Core Viewpoint - The ongoing war in Ukraine and Western sanctions have severely impacted the Russian economy, leading to unprecedented challenges for the nation and its citizens, contradicting the previous notion that conflict would lead to financial gain [1] Economic Impact - The Russian government plans to increase the value-added tax (VAT) from 20% to 22% starting January 1, 2026, which will significantly raise the financial burden on consumers [1][3] - This VAT increase is estimated to cost ordinary families an additional 45,500 rubles (approximately 3,900 RMB) annually, with the funds allocated for national defense and security [3] - Energy prices are also set to rise, with natural gas prices increasing by 9.4%, electricity by 10.9%, and transmission fees by 14.3%, leading to an average annual increase of 60,000 rubles in household expenses [3] Fiscal Challenges - Russia's resource revenue has declined by 21% year-on-year in the first nine months of 2025, with oil and gas tax revenues plummeting by 25% in September [5] - The federal budget now allocates 40% to defense and security spending, marking a historic high and indicating a shift to a wartime economic model [5][7] - The government is under pressure to increase taxes and cut welfare benefits to cover war expenses, effectively transferring the cost of the conflict onto the general populace [7][9] Public Sentiment - Despite ongoing support for President Putin among many Russians, the economic burden is becoming increasingly apparent, as citizens face rising costs in daily expenses such as groceries and utilities [5][9] - The situation has led to fuel shortages in some regions, with gas stations implementing purchase limits and black market prices soaring [7]