When No One Wins

A year into Putin’s war, the economic toll on Ukraine is obvious. But Russia is equally at risk

- Leonid Bershidsky

When a large country attacks a smaller, poorer one—with about a quarter its population and one-ninth its economic output—it’s not unreasonable to expect some manageable financial strain for the aggressor and catastrophic devastation for the victim. A year into Russia’s war in Ukraine, the economic fallout could indeed be described in those terms: Much of Ukraine has been reduced to rubble, with millions of citizens huddled in the cold and dark, while life in Russia, if you’re not a soldier on the front lines, remains fairly comfortable.

But as the war enters its second year, it’s becoming clear that the cost to both sides will turn out to be intolerably high. There’s no outcome that looks good for anybody, and the longer the conflict lasts, the higher the economic toll will climb.

Russia’s onslaught has obviously crippled Ukraine, and it’s unclear what it will take for the country to recover in our lifetime. Gross domestic product fell more than 30% in 2022, the steepest decline since Ukraine gained independence three decades ago. Last year’s budget deficit of almost 27% of GDP was plugged with foreign aid and debt that will almost certainly have to be restructured. Inflation officially hit 20%, but in reality it likely exceeded 30%. For poorer Ukrainians, it surely felt even worse. Prices for vegetables, for instance, have risen 85% as Kherson, the country’s biggest vegetable producer, has been the scene of heavy fighting, and much of the region remains occupied.