A "turbocharged" Russian defence industry is "at the expense" of the country's civilian economic sector", it is believed, as "significant" challenges could seriously compromise Vladimir Putin's ability to wage his war in Ukraine. The United States Office of the Director of National Intelligence's (ODNI) 2025 Annual Threat Assessment concluded that the country's economy is facing woes as Putin continues to try to "balance resource allocation between defense industrial production and civilian sectors". US European Command Commander and NATO Supreme Allied Commander Europe General Christopher Cavoli said yesterday that the war in Ukraine has "distorted" the Russian economy and "turbocharged" its defence industry.

This "imbalance" may be difficult for Putin to "unwind", the Institute for the Study of War (ISW) wrote in its daily report of the conflict. Experts said previously that Russia's ongoing and forecasted economic struggles are closely tied to Russian losses on the battlefield. Therefore, it is "not possible for the United States or the wider West to exert maximum pressure on Russia with economic tools alone".

Experts reccomended that US officials "leverage Russian vulnerabilities and achieve a stronger negotiating position by continuing — or increasing — military aid to Ukraine such that Ukrainian forces can continue to inflict significant manpower and materiel losses on Russia".

It comes after the Russian Central Bank decided in December to maintain the interest rate at 21%, the highest since 2003, as part of efforts to curb growing inflation.

Putin signed a decree on April 1 to raise salaries for Russian governors starting January 2026, aligning the pay with that of the country's deputy prime ministers.

This boost is described as "delayed", and "likely seeks to further secure loyalty" from regional leaders amid the "continued uncertainty" about Russia’s future, in particular, the country's "sustained war efforts and the Russian economy’s macroeconomic health", the ISW said.

Experts have also highlighted that Putin approved a list of instructions for the Russian government and the Defenders of the Fatherland Foundation aimed at increasing social benefits to veterans on March 10, which will "likely put further strain on the Russian budget and economy".

In addition, the ISW "continues to assess that increased military spending, including large payments and benefits to Russian servicemembers, is hurting the Russian economy at the macro level and that the Kremlin is reducing this spending on military personnel as part of efforts to mitigate the impacts of such initiatives".

It added: "Russian authorities are unlikely to sustain such high financial incentives as part of their recruitment drives in the medium- and long-term as the Russian economy continues to decline."