Key Kremlin state bank predicts Russia will lose war of attrition with Ukraine

Andrei Klepach, chief economist at VEB RF (previously known as Vnesheconombank, Bank for Foreign Economic Affairs), a major Russian state-owned bank, has said that Russia will not be able to win a war of attrition against Ukraine backed by the West and is inevitably heading towards a major social crisis.

Source: The Moscow Times, citing remarks made by Klepach during a session of the Nikitsky Club, a Russian interdisciplinary discussion club of academics and entrepreneurs

Details: Klepach said the Russian economy is suffering mounting losses from Western sanctions and Ukrainian strikes on ports, infrastructure, chemical plants and oil refineries. He acknowledged that Russia is losing the technological and economic competition not only to the US and China but, in some respects, to Ukraine as well.

Quote from Klepach: "We are falling behind. We are losing both technological and economic competition globally. And, as I have already said, we are losing it not only to China and the US; in some respects, we are losing it to Ukraine.

Ukraine's economy has, of course, been partly destroyed, and there is a demographic catastrophe. But, again, the Ukrainian economy is surviving despite everything. Of course, it receives enormous financial assistance… With that level of support, their military spending and their own expenditure amount to almost 50% of our budget.

We will not win this competition in a war of attrition. We have this illusion that everything over there will collapse. It hasn't collapsed, and it won't."

Details: Klepach noted that after a period of rapid economic growth in 2023-2024, driven largely by increased government military spending and investment in the defence industry, the Russian economy went into decline in 2026. Investment activity fell sharply, while a number of civilian industrial sectors entered recession, ranging from aircraft manufacturing and construction materials to light industry and food production.

He also highlighted the impact of tighter US sanctions imposed in late 2025. He said the restrictions had led India and China to reduce their purchases of Russian oil, "despite all their repeated statements that they do not comply with sanctions".

Klepach ultimately predicted an inevitable social crisis in Russia, comparing the potential upheaval to the February Revolution of 1917 and the collapse of the Soviet Union in 1991. In his view, the crisis will come when no one expects it, while Russia's technological gap with the rest of the world will continue to widen.

"The situation in the Soviet Union in 1991 – we had been heading towards it slowly and consistently, and everyone understood that we were heading towards a crisis, but there was no fatal inevitability that the Soviet Union would collapse," Klepach said.

"I believe Russia will not fall apart, but I am almost certain that we will face a social crisis," he concluded.

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