russia’s Regional Agony: The War Has Devoured What Sanctions Failed to Destroy

The rf’s consumer market keeps declining. Official inflation in March stood at 5.9%. Real inflation, adjusted for seasonal fluctuations, is already at 6%. Services are becoming by 8.8% more expensive, non-food goods are higher by 6% compared to 4.6% in February.

Food prices have fallen slightly – but only because closed dining establishments are no longer driving demand. Restaurants and cafes are cutting back their chains in moscow and in regions simultaneously. Consumers who have stopped going to restaurants have not switched to cheaper street fast food – that sector is also in crisis.

Tax reform has shifted small businesses from a simplified system to the general system with mandatory VAT payments, the tax burden has risen sharply. Those who couldn’t survive have closed down; those who remained have raised prices and are gradually losing customers.

The industrial picture is even bleaker. State-contracted enterprises – weapons, drones, frontline infrastructure – are operating at full capacity. The rest of civilian production is losing ground. There have been no mass layoffs yet, but delayed wages, cut bonuses, and part-time work have become common practice. The result is absurd: unemployment stands at 2.1%, the lowest rate in history, while real incomes and consumer confidence are falling. Demand is shrinking, but spending isn’t decreasing.

The regional picture varies, but every region has its own reasons for the decline. The volga-vyatka macroregion (home to tatarstan’s “alabuga” and dozens of military plants) is recording the highest inflation rate in the country – 8.2%. The defense industry is driving up wages, and with them – prices for everyone else.

The Far North of the rf is suffering from a collapse in cargo turnover at ports: “unscheduled repair work” at terminals in leningrad region is redirecting cargo to murmansk. However, the Northern Sea Route exists as an alternative only on paper; in reality, it operates for just a few months a year and handles negligible volumes of cargo.

The South looks promising only in the expectations of local entrepreneurs, but the numbers are not convincing: industrial production has fallen by 10.7% since the beginning of the year, housing completions have plummeted by 36.3%. The tourist season is under threat: anapa is facing another oil spill this summer, the temporarily occupied Crimea is dangerous, and Sochi is more expensive than Türkiye.

The only thing that remains stable across the country is state funding for the war. Regions with defense industries are holding on. The rest are steadily sliding downhill, and the planning horizon for most entrepreneurs has narrowed to a single goal: to survive longer than the neighbor.