Filenews 7 October 2025
By David Kirichenko
Russia's war in Ukraine has become a tough test of endurance, and Vladimir Putin is struggling to sustain his wartime economic powers. What many expected to be a quick victory has turned into a costly, exhausting war, with Moscow unable to break through the Ukrainian "drone wall".
Ukraine is trying to paralyze Russian refineries while accelerating domestic production of drones and missiles — innovations that exacerbate the problems facing the Kremlin.
Ljuba Sipovic, CEO of Dignitas Ukraine, which works with the Ukrainian military in advanced technologies, said that AI-powered targeting systems are particularly effective when used far from the front lines of war: "Near the battlefield there is a greater risk of confusing hostile - and non-hostile - targets. Away from the front, there is no such problem."
Anatoly Tkachenko, unit commander of Ukraine's 92nd Assault Brigade, told me: "The USSR defeated Germany in four years. The Russians in four years managed to occupy only half of the Donetsk region." Russia's answer to all of this is money: oil revenues converted into soldiers' salaries.
Oil money "buys" soldiers
To continue the war, the Kremlin relied on oil and gas revenues to fund soldiers' salaries and reparations to the families of the dead and wounded.
The Washington Post reports that in Moscow, the enlistment bonus in the army can reach $28,000, with a monthly salary starting at $3,200, plus bonuses for frontline service and confiscated equipment. Recent estimates by Re: Russia, a research platform run by exiled Russian academics, show that personnel costs alone reached a record 2 trillion. rubles ($25.6 billion) in the first half of 2025, almost 10% of the Russian Federation's total spending.
Russian economist Vladislav Inozemtsev speaks of "deathonomics", noting that in Russia's poorest regions, a man killed after a year at the front can leave his family up to $150,000, more than he would have earned in his entire life. At the same time, the war economy has created a new middle class in Russia's industrial areas, fuelled by soldiers' salaries, compensation for the dead and wounded, and wage increases in defense factories. For many, peace would mean a return to poverty, creating a perverse incentive to continue the war.
Oleksandra Ustinova, a member of the Ukrainian parliament, told me: "We cannot compete with Russia in manpower." Moscow values revenue more than human life. That is why Kiev has invested in building long-range drones, hitting refineries and energy infrastructure that finance Russian military operations.
"Ukraine is gradually developing this deterrent capability, which it will need in the future as well," notes Volodymyr Dubovik, director of the Center for International Studies at Odessa National Metchnikov University.
Ukrainian drones say "no" to oil
In August, fuel prices in Russia reached historic highs, and by September the shortage of gasoline (about 400,000 tons) forced many gas stations to close, especially the smallest independent stations that could not raise prices. In occupied Crimea, half of the gas stations have closed. Russia is now losing about 720 million euros in revenue. per month from fuel, as Ukrainian attacks have reduced diesel and gasoline exports by about 30%.
"The most effective sanctions – the ones that work the fastest – are the fires in Russian refineries, terminals and oil depots. We have significantly curtailed the Russian oil industry, and this significantly limits war activities," Volodymyr Zelensky commented in a speech on the evening of September 12. Ukrainian drone attacks are not only hitting refineries on the ground, but are also reshaping the war from the air.
Decoy drones are an important tool that "clear" the air defense corridors for long-range drones to penetrate. "It's possible that we'll see decoy drones take on a bigger role in the war," explains Samuel Bendet, a researcher at the Center for a New American Security.
Kiev has even turned Su-27 fighter jets into deceptive target launchers, armed with U.S. MALD missiles, forcing Russia to waste millions of dollars on interceptor missiles for fake targets. "Both Russia and Ukraine are using deceptive targets in their operations, demonstrating how effective they are at fooling air defense systems," points out Olena Krizanivska, a defense analyst and author of Ukraine's Arms Monitor newsletter. "According to reports, about 30% of the drones used by Ukraine are misleading."
In May, satellite images revealed that Russia resorted to deploying deceptive targets in the Far East. As Europe has discovered with Russian drone intrusions into its airspace, it is not economically viable to use expensive air defense missiles against cheap drones, especially when many of them are simply misleading.
"Ukraine, forced to adapt to survive, is now a leading power in defense technology. No other country has developed such a comprehensive innovation ecosystem on the battlefield," notes Deborah Fairlab, co-founder of Green Flag Ventures, whose activities focus on Ukraine.
These innovations and asymmetric tactics have enhanced the effectiveness of Ukrainian drone attacks against the Russian oil industry.
BBC data shows that since January, 21 of Russia's 38 largest refineries have been attacked. In 2025, successful Ukrainian attacks have increased by 48% compared to 2024.
The Russian news agency RBC reports that about 40% of Russian refining capacity is out of service. 70% of outages are due to drones, while Kommersant noted that in September alone, gasoline production fell by 1 million tons, causing the domestic market to run a deficit of 20%. According to political scientist Alexander Motyl, the impact goes far beyond the lack of gasoline: "Less oil means less money."
Motyl argues that Russia will find it difficult to pay its soldiers based on the contracts they have signed, as revenues shrink. This may explain why the Kremlin resorts to cheaper foreign mercenaries from Africa and Cuba. This economic pressure is no longer limited to the Kremlin's war budget. It also extends to the daily lives of ordinary Russian citizens.
Russian citizens feel pressure
Russia's war machine is facing budgetary constraints. For the first time since the start of the invasion of Ukraine, Moscow's military budget is projected to be reduced in 2026, from $163 billion to about $156 billion. dollars. According to Ukrinform, the spending cuts will affect 18 of the 51 federal programs, saving the Kremlin more than 207 billion rubles ($2.2 billion). At the same time, Ukrainian drone attacks on Russian refineries are undermining the oil revenues that Moscow relies on to pay soldiers and finance the war.
Even public transport is being sacrificed, with funding for new buses and trolleybuses falling by a third, even though about 50% of the fleet has exceeded its "life expectancy", showing how social needs are being degraded to finance the war.
"As long as Russia can export oil, mainly to China and India, revenues will decrease but will not dry up," said Ilona Sologub, an economist and editor at Vox Ukraine.
Within the country, higher fuel prices have an impact on the entire economy, driving up the cost of both consumer goods and military supplies. "This will force the central bank to raise interest rates," Solongub added, "creating pressure on the banking sector and increasing the cost of loans." This economic pressure shows why Ukraine's leaders view strikes at refineries as one of the most effective tools for weakening Moscow's war machine.
Alexander Colliand, a researcher at the Center for European Policy Analysis, noted: "As economic growth slows down and revenues fall, Moscow will no longer be able to support the fiscal stimulus that fuelled the economy in the recent past, but will adopt austerity measures that threaten to further strangle the economy."
Russia's central bank has so far kept the Russian economy in check, but the ongoing war is creating problems for the private sector. Huge spending on the war and trying to tame inflation have pushed interest rates to 17%, hurting the private sector.
According to the Moscow Times, the Kremlin plans to increase VAT by 2% in 2026, while a 5% increase in the tax on gambling winnings has been proposed.
With fuel prices having jumped 50% since January, Russian citizens are being asked to pay "the sad one". Mortgage arrears increased by 7% in a month and by 120% compared to the previous year, according to data from Ukrainian analyst Yevhen Istrebin.
The Kyiv Independent newspaper stressed that inflation is one of the main problems of Russians, with prosecutors investigating over 400 cases of food price increases in 2025 and sending warning messages to more than 5.000 companies. Authorities are trying to cap prices on commodities such as vegetables, dairy and poultry as food and services continue to push inflation well above the central bank's target. History shows that the economic pressure of Russian citizens in wartime rarely ends well for the Kremlin.
As political science professor Taras Kazio pointed out to me: "It is wishful thinking that the Russians will suddenly say 'enough' and stop fighting, as they did in 1917. They have been fighting for money and because they have been fed with anti-Ukrainian and anti-Western propaganda for three decades."
Pressure on the Russian state may intensify soon. With Washington now approving the exchange of information to direct attacks at greater depth in Russia, Ukraine's drones and missiles are becoming increasingly deadly. If the US supplies Kyiv with Tomahawk missiles with a range of up to 2.500 kilometers, Kremlin leaders, as Zelensky warned, "will have to find out where the shelters are".
As Ukraine cuts Russia's oil revenues, Moscow may soon find itself in a difficult position to meet the payments of its statesmen on whom it relies to continue the war. At the very least, it seems that the Kremlin will not be able to continue its attacks with the same intensity as in the early years. Over time, as Ukraine strengthens its technological shield, it will become increasingly difficult for Moscow to achieve its war goals.
