As of June 2026, Russia’s small business sector faces a deepening crisis characterized by rising tax burdens and stagnant consumer demand. Data from ARD reports indicate that entrepreneurs in Moscow are shuttering long-standing establishments due to a combination of increased value-added tax (VAT) rates, climbing operational costs, and an economic climate increasingly bifurcated between a struggling civilian sector and a subsidized military-industrial complex.
Why are small businesses in Moscow closing?
The closure of small enterprises, such as the café operated by Kirill in a high-end Moscow district, stems from a confluence of fiscal and market pressures. According to Natalia Zubarevich, an expert in economic geography cited by ARD, 2026 has proven particularly difficult for small firms. A primary driver is the increase in the national VAT from 20% to 22%, coupled with new mandatory fees for small businesses implemented earlier this year. These tax hikes collide with stagnant household incomes and rising costs for imported goods, leaving owners unable to pass expenses on to customers. Kirill noted to ARD that his landlord demanded a fourfold rent increase, a move that forced him to liquidate his business after six years of operation.
According to the Levada Center, an independent polling institute, inflation currently ranks as the number one concern for the Russian public, followed by the ongoing “special military operation” and corruption.
How does the war impact the civilian economy?
The Russian economy is currently split into two distinct realities. Natalia Zubarevich explains that while the civilian economy faces stagnation and decline, the military sector continues to receive significant support, creating a sharp contrast in regional prosperity. Reports from ARD highlight that regional budgets are under intense pressure, with 70 Russian regions ending 2025 with budget deficits, some reaching as high as 25%. These regions are strained by the high costs of recruitment and contract payments for soldiers, diverting critical funds away from local infrastructure and commercial development.
What is the effect of drone attacks on the state budget?
Ukrainian drone strikes on Russian energy and military infrastructure are causing tangible financial damage. Igor Lipsitz, an economist and former professor at the Higher School of Economics, notes that these attacks directly degrade the state’s tax revenue. As drone strikes target oil refineries, the subsequent need for repairs reduces the profitability of major Russian oil companies. Because these firms are primary contributors to the federal budget, the resulting decrease in their earnings translates to a smaller pool of tax revenue available to the Kremlin. While state media often minimizes the impact of these strikes, the economic consequences are forcing a tightening of fiscal policy across the board.
Comparison: Economic Outlooks
| Perspective | Source/Entity | Primary Claim |
|---|---|---|
| Official Government Stance | Kirill Dmitriev | The globalist policy has failed; the current forum represents a “path to a stable future.” |
| Economic Analysis | Igor Lipsitz | Refinery damage from drone strikes is actively eroding federal tax revenue. |
Frequently Asked Questions
Are all business sectors in Russia struggling?
No. According to analysis by Natalia Zubarevich, the economy is divided. While the civilian sector—including retail and hospitality—is suffering from high taxes and low demand, those linked to the military-industrial complex are currently thriving due to increased defense spending.
How does the public perceive the current economic situation?
Public sentiment is characterized by uncertainty and a sense of fatalism. As noted by the Levada Center, citizens are primarily worried about inflation and the duration of the ongoing military operations, with many expressing frustration that timelines for the conflict are repeatedly pushed back.
What is the status of the International Economic Forum in St. Petersburg?
While the Kremlin promotes the forum as a sign of international cooperation with over 130 countries participating, it has faced operational challenges. The event was preceded by Ukrainian drone strikes on nearby energy and military facilities, which have highlighted the vulnerability of the region’s infrastructure despite official attempts to shift the narrative.
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