Russia’s Vladimir Putin will address a flagship investment forum in Saint Petersburg on Friday, as the war in Ukraine drags the economy into stagnation and days after brazen Ukrainian drone strikes rocked his home city.
Russia’s offensive has led to rising prices, tax hikes, two-decade-high borrowing costs, business shutdowns and labour shortages, putting the economy in its trickiest spot since the start of the war in 2022.
Meanwhile, intensifying Ukrainian attacks on Russia’s vital energy infrastructure, oil depots, refineries, and exporting hubs are threatening to dent Moscow’s most important income stream.
In a highly symbolic strike, one attack hit a facility in Saint Petersburg as the conference opened on Wednesday, with arriving dignitaries greeted by a plume of black smoke in the background.
“The Russian economy is entering a stagnation, with high interest rates and high inflationary pressure,” Alexander Kolyandr, a London-based Russian economy expert, said on the eve of Putin’s speech.
“I don’t see the Russian economy entering the 1990s or something similar; it’s just a slow degradation of everything,” he added.
Russia’s GDP contracted by 0.2 per cent in the first three months of the year, according to official statistics, the first quarterly slump in three years.
And the government posted an $80 billion budget deficit in the first four months of 2026, equivalent to 2.5 per cent of annual GDP and more than was planned for the entire year.
The Saint Petersburg International Economic Forum (SPIEF) was once dubbed ‘Russia’s .’vos’.
Western investors keen to make a buck in Russia’s chaotic and fast-growing economy would gather to strike deals and hobnob with the Russian elite in the early years of Putin’s rule.
But since the assault on Ukraine, the forum has become a marker of the ex-KGB spy’s new place in the world.
Drones and machine guns are now on display.
Guests from the likes of China and Saudi Arabia are now the top attendees. Americans and Europeans are scarce.
Their slimmed-down ranks are led by figures such as former Hollywood actor turned Putin backer Steven Seagal, American conspiracy theorist Candace Owens, and MPs from the right-wing Alternative for Germany party.
Putin has previously used the event to insist the state can handle the billions being pumped into the military campaign, bash Western sanctions as a form of self-harm and insist that life at home will remain stable.
But recently, many Russians say life has become more expensive, as the economic costs of the war spread.
Asked by AFP about Russia’s economic woes, the Russian leader on Thursday channelled Mark Twain.
“Rumours of my death have been greatly exaggerated,” he said, as he rejected the idea that Russia was on the brink of a full-blown crisis.
Far away from where Putin will take to the stage on Friday, some small and medium businesses told AFP they were facing closure.
“Basically, we’re planning to shut down,” Svetlana, the owner of a maternity and kids brand in the Far East city of Khabarovsk, said.
“People are having fewer kids, tightening their belts; the costs are rising,” the 40-year-old said over the phone.
Internet blackouts, imposed by authorities as a means of thwarting Ukrainian retaliatory drone strikes, mean her card payment terminal is often out of service.
“We are going back to life 18 years ago, when there was no internet or social media,” she said.
“I’m tired of worrying about fines because of the new laws and the endless stream of new requirements that keep popping up,” she added.
Vera, a 42-year-old beauty salon owner in the Moscow region, said her supplies have ‘doubled in price’ since 2026.
But after surviving a near collapse in 2022, she is confident she can get through this.
“These difficulties are just unpleasantries,” she further said.
