The Ukrainian military’s successful strike on the Kremniy El microelectronics plant in Bryansk on March 10—Russia’s second-largest producer—has stirred considerable outrage in Moscow. Striking at semiconductor inputs for air defense systems and ballistic missiles using British Storm Shadows is apparently out of bounds. But the timing of the strike, combined with events in the Gulf and Ukrainian forces’ successful (if limited) advances in Dnipropetrovsk oblast, suggests we are in the midst of another 3−4-month cycle of punch and counterpunch, innovation and reaction.
It would be foolish to write off Russia’s capacity to absorb blows and adapt. Yet the Bryansk plant, aside from being a critical node, points to a problem that Russian leadership cannot solve: the country’s sheer size imposes a huge cost as more air defense radar systems are lost, air defense munition stockpiles are exhausted, and Ukrainian capabilities to launch deeper strikes—without relying on Western kit—continue to improve.
Where the present situation differs from past cycles at the front or in the «air war» is that the Russian economy is shifting from a negative equilibrium to an outright downward slide. Russian analysts are still using the heuristic of stagflation—nil growth and high inflation—for what looks more like recession with high inflation. The distinction matters when parsing why the relative state of the economy is so important in the current phase of attrition.
Statistics can obscure as much as they reveal, but they tell a story that should be of greater concern. According to TsMAKP’s trend review for January, aggregate freight turnover has fallen to levels not seen since the April-May stretch of the 2020 COVID shock. Onshoring does not explain this: any increase in domestic manufacturing would actually raise aggregate haulage, since inputs would have to be moved along with the final goods on the domestic market. People are obviously getting poorer, or the relative cost of services, housing, and other non-traded/non-moved items is swallowing all the income gains claimed by Russian outlets. The monetary value of imports is now lower than it was in early 2023. Demand for credit fell nearly 10% in February compared with January, alongside a record 31% month-on-month decline in mortgage applications. The current influx of oil revenues into the budget is useless at arresting these declines. Any additional money spent by the state would create disproportionately high levels of inflation, forcing interest rates even higher and achieving the same deadening effect on economic activity.
Attrition is more socioeconomically sustainable for the regime when there is at least the appearance of growth or, at a minimum, a modicum of price stability relative to wage levels. Every unit of non-military GDP the economy can sustain provides a safe flow of revenues for the state, can theoretically aid the productivity of military enterprises through «dual-use» innovation that makes labor more effective, and can provide a margin of slack capacity to be converted for military purposes should the need arise. But we are far past that phase of the conflict. There is no spare labor or capacity to convert, and the war has already cannibalized a large share of civilian capacities. As Ukraine stretches available air defense munitions and capabilities—targeting key parts of warning systems and manufacturing networks—the only way for Russia to get ahead again is to redirect yet more resources into military production at everyone else’s expense. In effect, Ukraine’s strategy is turning the country’s size and the spread of its military manufacturing base into a liability, just as the wartime economy of attrition has finally caught up to policymakers.
The only way around this dynamic for the regime is to lie. The Ministry of Labor claims real wages rose 4.4% in 2025 and the average wage rose 13.5%. How that squares with official inflation at 5.6% is unclear. Every major trade publication talks about declining purchasing power. Demand for winter tours and holiday packages for 2025−2026 fell 20% on average. January mortgage demand was already down over 18% year-on-year—a terrible indicator for consumer durables demand, since homeowners typically buy kitchen appliances, washing machines, and other essentials after closing. Every one of these declines means fewer VAT tax revenues, fewer income tax revenues, and fewer profit tax revenues.
Were the Ministry of Finance and technocrats confident that the current shock in the Gulf could deliver good news, they would not be preparing to cut discretionary non-essential spending by 10% in 2026. Siluanov is obsessed with calls for 10% spending cuts. Most years since 2015 he has proposed this explicitly as a target or implicitly to «optimize» state spending. But the current call to slash budgets proves definitively that there is no hope for energy revenues to compensate for the economy’s slowly failing health any longer. They will likely start with construction and repair works considered non-essential or that will take too long, canceling the contracts—a brilliant maneuver that merely delays the associated inflation and costs from physical bottlenecks in the economy. Ironically, falling freight movement and household consumption might alleviate some of that strain for longer.
All of this brings us back to why the beginning of Ukraine’s missile strike campaign—acknowledging the PR around the Flamingo system in particular—is significant from a timing perspective. The regime has managed the war effort through a careful balance of bribery, neglect, and socioeconomic sorting. Relying so heavily on bonuses and incentives to draw in volunteers has dampened the political risk of the public uniting against the war, even as wounded veterans are dragged back to fight so as to prevent them from ever surviving long enough to reintegrate into political life and make the regime pay for its failures and waste of lives. Similarly, the wage premiums that defense jobs command buffer against the inherent squeamishness one might have about producing weapons or munitions to wage a war no one can truly explain or make sense of. But should more of these strikes materialize in the coming weeks and months, the careful façade falls apart.
The buffer of huge stockpiles of pre-existing munitions and weapons systems is no longer there as a safety net. Coupled with the temporary advantage Ukrainian forces appear to have with FPV drones at the front (if Russian Telegram channels are to be believed), their commitment to a strategy of attrition appears to be turning in their favor. It is getting harder to replace whatever Russia loses from key supply nodes in its production networks, more costly to convince men to volunteer, harder to work factory employees to the bone while they watch their hometowns struggle more each passing month, and harder to reliably convert Russia’s sheer size advantage over Ukraine into a constant advantage. Iran is teaching Washington right now just how effective one can be with limited means but greater will and strategy over tactics. Perhaps Ukraine’s approach—with a more favorable balance of power—is finally yielding some results as Moscow’s policymakers wring their hands, unable to stave off the economy’s slide into a painful recession with no clear end in sight.
