Few signals that someone high up is panicking with few options left are better than efforts to use the administrative «guillotine» to slash burdensome regulations. It doesn’t cost money—something there’s certainly not enough right now—and it gestures toward the interests of business without resolving more fundamental issues like infrastructure, labor availability, or the lack of an impartial judiciary. Mishustin and the cabinet have endorsed a revised competition policy from the Federal Anti-Monopoly Service (FAS), narrowing a list of 33 goods and sectors down to just 9 «socially significant» ones and pushing the regions to enforce fairer competition. Agriculture, medical retail and services, regional public transport, and food retail made the cut. Each sector included has a relatively high share of small and medium-sized businesses, and all have been major contributors to cost-of-living increases since the invasion.
In parallel, Mishustin is gutting the reporting requirements for regional authorities—requirements that are often done manually and have multiplied over the years—by concentrating everything in a unified federal system imposed by Moscow, with agreement from various business working groups.
On one hand, these initiatives are relatively banal. They’re likely the result of discussions stretching back even to 2020, given the lethargic pace at which the bureaucracy typically moves. On the other, they’re evidence of an emerging «consensus”—at least for public consumption—that measures like these can support a market-driven recovery from what now looks like an economic crisis with no easy escape. Maxim Reshetnikov briefed the Duma on MinEkonomiki’s view that growth will pick up in 2027. What’s so confusing about this confidence is that Russia’s terrible growth figures for last year were boosted by a spurt of demand in December—typically associated with end-of-year budget spending, corporate races to spend money before the end of their fiscal years, and the run-up to the holidays. But it looks like some of that demand was «pent-up» from earlier in 2025.
Rather than a cause for optimism, this suggests that whatever demand is being deferred is shrinking. Encouraging more competition to drive down prices may, on its face, help with inflation. But at current interest rate levels and with a fiscal pullback to avoid too large a budget deficit, competition alone won’t suddenly magic a wave of investment and demand into existence, nor will it necessarily address the imbalances driving persistent inflation.
Fortunately for the Presidential Administration, the wonks in Moscow are confident that the January surge in inflation is over, as the effects of higher VAT taxes and tariffs no longer lift the public’s inflation expectations—echoing Putin’s assertions. Unfortunately for them, there is little compelling empirical literature that inflation expectations exist as a meaningful channel of influence on how consumers spend or businesses plan. Of course, in Russia, the large wedge between public expectations and official reality ironically gives the measure greater force as a policy tool.
Businesses complain that the biggest impediment to investment is simply a lack of capital. Some of that can be ameliorated with lower interest rates for business borrowing and consumer credit. But as a practical matter, the only options a business really has are to raise prices or cut costs. The former is quite difficult from a political perspective: there is far too much pressure on far too many people to restrain price increases wherever possible—a legacy of the COVID-era interventions that Andrei Belousov pioneered with Mishustin. The latter—slashing expenses—would, in most cases, require investments to improve labor productivity: investments that demand working capital and a comfortable enough revenue and profit outlook for a business to act. If prices go up, consumers will pull back even harder. If they don’t, more businesses will see their bottom lines fall apart. Since 25−30% of businesses are already losing money, the best way to save their balance sheets is fiscal stimulus and tax breaks—which aren’t coming.
All of this provides useful background to the Bank of Russia’s decision to cut the key rate to 15.5%. It’s not enough to significantly change the outlook as yet. Rather, it signals confidence that the combination of fiscal headwinds and a cooling labor market will limit the scale of inflation risks. With this cut, it suggests further reductions are likely in the months ahead because of how badly the civilian economy is performing. In theory, that supports MinEkonomiki’s theory of the case that growth rates recover in 2027. But low interest rates alone can’t resurrect faltering demand, address rising unemployment or underemployment (masked by the institutional peculiarities of the Russian labor market), or offset the mounting hit to public investment.
Consider the pettiness of fiscal politics within the Ministry of Finance as it fights to stabilize state finances while energy revenues keep falling amid US sanctions risks and the Indian government’s decision to slash Russian crude imports. MinPromTorg is appealing to Deputy Prime Minister Aleksandr Novak to grant the metallurgical sector tax deferments that would save it a measly 15 billion rubles. Siluanov and MinFin are protesting too much, as they always do, insisting that companies use targeted support measures instead. For context, the proposed tax relief is realistically worth less than 0.01% of GDP. In the grim math of the wartime economy, that’s equivalent to 1.5-million-ruble signing bonuses for 10,000 men—near the figure Ukrainian sources claim Russian battlefield deaths outpaced monthly recruitment in January.
Siluanov’s struggle for revenues as recession gains steam is now producing measures that outright contradict the price stability mandate from the Bank of Russia and the government’s focus on the cost of living. On February 9, MinFin tightened the conditions for labor migrants to receive or renew legal status to work in Russia. First, their income must match or exceed the so-called subsistence minimum—a figure that varies by region but has been linked to the minimum wage via constitutional amendment since 2020. Second, migrants have to pay their income taxes as an advance not only for themselves, but also for their minor children and dependents if they’re in Russia. Third, they’re expanding the list of professions required to pay income taxes in advance to include anyone working in a personal capacity as staff for an individual or household, and anyone doing such work without a permit. These advances are formulated as monthly charges, with the fixed charges running higher for those who do not currently have permits.
Since the regime intends to squeeze migrant laborers for more revenue, it must formalize their labor and prevent them from undercutting legally mandated wage minimums—as is common practice in sectors like construction. By default, that raises costs for businesses that have built profits off labor they can exploit. Those costs are passed on to consumers via higher prices. All this returns us to the initial premise of the latest effort to foster competition and reduce regulatory burdens for key sectors. The cabinet is simultaneously trying to help SMEs survive a downturn, reduce the cost of food, medicine, and key goods for the public, and expand the tax base on the backs of the migrant labor needed to meet the needs of an economy losing 30,000 or more working-age men (dead) and thousands more wounded at the front every month. And somehow, businesses are expected to resume plowing money into capex when the state is slashing infrastructure investments and depleting the physical and human capital stock upon which future growth rests.
