Russia’s war-fuelled economy faces total collapse by 2026 unless the Kremlin enacts politically impossible reforms, a senior Ukrainian adviser warned yesterday. As Moscow launched one of its heaviest barrages on the Ukrainian capital overnight, killing at least two civilians and wounding dozens, a senior Ukrainian commentator issued a bleak warning: without politically impossible reforms, Russia faces total economic collapse by 2026.

Anton Geraschenko, a former adviser to Ukraine’s interior minister and a prominent commentator on Russian affairs, published his detailed assessment on Monday. Posting on X, he described Russia as having become “a militarised, ‘two-speed’ system in which the military-industrial complex and war rents prop up growth by draining resources from the private sector and normal civilian industries.” 

He wrote: “The Russian economy and the Russian regions are kept afloat by the war and state procurement, while the civilian sector and most regions are slipping into stagnation.

“Rising incomes and employment are essentially a bubble inflated by federal spending and a labour shortage, and by 2026 regional budgets risk falling into the red – meaning that ending the war without deep restructuring will almost certainly trigger a new, severe economic collapse.”

Mr Geraschenko was blunt about the political deadlock: “The reforms and structural changes needed to escape this trap are politically out of reach for the Kremlin.”

He continued: “As a result, the regime’s goal is not to prevent a crisis, but to avert a collapse: prolong the ‘neither war nor peace’ mode within the country for as long as possible while maintaining high military spending; intensify manual redistribution of resources in favour of the defence sector and ‘loyal’ regions; mask the deterioration in living standards with statistics and propaganda; rely on grey export schemes and partial sanction relief without changing course.”

Mr Geraschenko reserved his sharpest words for Moscow’s diplomatic posture: “In this context, Moscow’s interest in ‘peace negotiations’ is not an attempt to end the war, but an effort to secure a favourable pause: to freeze the front and its territorial seizures, extract partial sanctions relief, and buy time to stretch out the inevitable crisis into a long, managed stagnation of the wartime economy.”

His briefing appeared hours before Russia launched one of its fiercest attacks on Kyiv in months.

In the early hours of November 25, waves of cruise missiles and Shahed drones set high-rise blocks ablaze, killing at least two civilians and wounding 27, according to multiple media reports. Kyiv mayor Vitali Klitschko reported fires across several districts; Ukrainian air defences downed 22 of 43 missiles and 62 of 78 drones.

The assault came less than a day after US-Ukrainian talks in Geneva refined Washington’s original 28-point peace plan into a shorter document that shelves immediate decisions on borders while insisting on Ukraine’s sovereignty and NATO-style security guarantees. Moscow dismissed the proposal as needing “substantive discussion”. 

On the battlefield, Russian forces are pressing near Kupiansk and Pokrovsk, while Ukraine reports inflicting 1,280 casualties in the last 24 hours.

Economic data appears to mirror Mr Geraschenko’s diagnosis: GDP growth has slumped from over 4% in 2024 to 0.6% in Q3 2025; defence spending devours 38% of the budget (£140 billion, or $183 billion); oil and gas revenues fell 12–25% in the first half of the year; official inflation is 9.1%, independent estimates put household inflation at 20–25%; the central bank’s 20% key rate has crushed lending; and a 2.6 million labour shortage, driven by losses approaching one million, has crippled civilian industry.

The 2026 deficit is forecast at £76 billion ($100 billion, 2.6% of GDP)). The IMF has cut Russia’s 2025 growth forecast to 0.7%, with most analysts expecting contraction in 2026.