Podcast Summary

The Indicator from Planet Money

Episode: Why hasn't the Russian economy collapsed?
Date: March 24, 2026
Hosts: Waylon Wong & Paddy Hirsch
Guests: Alina Rybakova (Peterson Institute), Timothy Ash (Chatham House), Vladislav Innozemtsev (Center for Analysis and Strategies in Europe)
Duration: ~10 minutes

Episode Overview

In this episode, the hosts explore the surprising resilience of Russia’s economy despite heavy international sanctions, ballooning war costs, and mounting debt following its 2022 invasion of Ukraine. Through expert interviews, they unpack the six main reasons Russia’s economy continues to function and introduce the chilling concept of "shmertonomica"—or death economics—underscoring the war's impact on Russian society and economic policy.

Key Discussion Points and Insights

1. Russia’s Essential Commodities

• Russia’s Role as a Commodity Exporter
  • Despite sanctions, Russia remains a vital supplier of oil, gas, metals, and fertilizers the world still relies on.
  • Alina Rybakova [02:39]: “We still consume sufficient number of energy, oil, gas and also some metals and mining, and we use it for fertilizers as well, that the global economy still needs.”
  • Oil remains Russia’s top earner, making it difficult for global sanctions to fully cut off revenue.

2. Ineffective, Slow Sanctions

• Sanction Gaps and Evasion
  • Sanctions were slow, predictable, and have loopholes Russia has exploited.
  • Timothy Ash [03:17]: “We haven't done enough. We've been too slow, we've been too well telegraphed. We've given the Russians lots of time to figure out ways to get around sanctions.”
  • Western enforcement is weak: no prosecutions or significant penalties, even for nations and companies that circumvent restrictions.

3. Pivot to China and Alternative Trade Partners

• China’s Role as an Economic Lifeline
  • China is now Russia’s largest trading partner, buying key exports and supplying goods.
  • Alina Rybakova [03:36]: “After oil, that's the most important pillar propping up Russia's war economy. China provides direct military support to Russia and also by providing some of the consumer goods, it frees up Russian industry to focus again on the military output.”
  • Russia has developed dependency on China, but it’s mutually beneficial in the short term as other countries quietly follow China's lead.

4. Preemptive Economic Planning & Buffering

• Putin’s Economic War Chest
  • Russia had already built up robust financial buffers—managing tight fiscal and monetary policies, reducing vulnerabilities, and stockpiling reserves—since the annexation of Crimea in 2014.
  • Timothy Ash [05:01]: “There was a lot of durability and buffers built in. Right at the outset. You saw very cautious economic policy from Russia, tight fiscal policy, tight monetary policy, deleveraging, reducing vulnerabilities and building up buffers.”
  • Forced sales of foreign assets to Russian buyers consolidated state and elite control, and losses for foreign investors topped $170 billion.
  • Alina Rybakova [05:34]: “The Kyiv School of economics estimated in March 25 last year that foreign businesses suffered over $170 billion in direct losses.”

5. Creation of a Loyal Elite

• New Loyalists in Business
  • Kremlin policies have given rise to a new, fiercely loyal business elite—a “new, even more loyal class of wealthy people”—whose fortunes depend on their support for Putin.
  • Paddy Hirsch [06:04]: “Putin has built a network of near fanatical supporters in the business classes, a new breed of almost oligarchs who owe everything to the president and who will go along with the president no matter what he does to the economy.”
  • This loyalty is rational: so long as the war and sanctions persist, their profit is tied to Putin’s regime.

6. "Shmertonomica" (Death Economics) and Social Quieting

• Direct Military Payments & Social Engineering
  • Following unpopular mobilizations, the Russian government offered massive financial incentives:
    • Soldier pay 6x prewar (2022) rates
    • $20-40,000 signing bonuses
    • $130-180,000 death benefits
  • Vladislav Innozemtsev [07:55]: “If someone aged around 35 years old, getting medium wage, enlists into the army, fights in Ukraine for around one year, and is killed on the front line. His relatives will get more money in cash that he would be able to earn till the rest of his life.”
  • Banks forgive up to $120,000 in debts for recruits—spread without corruption, instantly boosting poor regions.
  • Vladislav Innozemtsev [08:48]: “It's kind of a helicopter money. And therefore actually is the best way... because no one steals it. There is no corruption, there is no mismanagement, because most of the people who sign up for these benefits are poor and desperate and come from deprived regions.”
  • This has created a macabre Keynesian stimulus that buoys poorer areas, moving recruitment from forced to eager—marginalizing war’s impact among elites and silencing dissent.
  • Vladislav Innozemtsev [09:31]: “So when I'm asking why the Russians do not protest because they don't care, why should they care if they are not affected by the danger of mobilization? And this is the most important thing, it keeps the society quiet and allows Putin to do what he wants.”

The Consequences: A Mortgage on the Future

• The war economy props up growth now but at immense future cost:
  • Massive government debts
  • Loss of workforce
  • Degradation of economic sectors
  • Up to half of the government budget now goes to "defence"
• Paddy Hirsch [09:49]: “Russia's been mortgaging its future to keep its economy rolling. But eventually the debt will have to be paid.”

Notable Quotes & Memorable Moments

• Timothy Ash on sanctions' flaws:
  • [02:57]: “Sort of sanctions have been, you know, we’ve just not been very clever. That’s the reality.”
• Alina Rybakova on war dividends for loyalists:
  • [05:56]: “To give them something, and in order to give something, you need to take something.”
• Vladislav Innozemtsev on societal resignation:
  • [09:31]: “When I'm asking why the Russians do not protest because they don't care, why should they care if they are not affected by the danger of mobilization?”

Timestamps for Key Segments

• [02:05] — The real state of the Russian economy: war costs, growth, and debt
• [02:25] — The export engine: Russia’s irreplaceable commodities
• [02:57] — How Western sanctions fell short
• [03:36] — China’s pivotal role and the new trade routes
• [04:42] — Early shocks and Russia’s pre-planned buffers
• [05:45] — Foreign asset seizures and the rise of a loyal economic elite
• [06:44] — Social consolidation: how incentives quieted unrest
• [07:30] — “Shmertonomica”: military payments and their economic impact
• [08:48] — Debt forgiveness and its role in poor regions
• [09:13] — How war economics polarizes Russian society
• [09:49] — The looming reckoning and long-term costs

Summary

This episode gives a concise yet deep look at the surprising stamina of Russia’s war economy. By unpacking export reliance, the shortcomings of sanctions, Russia’s pivot to China, shrewd prewar planning, elite co-option, and large-scale militarized spending, the hosts paint a picture of an economy in survival mode—defying collapse for now, but with haunting implications for the future. The concept of “shmertonomica” stands out as a vivid and unsettling explanation for how the war is fueling short-term resilience but deepening fractures within Russian society.