In a New York Times op-ed on Wednesday, Foreign Minister Maria Malmer Stenergard cautioned the West against overestimating Russia and said the economy is more fragile than it appears.

While Russia has claimed GDP expanded by about 13% between 2020 and 2024, Sweden’s analysis of nighttime luminosity suggests the economy actually shrank by 8% during that span.

Moscow has also lowballed inflation substantially, according to Stenergard, who pointed out that Russia’s official inflation figure in 2024 was 10% while the central bank hiked interest rates to 21% that year.

Similarly, Sweden’s military intelligence chief has estimated that today’s inflation is likely closer to the current benchmark borrowing cost of 15% than the government’s official reading of 5.2%.

“This would mean Russia is overstating its purchasing power, and that its military spending capacity is weaker than it appears,” Stenergard wrote.

The U.S.-Israeli war on Iran has given Russia a bit of relief by sending oil prices higher and loosening sanctions—allowing the Kremlin to generate more revenue.

But Swedish intelligence believes Russia would need the average price for Urals oil to stay above $100 a barrel for the rest of the year to provide a meaningful benefit to the government’s finances, Stenergard said. Last week, the average Urals price hit $94.87 a barrel, the highest since 2023.

If the U.S. and Iran reach a ceasefire agreement that reopens the Strait of Hormuz and lifts sanctions on Iranian oil, then global crude prices will plummet.

At the same time, more advanced Ukrainian drones with longer ranges have evaded air defenses and attacked Russian oil export terminals, limiting the gains from higher oil prices.

“Not everyone agrees with Sweden’s assessment of Russia’s reporting on its economy, but there is growing agreement about the economy’s general fragility,” Stenergard added. “Inside the country, elites are increasingly alarmed.”

Even Russian President Vladimir Putin has admitted that the economy contracted early this year, while think tanks, bankers, and officials close to the Kremlin have been warning for months that a financial crisis is on the horizon.

Meanwhile, Ukraine has been making battlefield gains in recent months and has inflicted 1.2 million casualties on Russia since the war started, with new recruits increasingly difficult to find.

Stenergard highlighted Russia’s precarious condition to argue for tighter sanctions on its energy sector, namely a ban on providing maritime services, such as insurance, access to ports, and financing. 

“Russia’s economy, in nominal terms, is barely bigger than the State of New York’s, smaller than that of Texas and fragile,” she said. “Russian households are feeling the pinch of daily expenses, and the lion’s share of the liquid assets in the country’s national wealth fund — its financial buffer — has been drained to finance the war.”

In fact, a survey from Russia’s state-owned pollster showed Putin’s approval rate has fallen to 65.6% from 77.8% at the start of the year and prewar levels well above 80%.

That’s as ordinary Russians have become so fed up with inflation and disruptions to daily life, like a strict internet ban, that they are even vocalizing their dissatisfaction.

More businesses are also defaulting, and Russian cities far from the frontlines are being hit by Ukrainian drones, with one near the Black Sea suffering from toxic rain after an oil refinery was struck.

Inflationary pressures will persist for years amid a demographic downturn, military mobilizations, and the high demand for labor in the defense industry.

Russia’s government has estimated the workforce will need 3.1 million more workers by 2030, according to Interfax. And in the next five years, the total shortfall will hit 11 million jobs when including a ramp-up in retirement.

A former senior official in the Kremlin wrote in the Economist this month that the country is fed up with Putin, including elites who are chafing under all the state seizures of their assets.

“The irony is that Mr. Putin started the war to preserve power and the system he has created,” the former official said. “Now, for the first time since the conflict began, Russians are starting to imagine a future without him.”