🏠 Bogdan's public essays

Russia Falling Counter-Analysis: Steelman

This is a reactions piece to the fresh wave of Russia-doesn’t-fall-so-easily takes on the recent shift in perspective—using Money & Macro’s video Why Russia’s war economy is stronger than you think as the best-articulated version. It’s a steelman, then a stress test. For context, see my Oct 16 sustainment note, where I argued Russia just shifted from “gradually” to “suddenly” on structural strain. (Russia Losing Hearts & Minds (Plus the War))

TL;DR

The steelman says “no collapse.” I agree—and also say “that’s not the bar.” The bar is whether Russia can sustain a high-intensity war while its energy/logistics backbone is degraded and its fiscal room narrows. On that narrower, harsher test, the evidence keeps bending one way.

What the video argues (fair summary)

Bottom line (their view): Waiting for an economic collapse is a fantasy; only bigger Western support and smarter sanctions alter the trajectory.

Fit with my running analysis (quick read)

Broadly, their “Phase One” story is true—and it fooled a lot of forecasters. Where we diverge is what matters now:

My frame remains: no sudden macro “collapse,” but a tightening sustainment vise—fuel, finance, labor, and imports—accelerated by Ukrainian deep strikes and smarter enforcement.

Claim-by-claim: receipts, friction, verdicts

A) “Capital controls removed the run risk.”

Steelman: Correct. Controls + ad hoc decrees stopped a 2022-style RUB spiral and gave fiscal/FX time to breathe. (Reuters) Friction: That tool bought time by taxing the private economy: higher borrowing costs, weaker investment, dual-rate distortions. Russia still must import precision goods; sanctions raise prices/latency, and physical interdictions now layer on top. (EU/UK tightening on shadow fleet & energy; Reuters.) (Reuters) Verdict: True but incomplete. Controls avert classic BOP crises; they don’t fix import chokepoints or repair bombed assets.

B) “Low debt = no debt crisis.”

Steelman: Russia’s public debt/GDP is low by global standards; the state can lean on captive banks. Friction: When your policy rate hovers in the high teens and OFZ auctions clear near mid-teens, servicing costs spike—even on low debt. Moscow is now hiking VAT to 22% and widening 2025’s deficit to ~2.6%/GDP to keep up. (Reuters; Interfax.) (Reuters) Verdict: Directionally right, dynamically brittle. The burden is shifting from balance sheet to cash flow: high-rate carry, higher taxes, slower growth.

C) “War spend/GDP shows Russia has headroom.”

Steelman: On apples-to-apples, the chart is roughly right:

D) “Imports won’t be suddenly strangled.”

Steelman: Food and basic energy, agreed; China/India will keep trading. Friction: The fight is in high-value inputs (chips, optics, machine tools) and shipping insurance/tonnage. New UK/EU listings target the “shadow fleet” plumbing and raise costs/delay for every marginal barrel/part. (Reuters/EU packages.) (Reuters) Verdict: Volumes persist, costs creep up. “No blockade” ≠ “no squeeze.”

E) “Public can absorb the pain; polling says they’re fine.”

Steelman: Life-satisfaction/happiness indicators have printed records since 2023–25. (IntelliNews) Friction: Under wartime authoritarianism, who answers and how changes the data. Levada itself has written about measurement problems and self-censorship; refusal rates and preference-falsification rise as repression rises. (Levada methodology note.) (Levada Center) Verdict: Treat as a controlled signal, not ground truth. The same “lens of war” that lifts GDP also gags criticism.

F) “Phase Two tools (price/wage controls) remain unused.”

Steelman: True that the Kremlin still has levers. Friction: Using them admits the squeeze and worsens distortions: price caps beget shortages, rationing, and black markets—and they don’t rebuild a CDU unit at Kirishi. (Price-control deliberations; Kirishi outage.) (The Moscow Times) Verdict: It’s an option—at a cost. The more Moscow “manages,” the more productive capacity it sacrifices.

Does the counter-analysis change our thesis?

It sharpens it. The video is right that we shouldn’t sit around predicting a textbook macro collapse. Russia still has levers: capital controls, captive finance, taxation, and social coercion. But those levers are now countering real, compounding losses:

My verdict: the Money & Macro piece is the best version of the “Russia won’t just collapse” argument—and it’s largely right on first-order macro logic. Where it doesn’t land is the operational reality of a belligerent whose industrial base is now a battlefield. That’s the difference-maker between “sustainable churn” and “sustainment break.” Our window (late-2025 to mid-2026) stands, with higher confidence when refinery/port/gas-plant attrition persists and financing tightens. (Refinery strikes series; VAT/deficit/NWF prints.) (Reuters)

What to watch (one-week tests)