The war in Ukraine has done enormous economic damage to both Ukraine and Russia. Ukrainian GDP declined 30 percent in 2022 while Russia’s declined about three percent. Russia was hit hard by economic sanctions in 2014 for taking Crimea and parts of eastern Ukraine, and sanctions for its 2022 invasion made it even more isolated from the global economy. Russia’s only arms imports now come from equally poor North Korea (artillery ammo) and Iran (cheap Shahed 131/136 cruise missiles). Payment is by barter. North Korea gets badly needed food and oil supplies while Iran receives modern jet fighters and other military tech. China and India help with the funding by purchasing heavily discounted Russian oil and natural gas.
Recently Western sanctions were expanded, blocking Russia from obtaining a lot of industrial equipment for factories or establishing new ones. Russia now has a more difficult time obtaining machine tools and components needed be used to build weapons. These include motors and other components for UAVs, including lithium-ion batteries that power most UAVS. Many of these banned components for weapons are also used in non-military items. These are called dual use items, and the new sanctions ban them as well because this is how you guarantee no supplies of items that can be used to build weapons. This includes complex systems like missiles, which require specific chemicals needed to fabricate the solid-fuel motors used.
There are alternative sources for sanctioned items, but the cost is higher, delivery takes longer, and regular deliveries are not guaranteed. Using smugglers to deal with sanctions is expensive but Russia must pay to keep essential war-time industries going.
Dealing with sanctions also requires a lot of money and Russian government debt is more expensive to raise because of higher interest rates for what lenders call high risk of default debt. That has forced Russia to be selective in what military equipment it purchases. For example, the government won’t buy many new rifles for their combat troops because there are still lots of older weapons in storage. That does not always work as it should because many of these old rifles were so poorly maintained that they were often obviously rusty and barely operational. The newly mobilized troops complain but the federal government recognizes that most of these poorly trained and equipped soldiers won’t last long in combat. Local governments of places many of the new troops come from suffer most of the blowback for this and often organize efforts to raise money locally to buy new weapons and other equipment for the local men now in the army.
Foreign suppliers are few and provide low quality weapons. This includes Iranian propeller-driven small UAVs armed to perform as slow-moving cruise missiles. Then there are cheap and often elderly North Korean 152mm artillery shells needed to keep the fighting going. The Iranian missiles are not as useful as predicted because the Ukrainians now shoot down nearly all of them. There is still damage, because the wreckage of the downed missiles often still has its explosives on board, and these frequently go off when they hit the ground. If Russia uses a lot of cruise missiles in an attack, more will be downed inside an urban area, where the wreckage does some damage to the Ukrainian infrastructure.
Russia’s enormous prewar artillery munitions stocks are now depleted, while its production facilities are unable to expand. Before 1991 a lot of Soviet era 122m and 152mm ammunition was produced outside post-1991 Russia. That includes Ukraine, Belarus and other countries that have halted production and dismantled production facilities. Russia was not expecting a long war in Ukraine and did not have the artillery munitions available to fire all their shells their available guns sent to Ukraine. On the front lines Ukrainian troops have noted much fewer Russian shells fired at them. Ukrainian artillery, a combination of old 152mm and new 155mm guns, use more effective tactics than the Russians.
Russia has used up its own supplies of ballistic and cruise missiles; the few remaining are not enough to reverse the progress Ukraine is making in rebuilding its production capabilities. Ukrainian reconstruction is concentrating on keeping the lights on, along with other utilities (water, sewage disposal and heating). While much housing has been damaged or destroyed, twenty percent of Ukrainians have left the country, at least temporarily, leaving enough unoccupied housing for those needing temporary shelter until their bombed-out homes are repaired or rebuilt. Some of the foreign aid consists of building supplies to speed the restoration of war damaged housing. Russia is also suffering a smaller exodus of population. Most of these are military-age men avoiding mobilization or unemployed Russians with skills who can get jobs anywhere. These refugees have been sufficiently numerous to cause labor shortages inside Russia, forcing the government to import North Korean workers to deal with some of the shortages.
Neighboring Belarus is technically an ally, but the relationship is more like Belarus being an unwilling donor of resources to a Russia that makes no secret of the plan to absorb Belarus once Ukraine is conquered. Most Belarussians are pro-Ukraine as well as for their own independence from Russia. The pro-Russia Belarus leaders and their security forces, reinforced with some Russians, keep Belarus from more actively supporting Ukraine. Central Asian nations that also became independent of Russia in 1991 see themselves as on the Russian's acquisition list and have adopted a wary neutrality towards the Russia-Ukraine war. Like Belarus, the Central Asians also support Ukraine. This has limited Russian economic opportunities in Central Asia. China has sped up its efforts to replace Russia as the major foreign trading partner with the Central Asian states.
China has generally avoided increasing its pre-war trade with Russia because of all the sanctions, but has quietly increased its trade with North Korea and Iran. China does not give things away but is willing to sell to anyone who can pay. Iran has oil and North Korea has coal and minerals plus whatever its hackers can steal. China allows these hackers to work from China as long as they pay their own way and do not hack Chinese. The North Korean hackers have become quite good at stealing cryptocurrency, which China or Russia will accept as payment.
The more desperate the Russian economic situation gets, the more they have to improvise to survive. That’s an old Russian tradition that must be relied on more often than most Russians want.