Putin’s appearance at this year’s Eastern Economic Forum followed a familiar script, though one dramatically rearranged from five years ago. Where the Forum was once a venue for chasing foreign investment, it has become a stage for the Kremlin to boast about conditions in the Far East. Officials touted 25 trillion rubles of investment over the past 11 years, a tripling of regional gross product, and record-low unemployment of 2.2% – measured against the bizarre benchmark of 1998. What stood out most, however, was an otherwise banal remark about balancing growth and price stability for business. For Putin, it makes little sense to “introduce tax breaks and simultaneously tighten the screws” through more inspections or regulations. To appreciate the absurdity, this conversation has been recycled in various guises for more than fifteen years. Intended as a signal that mass nationalizations are not imminent—or so one hopes—it still reveals the poverty of thought in Moscow.
Before turning to the richer parts of the speech, it is worth pausing on tax breaks. At this stage of the war, the only thing the Kremlin can realistically do to “help” businesses is refrain from ordering a mobilization or deepening state intervention in their markets. The business association Opora Rossii has asked Prime Minister Mikhail Mishustin to extend tax breaks to the retail giant Ozon, whose logistics centers have been hit by Ukrainian strikes, and to sellers using its platform. Tax breaks can be useful, but they only work if companies continue to make profits. Russian businesses’ profits fell 13.3% year-on-year in the first half to roughly 11.7 trillion rubles—a significant drop even before inflation. Labor and other costs keep rising, while firms struggle to manage debt or raise prices without losing customers.
Relatedly, the regime’s expansive use of tax breaks to steer investment into defense supply chains and regional economic hubs has produced a flood of inefficient companies that survived their early years only because of generous fiscal terms. There is little impulse to rationalize them or raise their efficiency, especially in a political system that treats employment as a way to minimize protests and other pushback. The result is a large number of less productive firms operating in an economy still flooded with money from military spending. They must keep raising prices to offset labor costs. There is also a pullback in IT, a poor sign for white-collar productivity: investment by IT companies is down 37% year-on-year. Sber data from its subsidiary Sampa show that from January to August 2026, the share of consumer spending at large retail centers on alcohol, perishables, and food staples rose from 22% to 24%. The shift is not seismic, but it illustrates a slow reallocation of spending toward staples whose price increases reliably outpace headline inflation.
More interesting than the tax-break remark was Putin’s admission that price stability matters more than growth. In his telling, long-term investment planning is difficult amid “galloping” inflation. That is true. What is more striking is the mechanism he proposed for anchoring value-added industries in the Far East: guaranteed long-run demand from federal, regional, and municipal governments. For that to be remotely feasible, the budget would have to run deficits indefinitely—until the regime is willing to gut social transfers. Yet under the current sanctions regime and labor shortage, deficits themselves drive inflation higher, especially after a decade of import-substitution policies that have tied consumer prices more tightly to domestic conditions than to global trends. Putin insisted that the economic cooling produced by high interest rates should not be overdone. Another round of utility tariff increases in October—by as much as 15%—will nevertheless push inflation higher again this fall. Official statements of intent keep contradicting the consequences of decisions the government refuses to reconsider.
If Putin truly believes price stability is a panacea—a belief that shaped policy in the 2010s and was used to justify harsh budget cuts after 2016—that goal is materially impossible in wartime. His comments on fuel shortages better capture the reality facing businesses. Whatever interventions the state is willing to finance create obligations, at least as the Kremlin sees them. Particularly galling was Putin’s invocation of his time as prime minister during the 2008 global financial crisis, when he ignored the pleas of much of big business, bailed out well-connected insiders (who, to be fair, ran nationally critical firms), and did almost nothing to restore sustainable growth. Where such obligations exist, financial planning and resource allocation become harder no matter the inflation rate, because the obligations themselves shift with political expediency.
In practice, obligations between business and the state run in one direction. The Kremlin’s continued acknowledgment that it must avoid excessive pressure is itself an admission that the two sides exist in a state of mutually assured destruction if either fails. Putin’s claim that the economy is in an “absolutely stable regime” is worrisome precisely because officials rarely need to say such things when conditions truly are stable. If corporate profits keep falling, the “stability” they keep invoking will shift from nominal growth accompanied by real-terms decline—already a form of contraction—to an outright nominal recession.
