Russia's economy, which defied initial sanctions and saw growth propelled by massive military spending and robust oil exports, is now showing significant signs of a downturn.

Recent economic indicators are flashing red, with manufacturing activity declining, consumer spending tightening, and inflation remaining stubbornly high, straining the national budget, the Wall Street Journal (WSJ) reported on July 4.

Russian officials are openly acknowledging the risks of a recession. Economy Minister Maxim Reshetnikov warned last month that Russia was on the "verge of a recession," while Finance Minister Anton Siluanov described the situation as a "perfect storm." Companies, from agricultural machinery producers to furniture makers, are reducing output. The central bank announced on July 3 it would debate cutting its benchmark interest rate later this month, following a reduction in June.

While analysts suggest this economic sputtering is unlikely to immediately alter President Vladimir Putin’s war objectives—as his focus on "neutering Ukraine" overrides broader economic concerns—it exposes the limits of his war economy.

The slowdown indicates that Western sanctions, though not a knockout blow, are increasingly taking a toll. If sanctions intensify further or global oil prices fall, Russia’s economy could face more severe instability. This downturn undermines Putin's strategic bet that Russia can financially outlast Ukraine and its Western allies, suggesting Moscow may struggle to finance the war indefinitely.

Death of top Russian oil executive fuels fresh scrutiny of elite’s ‘window falls’

The unexplained death of a top Russian oil executive on July 4 is fueling renewed scrutiny over the rising number of high-profile Russian officials and businessmen who have died under mysterious circumstances, specifically, have fallen out of windows. Andrei Badalov, vice president of Transneft, Russia’s largest state-controlled pipeline transport company,

The Kyiv IndependentTim Zadorozhnyy

Experts warn that Russia's economic growth model, overly reliant on military spending, is unsustainable and necessitates a contraction of civilian economic capacities to free up workers for the war machine, which is not a viable long-term strategy. Putin recently dismissed suggestions that the war is stifling the economy, echoing Mark Twain by stating reports of its death "are greatly exaggerated." However, he also cautioned that a recession or stagflation "should not be allowed under any circumstances."

After a brief recession in 2022, military spending, which accounts for over 6% of gross domestic product this year (the highest since Soviet times) and approximately 40% of total government spending, had propped up Russia’s economy and blunted the impact of Western sanctions. Russia’s ability to reroute oil exports to China and Beijing’s support with electronics and machinery provided additional economic stimulus. This created an economic paradox: the most sanctioned major economy was, for a period, growing faster than many advanced economies.

However, this military spending "sugar rush" fueled runaway inflation, compelling the central bank to raise interest rates to a record 21% to try and tame it. Higher interest rates increased borrowing costs for businesses, curbing investment, expansion plans, and squeezing profits. The economic comedown has already begun.

Official data shows Russian GDP growth slowed to 1.4% in the first quarter compared to a year earlier, down significantly from 4.5% in the fourth quarter of 2024. S&P Global’s purchasing managers’ index indicated Russia’s manufacturing sector contracted at its sharpest rate in over three years in June, and new car sales dropped nearly 30% year-over-year in June.

Businesses across Russia are feeling the effects, according to the WSJ. Rostselmash, the country’s largest producer of agricultural machinery, announced in May it would cut production and investment, and pull forward mandatory annual leave for its 15,000 employees due to a lack of demand. In Siberia, electricity grid operator Rosseti Sibir stated it was on the verge of bankruptcy due to high debt, halting investments and proposing tariff hikes for industrial users.

While some analysts argue the Russian banking system remains stable, others warn of increasing instability. A recent report by the Washington, D.C.-based Center for Strategic and International Studies (CSIS) highlighted risks from a government decision to control war-related lending at major Russian banks. The state could direct banks to offer preferential loans, potentially forcing the government to absorb losses if high interest rates prevent companies from meeting obligations.

The Moscow-based Center for Macroeconomic Analysis and Short-Term Forecasting also assessed in May that the risk of a protracted systemic banking crisis in 2026 was "moderate" and growing.

These economic challenges intensify pressure on the Kremlin by reducing its financial capacity to fund its war in Ukraine. The government has operated with a budget deficit throughout the war and projects this will continue for at least two more years. This fiscal strain could provide an opening for Western nations to implement more powerful sanctions.

Falling oil prices present another significant risk for Russia, as energy sales account for about a third of its budget revenues. The price of Russian crude has consistently remained below the level assumed in this year’s budget, and Russia’s oil-and-gas revenue in June fell to its lowest level since January 2023, according to Finance Ministry data.

Trump says Putin ‘wants to keep killing people,’ signals US may send Patriots to Ukraine

“It just seems like he wants to go all the way and just keep killing people. It’s not good,” U.S. President Donald Trump said.

The Kyiv IndependentTim Zadorozhnyy

Ukraine struck a critical Russian military-industrial site overnight on July 5 that produces components for high-precision weapons used by Moscow to attack Ukraine, the General Staff of Ukraine's Armed Forces reported.

The site in question is JSC VNIIR-Progress, a Russian state institute that specializes in developing electronic warfare (EW) systems, including the Kometa antenna arrays, used to jam satellite, radio, and radar signals.

The institute is located in Cheboksary, Chuvash Republic, about 1,200 kilometers (745 miles) away from the Ukrainian border.

The Kometa antenna is used in Shahed-type drones, Iskander-K cruise missiles, and guided aerial bomb modules — all high-precision weapons used by Russia to strike civilian and military targets across Ukraine.

The General Staff confirmed that Ukrainian weapons reached the target area but said final damage assessments were still underway.

The VNIIR-Progress institute has been sanctioned by both the United States and the European Union for its role in supporting Russia's war effort.

The Iskander-K is a precision-guided cruise missile with a range of up to 500 kilometers (311 miles), frequently used by Russia to target civilian areas. Shahed drones have become a central part of Moscow's airstrike tactics since late 2022 due to their low cost and high payload.

Located on the Volga River, Cheboksary is the capital of the Chuvash Republic and lies deep inside Russian territory. Russian independent media outlet Astra and local Telegram channels earlier reported explosions in the city overnight.

Russia's Defense Ministry claimed to have shot down two drones over the region.

This marks the second known Ukrainian drone strike on VNIIR-Progress. On June 9, explosions and fires were also reported at the facility following another drone attack.

Russian forces have occupied the villages of Zelenyi Kut and Novoukrainka in Donetsk Oblast, located near the administrative border with Dnipropetrovsk Oblast, the battlefield monitoring platform DeepState reported on July 5.

Russian forces are attempting to push further west, according to DeepState.

Donetsk Oblast has been a central battlefield since the start of Russia's full-scale invasion in February 2022 in Ukraine. While Dnipropetrovsk Oblast lies further west and has not seen significant Russian incursions, it is frequently targeted with missile, drone, and aerial bomb strikes.

Russian troops have been escalating their assaults in the area and are attempting to breach into Dnipropetrovsk Oblast.

"The situation around Dachne is pretty intense," DeepState wrote on Telegram, referring to the nearby front-line settlement in Dnipropetrovsk Oblast.

Ukrainian forces have deployed reinforcements, but Russian units, relying on numerical advantage and constant infantry assaults, have breached some defenses in the area, DeepState said.

Ukraine's military has not officially confirmed the loss of the settlements.

Russia's Defense Ministry claimed Novoukrainka was captured as early as June 29, though that assertion was not independently confirmed at the time.

On July 2, Ukraine dismissed Russian claims of advancing into Dnipropetrovsk Oblast, calling them disinformation. It said that a small Russian reconnaissance unit briefly entered the village of Dachne, took photos with a Russian flag, and was then "eliminated."

Ukrainian military spokesperson Viktor Trehubov said in mid-June that Russia was escalating attacks in the Novopavlivka sector — in the western part of Donetsk Oblast — and trying to breach into Dnipropetrovsk Oblast.

DeepState analysts suggest Moscow views an incursion into Dnipropetrovsk Oblast as symbolically significant and a propaganda opportunity, while for Ukraine, holding the administrative line is a strategic priority.

Oleksandr Syrskyi, commander-in-chief of Ukraine's Armed Forces, said on July 5 that he had visited the front line in Kharkiv Oblast, warning of a growing threat of renewed Russian offensives in northeastern Ukraine.

According to Syrskyi, Russian troops are ramping up attacks in the sector using large numbers of troops. Over the past week, Ukrainian troops have repelled more than 60 Russian assaults in the area, with "about a dozen battles continuing to rage every day," Syrskyi said.

"Russian forces are trying to overwhelm us with quantity, but we must be vigilant and apply effective tactical and technological solutions to prevent the invaders from advancing," he said in a Telegram post.

Syrskyi said he had reviewed battlefield situation in the area, identifying unit needs, and issuing updated tactical orders.

Syrskyi said he was coordinating closely with Joint Forces Commander Major General Mykhailo Drapatyi.

Kharkiv Oblast, located in northeastern Ukraine, borders Russia and includes the country's second-largest city. It has been a frequent target of Russian assaults and missile attacks since the full-scale invasion began in February 2022.

Since Ukraine's successful counteroffensive in the northeast in the fall of 2022, Russia has occupied less than 5% of Kharkiv Oblast, along the region's eastern edge.

In spring 2024, Russian forces opened a new front in the north of Kharkiv Oblast, near the town of Vovchansk, but were pushed back by Ukrainian troops.

The Ukrainian battlefield monitoring platform DeepState reported on July 4 that Russian forces had advanced up to 3 kilometers (1.86 miles) into Kharkiv Oblast near the border village of Milove, opening yet another front in the northeast.

On July 4, Pavlo Shamshyn, spokesperson for Ukraine's operational-tactical group "Kharkiv," said that the number of Russian assault operations in the sector had sharply increased.

Fighting remains intense near the town of Vovchansk and surrounding villages. Shamshin said Russian troops are advancing in small groups of three to 10 soldiers, relying on drone support.

Andrii Pomahaibus, chief of staff of Ukraine's 13th National Guard Khartiia Brigade, said in May that Russia had been massing forces near the border, possibly preparing for a new offensive in the sector.

Despite repeated calls from Ukraine, the U.S., and European leaders for an unconditional ceasefire, Russia has continued ground attacks along the front and long-range missile and drone strikes targeting Ukrainian cities and infrastructure.

Russia's largest airports experienced hours-long flight delays and cancellations on July 5, as authorities imposed temporary restrictions due to a reported threat of Ukrainian drone attacks, the pro-Kremlin Telegram channel Shot reported.

Ukraine hasn't commented on the report. Kyiv's drone campaign, which has increasingly disrupted civilian air travel in Russia, is part of Ukraine's broader strategy to undermine Russia's logistics far beyond the front line.

Some passengers in Russia reported waiting more than 10 hours on July 5 as their flights were being delayed, according to Shot.

Departures at Moscow's Sheremetyevo Airport were halted for several hours, delaying over 20 flights. At St. Petersburg's Pulkovo Airport, roughly 50 flights were delayed and more than 20 canceled.

Leningrad Oblast Governor Alexander Drozdenko said that two drones were shot down south of St. Petersburg, prompting a temporary suspension of operations at Pulkovo Airport.

The disruptions followed a wave of Ukrainian drone attacks overnight, which targeted military and industrial infrastructure in at least six Russian regions.

The Russian Defense Ministry said it intercepted 42 drones within three hours, mainly over the Belgorod, Bryansk, and Kursk oblasts near the Ukrainian border.

Novaya Gazeta Europe reported in May that at least 217 temporary airport closures have occurred across Russia since Jan. 1 due to drone threats, more than in 2023 and 2024 combined.

A similar wave of strikes ahead of Russia's Victory Day in May led to massive delays, affecting an estimated 60,000 travelers.

Ukraine’s new drone strategy — cripple Moscow’s airports, make Russian population ‘pay’

Hundreds of Ukrainian kamikaze drones have flown towards Moscow in recent weeks. None appear to have even reached the Russian capital, yet the effect on the city — and the wider country — has been hugely significant. Ukrainian drones have forced at least 217 temporary airport closures across Russia since Jan. 1,

The Kyiv IndependentTim Zadorozhnyy

Russia is seeking to involve Laos in its war against Ukraine under the pretense of humanitarian cooperation, Ukraine's military intelligence (HUR) claimed on July 5.

According to the agency, Moscow is organizing the deployment of a combined unit of military engineers from the Lao People's Armed Forces to Russia's Kursk Oblast, allegedly to help with demining operations.

Ukraine initially captured 1,300 square kilometers (500 square miles) of Russian territory during a cross-border offensive to Kursk Oblast but lost most of it during a Russian counteroffensive this year, which was supported by North Korean troops.

Laotian authorities have reportedly agreed to send up to 50 engineers to support Russian efforts. In addition, Laos is said to be offering free rehabilitation services to wounded Russian soldiers.

"Russia, under the guise of humanitarian rhetoric, is trying to legalize the presence of foreign military contingents on its territory, effectively using them to wage war against Ukraine," HUR said.

This comes amid broader efforts by the Kremlin to recruit foreign personnel. Russia has drawn heavily on fighters from Asia and Africa, as well as North Korea.

Ukraine has captured multiple foreigners fighting for Russian forces. an April investigation by Russian independent outlet Important Stories identified more than 1,500 foreign fighters from 48 countries who had joined Russia's war.

Laos, a landlocked Southeast Asian country bordering China, Vietnam, and Thailand, has not commented on HUR's claim. The country maintains close ties with both Moscow and its ally Beijing.

At least four civilians were killed and 37 others injured in Russian attacks across Ukraine over the past 24 hours, regional authorities reported on July 5.

Russia launched 322 drones overnight, including Iranian-designed Shahed-type attack drones, according to Ukraine's Air Force. Air defenses intercepted 292 drones, while another 135 dropped off radars, likely used as decoys to overwhelm Ukrainian systems.

The attack was repelled using aviation, electronic warfare, mobile fire teams, and air defense systems.

In Donetsk Oblast, Russian strikes killed two civilians and injured four more, Governor Vadym Filashkin said. In Kharkiv Oblast, one person was killed and 15 injured, including two children, according to Governor Oleh Syniehubov.

In Kherson Oblast, 11 civilians were injured as Russian forces targeted residential areas and other civilian infrastructure, Governor Oleksandr Prokudin reported.

A 49-year-old postal worker was injured in Chernihiv Oblast by a first-person-view (FPV) drone, Governor Viacheslav Chaus said. The man sustained shrapnel wounds while delivering mail.

In Dnipropetrovsk Oblast, four civilians, two men and two women, were injured in Russian strikes, Governor Serhii Lysak reported.

In Zaporizhzhia Oblast, an 84-year-old man was killed, and two others — a 54-year-old man and a 10-year-old boy — were injured, Governor Ivan Fedorov said.

The latest strikes come as Russia continues to escalate its aerial campaign and reject calls for a ceasefire. Ukrainian officials have repeatedly urged Western partners to bolster Ukraine's air defense capabilities amid persistent drone and missile strikes.

Trump says Putin ‘wants to keep killing people,’ signals US may send Patriots to Ukraine

“It just seems like he wants to go all the way and just keep killing people. It’s not good,” U.S. President Donald Trump said.

The Kyiv IndependentTim Zadorozhnyy

Editor's note: This story has been updated with additional comments by U.S. President Donald Trump.

U.S. President Donald Trump said on July 5 that Russian President Vladimir Putin does not appear interested in ending the war in Ukraine, according to a comment made onboard Air Force One.

Trump reiterated that he was "very unhappy" with the July 3 phone call between the two leaders.

"It just seems like he wants to go all the way and just keep killing people. It's not good. I wasn't happy with it," Trump told reporters.

The call, which lasted about an hour, was confirmed by the Kremlin to have focused on Ukraine. Putin reportedly told Trump that Russia would continue pursuing its "goals" in the war.

Trump's remarks follow a sharp escalation in Russian missile and drone attacks across Ukraine that have killed and injured hundreds of civilians in recent weeks.

The strikes have hit multiple regions, destroying civilian infrastructure amid persistent calls from Ukraine, the U.S., and Europe for an unconditional ceasefire.

When asked if he can end Russia's war against Ukraine, Trump said, "I don’t know. I can’t tell you whether or not that’s going to happen."

Trump agreed when asked if ending the war is a priority, saying, "Yes. I’d like to see it happen."

The day after his call with Putin, the U.S. president spoke by phone with President Volodymyr Zelensky and said the two had a "very strategic" conversation.

"We talked about different things... I think it was a very, very strategic call," Trump said. When asked about supplying Patriot air defense systems to Ukraine, he replied, "Yeah, we might."

"They're going to need something because they're being hit pretty hard," Trump added.

The statement comes as the U.S. Defense Department has paused deliveries of several key weapons systems, including Patriot missiles and precision-guided munitions, prompting concern in Kyiv.

While Trump has said he wants to help Ukraine, his administration has not imposed new sanctions on Russia since taking office and has not approved additional aid packages.

The U.S. president has instead directed strikes against Iran, targeting three nuclear facilities in June in response to regional escalations, a move critics say contrasts with his cautious approach toward Moscow.

When asked why he appears tougher on Tehran than Moscow, Trump told reporters, "No, I think I'm tougher on Russia than I am on Iran."

Despite two rounds of face-to-face talks between Moscow and Kyiv in May and June in Istanbul, no agreement on a ceasefire has been reached. The negotiations have only resulted in prisoner exchanges, as Moscow continues to push for maximalist demands in peace talks.

Russia has lost 1,025,260 troops in Ukraine since the beginning of its full-scale invasion on Feb. 24, 2022, the General Staff of Ukraine's Armed Forces reported on July 5.

The number includes 1,050 casualties that Russian forces suffered over the past day.

According to the report, Russia has also lost 10,990 tanks, 22,953 armored fighting vehicles, 54,148 vehicles and fuel tanks, 29,921 artillery systems, 1,428 multiple launch rocket systems, 1,191 air defense systems, 420 airplanes, 340 helicopters, 43,609 drones, 28 ships and boats, and one submarine.

Ukraine strikes deep into Russia with drones, targets airfields after record Kyiv barrage

The Russian Defense Ministry reported a total of 42 drones destroyed, with 37 of them intercepted in three regions bordering Ukraine: Belgorod, Bryansk, and Kursk.

The Kyiv IndependentOlena Goncharova