Russia fires economist over Ukraine war warning

The chief economist at one of Russia’s largest state-run financial institutions has been fired after reportedly warning the country would lose a “war of attrition” against Ukraine and the conflict’s economic toll would trigger a major crisis.

Andrei Klepach, a former deputy economy minister, was dismissed from his job at state development company VEB on Sunday after comments he made earlier this year were reported in Russian-language media.

Klepach’s firing came after “a call from up high” to Igor Shuvalov, the former top economic aide to President Vladimir Putin, according to exiled independent Russian outlet The Bell, which first reported the news.

The move indicates the Kremlin has zero tolerance for dissent among its elites as Putin’s invasion of Ukraine drags on into its fifth year. Though many of Russia’s top business people, economic officials and economists are critical of the war in private, only a handful have spoken out against the conflict or left their jobs.

Klepach’s remarks at a conference in May, reported by the Moscow Times on Friday and widely cited in Russian media, were unusually frank for a prominent figure speaking in public but echoed concerns by the elite that have been widespread since the war’s early months in 2022.

“We are falling behind. We are losing technological and economic competition in the world [ . . . ] not just to China and the US, but in some respects Ukraine,” Klepach said. “We won’t win the competition in this war of attrition. We are under the illusion that everything over there will collapse. It hasn’t and it won’t. Our costs are growing.”

Klepach said Russia’s economy had begun to contract this year after a war-driven boom in 2023 and 2024 gave way to sharp cuts in investment and an industrial recession, which he partly blamed on the central bank’s high interest rates.

The war in Ukraine “has already gone on for longer than [the second world war] and there’s no end in sight for now”, Klepach said. “Both sides are intensifying their strikes, including on each other’s economy. Our losses from the Ukrainian armed forces’ strikes on our port, oil and gas, chemical, and logistical infrastructure are growing, and they’re already becoming a noticeable macroeconomic barrier to Russian economic growth.”

Klepach said the economic woes and tougher western sanctions would lead to a “social crisis [ . . . ] when nobody expects it”, likening it to the Russian Revolution of 1917 and the collapse of the Soviet Union in 1991.

“I believe Russia won’t collapse but I am almost certain we will have a social crisis,” he said. “Our economy won’t crash, but our backwardness will intensify with all the ensuing consequences.”

The pessimism has grown further recently as Ukraine’s drone strikes and the Kremlin’s ballooning expenditure on the war have continued to damage Russia’s economy.

The Kremlin’s budget for the first seven months of this year ran a deficit of Rbs6.5tn ($76.5bn), equivalent to 2.8 per cent of GDP and close to double the planned deficit of Rbs3.8tn.

The growing hole in Russia’s state coffers has come from additional spending to fund the military, which the finance ministry has estimated could outstrip its own plans by as much as Rbs4tn.