Luikmel noted that waging war is extremely costly for Russia, pointing to an exceptionally tight labor market, with unemployment at around 2 percent.

"Production and labor costs are rising very rapidly, and this is one of the main factors restraining Russia's growth, even when oil markets are strong," he added.

The Russian central bank is concerned about inflation, which exceeds its 4 percent target by nearly half. The policy rate recently fell from 21 percent to 15 percent. However, with labor supply constrained, the bank must curb economic expansion through tighter credit, as there are simply not enough workers—and they cannot be easily replaced from abroad.

The labor shortage extends far beyond the front lines. "A large number of working-age people have left the country, and the ongoing psychological pressure of mobilization is prompting students to extend their studies abroad. The service sector, which often relies on young workers, is experiencing a severe shortage, with reports of minors pouring drinks in restaurants," Luikmel said.

In the construction sector, high interest rates and a lack of workers are paralyzing activity. Luikmel pointed out that while lobbyists have secured state subsidies and interest rate reductions for new developments, demand remains suppressed by inflation and elevated borrowing costs.

In the energy sector, the overall environment remains favorable for Russia. In March, spot transactions for Urals crude were priced at $80–$90 USD per barrel—roughly double the $44 price cap. Russia primarily sells to China and other countries concerned about potential disruptions in the Strait of Hormuz.

Western price caps initially complicated revenue generation due to the use of shadow fleets and high insurance costs. However, Russian oil trade has since increased by an estimated 50–75 percent. Any stabilization in the Strait of Hormuz could lower spot prices, negatively affecting Russia's revenues.

Ordinary Russians are feeling the economic strain. Rising prices are constraining growth and creating uncertainty for savers. In addition, the visible loss of workers to the military is a major drag on future development.

The IMF recently published an updated forecast for the Russian economy, projecting annual growth to increase from 0.8 percent to 1.1 percent. This modest acceleration—despite significantly higher oil prices—suggests that domestic constraints are weighing heavily on the economy, Luikmel said.

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