Andrei Klepach, chief economist at VEB.RF, has delivered an unusually blunt warning that Russia cannot win the war of attrition against Ukraine, and risks a social crisis if economic conditions continue to deteriorate.
The remarks, delivered at a session of the Nikitsky Club, a forum of senior Russian officials and business leaders, represent one of the most candid assessments of the war’s economic toll to come from inside the Kremlin’s own financial architecture. VEB.RF is a key state-owned bank that finances national projects and holds the status of a “state development corporation.”
“We are losing the competition”
Klepach told attendees that sanctions and the Western blockade are increasing the costs to the Russian economy, while Ukrainian strikes on ports, infrastructure, chemical plants, and oil refineries are causing ever-greater damage. He said Russia is falling behind technologically and economically.
We won’t win the competition in this war of attrition. We’re under the illusion that everything will collapse. It hasn’t, and it won’t. Our costs are mounting.
He added that Russia is losing not only to China and the United States but, in some respects, even to Ukraine, whose economy has been partially destroyed and is suffering a demographic catastrophe yet continues to function thanks to substantial Western financial aid.
Economic decline and social crisis risk
Klepach noted that after the economic growth observed in Russia in 2023-2024, the country’s economy entered a decline in 2026. Investment has sharply declined, and civilian industries including aviation, building materials production, light industry, and food processing have fallen into recession. He blamed the Central Bank of Russia’s ultra-tight monetary policy for at least half of the economic downturn.
In the economist’s view, the combination of these problems will ultimately lead Russia to a “social crisis.” He compared the potential course of events to the revolutionary upheavals of 1917, noting that the February Revolution came as a surprise to many. However, Klepach does not forecast total economic collapse, only a growing lag behind other nations.
The warning comes as Russia’s federal budget deficit for the first seven months of 2026 has reached 6.46 trillion rubles, with July alone adding another 724 billion rubles in deficit. Klepach is a former Putin appointee, making his public criticism all the more remarkable at a time when the Kremlin has ramped up censorship and prosecutions of dissenting voices.
Putin has repeatedly shrugged off economic concerns and vowed to continue the war effort, even as some members of Russia’s elite privately argue it is time to find an off-ramp. Klepach’s remarks appear to highlight the growing disconnect between official optimism and the reality facing Russia’s state financial institutions.
Sources: The Moscow Times; RBC-Ukraine; The Daily Beast; Forbes
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