The Russian military machine, amidst the ongoing war in Ukraine, is facing pressure due to tightening sanctions and falling revenues. Even businesses in regions that have benefited from a significant increase in military spending are struggling and appealing to officials for help. This is reported by UNN with reference to Bloomberg.
Details
In the Nizhny Novgorod region, which has been an important industrial center since Soviet times with large defense factories and an automobile plant, the economic situation is causing "serious concern." In particular, the local association of industrialists, in a letter to a senior regional official this month, outlined a whole list of problems faced by enterprises. It highlights a sharp decline in investment, profit, orders, and production over the past year.
This region, with a population of about 3 million people, is located approximately 500 kilometers (310 miles) east of Moscow. Members of the association urged local authorities to convey their concerns to the Russian government.
They also called for a resumption of investment, the return of preferential loan rates, and faster payment of bills, indicating that giant state-owned enterprises such as the United Shipbuilding Corporation, Roscosmos, Rosatom, and Rostec were among the main culprits of overdue payments.
Payment delays can indicate widespread financial difficulties, as contractors are forced to deplete their reserves to cover current expenses or resort to expensive loans, further reducing profitability. And this is despite the fact that government defense spending increased by approximately 30% last year and is projected to remain virtually unchanged in 2026.
In addition, almost all 80 regions of Russia are facing budget deficits, which will force them to become even more dependent on Kremlin funding. At the same time, Moscow is prioritizing spending on the full-scale war against Ukraine, which is now in its fifth year.
Also, the cumulative deficit of regional budgets increased last year by more than 1 trillion rubles to 1.48 trillion rubles, which is more than three times the deficit in 2024.
Recall
The Russian economy is entering a phase where official statistics no longer hide the scale of problems, losing its ability to generate profits in traditionally strong sectors. The net profit of enterprises for the first eight months of 2025 decreased by 8.3%, and the share of problem borrowers among legal entities reached 23%.