Russian Economist Dismissed After Cautioning on Moscow’s Economic Outlook

A leading Russian economist has been dismissed after publicly expressing concerns about Moscow’s faltering position in an economic “war of attrition” against the West. He forewarned of a potential social crisis, just as the European Union plans to intensify sanctions against Russia’s military and industrial sectors.

This situation transcends a simple reshuffling within the Kremlin. For the U.S. and its European partners, the critical question is whether sustained economic sanctions are beginning to limit Moscow’s capacity to maintain its military engagements or if Russia can endure the financial pressures while restoring its military resources.

Andrei Klepach, who served as the chief economist at the state development bank VEB.RF, was terminated following his statements highlighting Russia’s technological and economic decline and the increasing costs of its military actions in Ukraine. This information was disclosed by two sources familiar with the situation to Reuters on August 17.

The state-owned bank VEB confirmed Klepach’s departure but did not specify the reason. Klepach himself, who had been the chief economist since 2014 and previously spent ten years at Russia’s Economy Ministry, also acknowledged his firing.

“We are falling behind. We are losing both the technological and economic competition in the world,” Klepach said in a May speech to the Nikitsky Club, a forum of economists, academics and government officials. The remarks were delivered in May but did not draw attention in Russian media until last week.

“And we are losing it not only to China and the United States, in some ways we are losing it to Ukraine too,” he said, attributing Ukraine’s resilience in part to continued financial backing from the West.

“We will not win the competition in this war of attrition,” Klepach said. “We have the illusion that everything there [in Ukraine] will collapse. It has not collapsed and will not collapse. Our costs are mounting.”

Klepach acknowledged that Russia had proved resilient to Western sanctions but warned that Ukrainian attacks on energy and logistics infrastructure were creating additional economic pressure. Reuters noted that Russia’s central bank said in July that economic growth could fall as low as zero this year, while repeated Ukrainian strikes on Russian refineries and other facilities have caused supply disruptions and added to inflation risks.

“Economically we will not collapse, but our lag will continue to grow, with all the resulting consequences,” Klepach said, predicting that Russia could face a social crisis “precisely when nobody is particularly expecting it.”

A European intelligence source told News Media that Russia’s deeper economic problems should not be confused with immediate financial pressure on President Vladimir Putin. The source said higher oil prices had helped Moscow cover more of its budget deficit and could give the Kremlin additional time before economic constraints begin forcing difficult choices over the war. “It doesn’t solve the fundamental economic problems in Russia, but from a budgetary point of view, Putin is OK actually,” the source said. “He’s not under pressure.”

The source argued that this could delay expectations that deteriorating economic and budget conditions would eventually pressure Putin to end the war, potentially allowing Moscow to continue fighting “another spring” or “another season.” The assessment adds a counterpoint to Klepach’s warning: Russia may be losing ground economically over the longer term while still retaining enough near-term revenue to sustain its war effort.

The warning comes as the European Union prepares to intensify its economic pressure on Moscow.

EU foreign policy chief Kaja Kallas told Germany’s Die Welt that she plans to propose what she called the “most far-reaching sanctions listings since the start of the war.” Kallas said existing EU sanctions had deprived Russia’s war machine of more than $1.16 trillion, a figure presented by Kallas and reported by Reuters on Aug. 17.

EU diplomatic sources told Reuters that the bloc’s diplomatic service is expected to propose sanctions against approximately 1,600 additional Russian individuals and entities, with a particular focus on the country’s military-industrial complex.

The measures are expected to include asset freezes along with travel and transaction bans. Officials plan to present the list to EU governments in early September and aim for adoption in October.

Inside Russia, authorities also moved Monday against one of the country’s remaining prominent liberal opposition figures.

Lev Shlosberg, deputy chairman of the Yabloko party, was sentenced to 11 years and one month in a penal colony, independent Russian outlet Mediazona reported. Shlosberg was accused of “discrediting Russia’s armed forces and spreading false information” about them.

Shlosberg, who described the war during his trial as a catastrophe for Russia, maintained his innocence and said the case against him was political. He also repeated his call for a ceasefire. The sentencing came a week after Russia’s Supreme Court barred Yabloko from participating in next month’s parliamentary election.

Meanwhile, attacks continued through the weekend and into Monday.

Russian strikes targeted port infrastructure in Ukraine’s Izmail district in the Odesa region overnight, according to Ukrainian authorities. A separate strike damaged a civilian Togo-flagged vessel and injured four people. Across the border, a Ukrainian drone attack killed a woman and struck an industrial facility in Russia’s southern Astrakhan region, the regional governor said.

Separately, ArcelorMittal said a Russian missile strike on its Kryvyi Rih steel plant over the weekend killed two employees and injured three employees and contractors, damaging major energy and blast-furnace facilities and partially halting production.