There is a point where propaganda cannot shape reality, where the Russian economy is projected to grow at just 0.9 percent in 2026, where inflation will rise while the economy stagnates, and the market knows it. Russian stocks suffered their worst losses in three years last week after the state started seizing publicly-owned companies and stiffing the shareholders, earning a rare rebuke from the central bank. Vladimir Putin bet on a short war in Ukraine followed by lingering sanctions in the West. Instead, he got a long, hideously expensive war awith ever-ratcheting sanctions pressure. The result is a collapsing civilian economy. Russia is its war economy, now.
Major Russian employers are laying off workers and operating with shortened work weeks to avoid layoffs. Cemros, once among the biggest players in European cement markets, has to furlough workers. Alrosa, a diamond mining company, is reducing payroll under severe inflation pressure. Mining company Mechel is cutting back coal production. Sveza, a huge lumber and wood products company, has received the Russian equivalent of a bank bailout after their CEO stepped down earlier this year to avoid falling out of a window.
And then there are the motor vehicle makers, the essential industry for modern transportation. The market for heavy trucks in Russia is down 57 percent from 2024, with KAMAZ being the biggest loser. Zombified foreign brands are getting favorable treatment from the Kremlin in order to maintain a facade of normality. But just look at the new Iskra in the screenshot above. Made from the cheapest parts with the fewest features possible, the Iskra is the perfect rally car for a ‘meat wave’ assault on a Ukrainian position, since it only needs to run 20 miles or so before it becomes a burned-out drone target.
A civilian owner on the other hand will likely have pieces falling off the car by 20,000 miles, assuming there is gasoline to actually put in the tank. That is no sure thing in Russia right now. A combination of international oil sanctions and kinetic Ukrainian oil sanctions has reportedly cut Russian fuels production by almost half, at this point. Estimates vary, but there are clear examples now of the fuel shortages across Russia and reaching the front. As one shiny panel after another breaks and slips and falls off Putin’s war machinery, revealing the jalopy underneath the Potemkin rally car, military collapse begins to seem more possible all the time, because it is.
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