Putin Is Battling Inflation – But Sacrificing Russia’s Economy |
This publication was adapted from the original at the Sakharov Review’s “The Country and the World” project and is part of the series “Four Years of War: The Results.”
The Kremlin has turned fighting inflation into a quasi-ideology. The doctrine combines the recommendations of court financiers with the ruler’s own strategy, aimed at preserving power for decades to come.
Since February 2022, desperate measures to curb inflation have been implemented in Russia with such consistency that look like a natural policy beyond questioning.
But they are not. They are a decision.
A comparison helps clarify the picture. Over four wartime years (2022-2025), Russia’s consumer price index rose by 39%, compared with 61% in Ukraine. If we look at two other countries at war with each other, Israel and Iran, inflation from 2023-2025 amounted to 11% in the former and at least 200% in the latter.
Russia has been less successful at containing inflation than Israel. But when it comes to effort, first place belongs squarely to Moscow, as evident in the 10.4 percentage point gap between the interest (16%) and inflation (5.6%) rates at the end of 2025. In Ukraine, the difference was 7.5 percentage points while Israel's gap was just 1.4.
Unlike Israel, Russia is fighting under heavy sanctions and financing the war almost entirely from domestic resources. It has no access to international borrowing, receives no external grants or preferential loans and struggles to sell its oil on global markets at anything close to full price. Under similar conditions, its finances might have resembled the chaos seen in Iran. Instead, Russia’s economic reality looks markedly different.
This makes the phenomenon all the more intriguing because Russia has no anti-inflationary tradition of fiscal restraint. Neither of the empires that preceded the Russian Federation — under the tsars or U.S.S.R. — was ever particularly scrupulous with their finances, especially in wartime.
Many observers believe this uncharacteristically harsh financial policy is dictated by Central Bank Governor Elvira Nabiullina. She has been in office since 2013 and belongs to the small circle of Putin’s top technocrats.
Her image intrigues the outside world. At the height of the war, The Economist showered her with praise (“her mere presence at the helm is enough to calm markets”) and compared her to a Shakespearean tragic character, without specifying which........