month, and the new tax measures are pushing them towards bankruptcy or into the underground economy, reports AFP.
“Inflation was felt immediately after the start of the war”
A woman who has been running a small business for 12 years and who agreed to speak under the protection of anonymity claims that the problems began with the onset of the invasion in Ukraine.
“From the moment the military operations began, I felt the effects of inflation”, says the entrepreneur, explaining that the increase in taxes and new regulations have significantly reduced profits.
The increase in prices and the volatility of the ruble are among the main domestic economic consequences of the conflict, against the backdrop of Western sanctions imposed on Russia.
In the early years of the war, the state’s massive expenditures for the military industry managed to support the economy. However, today economists say that the positive effects have been almost exclusively concentrated in the defense sector.
Russia’s military expenditures have reached approximately 8% of GDP, the highest level since the post-Cold War period.
On the other hand, the civilian economy is slowing down. At the beginning of 2026, Russia recorded its first quarterly economic contraction in the last three years.
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