SOCIETY
The Same as It Was?
How Russians’ Perceived Financial Being Has Changed amid the Russia-Ukraine Conflict
How Russians’ Perceived Financial Being Has Changed amid the Russia-Ukraine Conflict
February 20, 2025
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Vladimir Zvonovsky
Professor at Samara State University of Economics
Vladimir Zvonovsky argues that the latest phase of adaption to the wartime economy has seen the initial winners and losers from Russia’s “special operation” in Ukraine switch places.
Normal, peacetime economic growth entails people’s financial well-being improving when they create new products and promote economic efficiency and development. Yet with the rise of the wartime economy in Russia, it is those able to take advantage of the lavish fiscal spending who have adapted more successfully to the new political and economic reality.
Three phases of adaptation to the new reality
In the first phase, from the time the special military operation started until approximately mobilization in autumn 2022, young people, residents of Moscow and St Petersburg, private-sector workers and people with higher education were most likely to say they had taken a hit financially. Meanwhile, state employees, pensioners, older Russians and residents of small towns felt better. Thus, economic the prewar “winners” and “losers” had switched places.
In the second phase, from the start of mobilization in autumn 2022 until approximately autumn 2023, Russian business began to adapt to the new reality, and private-sector employees and businesspeople – particularly those producing things for the special military operation and those helping to get around foreign sanctions to import goods into Russia – began to assess their financial situation similarly to state employees and pensioners. In addition, some Russians who had previously strategically built their businesses in the West returned to Russia, citing sanctions headwinds and the broad confrontation between Russia and the West.
In this phase, thanks to lavish fiscal flows, residents of regions bordering Ukraine grew more upbeat about their financial situation than residents of Moscow and St Petersburg and of Russian regions located far from the fighting.
In the third phase – approximately the second half of 2023 – an economic system crystallized in which regions and social groups that had been “left out” before the conflict (e.g., older people, people without higher education) thought their chances of getting a bigger slice of the economic pie had gone up.
What does the end of the third phase mean?
Three phases of adaptation to the new reality
In the first phase, from the time the special military operation started until approximately mobilization in autumn 2022, young people, residents of Moscow and St Petersburg, private-sector workers and people with higher education were most likely to say they had taken a hit financially. Meanwhile, state employees, pensioners, older Russians and residents of small towns felt better. Thus, economic the prewar “winners” and “losers” had switched places.
In the second phase, from the start of mobilization in autumn 2022 until approximately autumn 2023, Russian business began to adapt to the new reality, and private-sector employees and businesspeople – particularly those producing things for the special military operation and those helping to get around foreign sanctions to import goods into Russia – began to assess their financial situation similarly to state employees and pensioners. In addition, some Russians who had previously strategically built their businesses in the West returned to Russia, citing sanctions headwinds and the broad confrontation between Russia and the West.
In this phase, thanks to lavish fiscal flows, residents of regions bordering Ukraine grew more upbeat about their financial situation than residents of Moscow and St Petersburg and of Russian regions located far from the fighting.
In the third phase – approximately the second half of 2023 – an economic system crystallized in which regions and social groups that had been “left out” before the conflict (e.g., older people, people without higher education) thought their chances of getting a bigger slice of the economic pie had gone up.
What does the end of the third phase mean?
“Already by early 2024, the peak of people’s assessments of their financial situation had passed.”
A poster of the Ivanovo social protection department advertising free land for accomplishments on the battlefield in Ukraine. The lines below say, 'This new benefit was enacted at the behest of the President of Russia.' This new benefit was recently enacted at the behest of Putin. December 2024. Source: VK
By then, young people seem to have felt well-adapted to the new reality, which signaled a return to the prewar state of affairs, where the most positive assessments came from young people, residents of Moscow and St Petersburg, private-sector workers and high-income groups of the population.
Major geographical differences disappeared: Muscovites looked at their economic fortunes about the same as residents of Russia’s provinces, be they close to the front line or not. The economic boost felt by “periphery” social groups turned out to be very short.
In winter and spring 2022, many Russians who generally supported the military intervention in Ukraine hoped that the conflict, together with the break in economic and political relations with Western countries, would bring about state paternalism. Of course, they expected that such a shift in economic policy would improve their own lot.
But these hopes proved forlorn. Supporters of paternalism voiced disappointment in focus groups we conducted in various Russian regions at the beginning of 2023.
When the war began in 2022, people... believed that now everything in the country would really change and the people would be different. And the country was mobilized... and finally, now all these traitors and vile people had gone off to the West and the most active, the most energetic, the most proper, the most noble and the most intelligent people, the most decent people, remained here. There would be order in the country... But everything has stayed the same… (Male, 54 years old, 2023)
Over the course of last year, the third phase gradually gave way to the fourth, with the most financially sure groups from before the special military operation regaining their confidence – young people, residents of Moscow and large cities, high earners and big consumers. Meanwhile, the least financially confident were again residents of small towns, older generations, pensioners, low earners and people living from paycheck to paycheck, and people with modest consumption habits.
Thus, the economic structure of Russian society has gone back to how it was, and assumptions that new heroes and social groups would gain the upper hand thanks to the Ukraine conflict have proven unjustified. The better-off have adapted and retained their advantages, while the worse-off, who had hoped for a redistribution of wealth that would benefit them, have been disappointed.
Dynamics of the backward-looking prosperity index
To measure how different groups in the country have adapted to changing economic conditions, our colleagues have asked Russians to assess their personal financial situation. Throughout the conflict, they were periodically asked: “in your view, has your financial situation improved, worsened or basically stayed the same in the last 2-3 months?”
The ratio of the share of Russians whose financial situation improved over the last year versus the share of Russians whose situation worsened has been measured using what we call a “backward-looking personal prosperity index.” On average across the country, the shares were approximately in September 2024, while at the beginning of the year it had been 0.74 – indicating a predominance of positive responses that marked the peak for the past few years.
This is confirmed by data from pollsters. Both the Levada Center and the Public Opinion Foundation (FOM) have found that Russians gave the most positive assessments of their financial situation in the last 15 years at the end 2023/beginning of 2024.
Major geographical differences disappeared: Muscovites looked at their economic fortunes about the same as residents of Russia’s provinces, be they close to the front line or not. The economic boost felt by “periphery” social groups turned out to be very short.
In winter and spring 2022, many Russians who generally supported the military intervention in Ukraine hoped that the conflict, together with the break in economic and political relations with Western countries, would bring about state paternalism. Of course, they expected that such a shift in economic policy would improve their own lot.
But these hopes proved forlorn. Supporters of paternalism voiced disappointment in focus groups we conducted in various Russian regions at the beginning of 2023.
When the war began in 2022, people... believed that now everything in the country would really change and the people would be different. And the country was mobilized... and finally, now all these traitors and vile people had gone off to the West and the most active, the most energetic, the most proper, the most noble and the most intelligent people, the most decent people, remained here. There would be order in the country... But everything has stayed the same… (Male, 54 years old, 2023)
Over the course of last year, the third phase gradually gave way to the fourth, with the most financially sure groups from before the special military operation regaining their confidence – young people, residents of Moscow and large cities, high earners and big consumers. Meanwhile, the least financially confident were again residents of small towns, older generations, pensioners, low earners and people living from paycheck to paycheck, and people with modest consumption habits.
Thus, the economic structure of Russian society has gone back to how it was, and assumptions that new heroes and social groups would gain the upper hand thanks to the Ukraine conflict have proven unjustified. The better-off have adapted and retained their advantages, while the worse-off, who had hoped for a redistribution of wealth that would benefit them, have been disappointed.
Dynamics of the backward-looking prosperity index
To measure how different groups in the country have adapted to changing economic conditions, our colleagues have asked Russians to assess their personal financial situation. Throughout the conflict, they were periodically asked: “in your view, has your financial situation improved, worsened or basically stayed the same in the last 2-3 months?”
The ratio of the share of Russians whose financial situation improved over the last year versus the share of Russians whose situation worsened has been measured using what we call a “backward-looking personal prosperity index.” On average across the country, the shares were approximately in September 2024, while at the beginning of the year it had been 0.74 – indicating a predominance of positive responses that marked the peak for the past few years.
This is confirmed by data from pollsters. Both the Levada Center and the Public Opinion Foundation (FOM) have found that Russians gave the most positive assessments of their financial situation in the last 15 years at the end 2023/beginning of 2024.
“It seems this optimism (which we call the third phase) passed in the first half of 2024, however, when negative economic changes, in particular rising inflation, began to make Russians anxious. This squares with hard data – in particular, falling retail sales.”
“In your view, has your financial situation improved, worsened or basically stayed the same in the last 2-3 months?” (FOM, Russia, 2000-24). Green - “Improved”, Red - “Worsened”, Blue - “Basically the same”, Grey - “Hard to say”.
Which social groups are driving the fourth phase?
At the beginning of the conflict, men and women assessed their economic fortunes approximately the same, but in 2024 their assessments began to diverge. In early 2024, the share of “no change” responses among women was significantly higher than among men, indicating that men were more polarized about their ability to economically win or lose in the context of the special operation. By the year-end, the share of men who said their financial situation had improved increased more than that of women. The new conditions likely create a more dynamic, polarized environment for men than for women.
The differences across age groups have deepened. Younger generations assess their financial situation more positively than older generations, i.e., Russians entering the labor market for the first time feel are rather confident about their economic prospects.
Overall, amid the headline growth of the Russian economy, the most optimistic groups are those that can compensate for economic problems, primarily inflation, by demanding higher wages either at their current place of work or by changing it, with the labor shortage in Russia playing into their hands. Groups that do not have such opportunities not only feel less optimistic or pessimistic, but the gap between the economically “successful” and “unsuccessful” seems to be growing.
In the first months of the wartime economy and life under sanctions, high-income groups were hit hard. Economists have noted this, pointing out that a wobbling Russian banking system actually confiscated some foreign-currency deposits of Russians, who most likely belonged to these groups.
After mobilization in autumn 2022 and the engagement of wider groups of the population in the conflict – both as soldiers and as workers fulfilling state defense orders, through “parallel imports,” etc. – the state boosted wages significantly.
The higher one’s income, the less likely one is to say his/her financial situation had deteriorated, and such patterns became more pronounced from early 2024. That was when, across almost all groups, the backward-looking personal prosperity index was at its highest since 2022.
At the beginning of the conflict, men and women assessed their economic fortunes approximately the same, but in 2024 their assessments began to diverge. In early 2024, the share of “no change” responses among women was significantly higher than among men, indicating that men were more polarized about their ability to economically win or lose in the context of the special operation. By the year-end, the share of men who said their financial situation had improved increased more than that of women. The new conditions likely create a more dynamic, polarized environment for men than for women.
The differences across age groups have deepened. Younger generations assess their financial situation more positively than older generations, i.e., Russians entering the labor market for the first time feel are rather confident about their economic prospects.
Overall, amid the headline growth of the Russian economy, the most optimistic groups are those that can compensate for economic problems, primarily inflation, by demanding higher wages either at their current place of work or by changing it, with the labor shortage in Russia playing into their hands. Groups that do not have such opportunities not only feel less optimistic or pessimistic, but the gap between the economically “successful” and “unsuccessful” seems to be growing.
In the first months of the wartime economy and life under sanctions, high-income groups were hit hard. Economists have noted this, pointing out that a wobbling Russian banking system actually confiscated some foreign-currency deposits of Russians, who most likely belonged to these groups.
After mobilization in autumn 2022 and the engagement of wider groups of the population in the conflict – both as soldiers and as workers fulfilling state defense orders, through “parallel imports,” etc. – the state boosted wages significantly.
The higher one’s income, the less likely one is to say his/her financial situation had deteriorated, and such patterns became more pronounced from early 2024. That was when, across almost all groups, the backward-looking personal prosperity index was at its highest since 2022.
“Whereas up until early 2024 wide swaths of the population were upbeat on their financial situation, now only high-income groups are.”
Is debt driving people to enlist?
People take out loans for different reasons. Some do not have enough money until their next paycheck, while others have enough and decide to borrow more to buy a car, household appliances or even an apartment.
In Russia, borrowing from a credit company most often suggests a deterioration in the borrower’s financial situation. Among respondents who took out such a loan, the share whose financial situation rhetorically worsened in the last year was 34% in 2022, 38% in 2023 and 41% in 2024. Still, the share of those who took out a loan has declined.
These dynamics correlate even more strongly with the stated purpose of the loan. A mortgage or car loan does not allow for conclusions to be made about the borrower’s financial situation. But a sign that a borrower is facing financial difficulties is the history of a cash loan to buy consumer goods or a loan from a microfinance organization (34%), as is borrowing money from friends and relatives (49%).
The success of one’s adaptation to the changing reality is driven chiefly by the source and size of one’s income, access to loans and consumption behavior. Noneconomic factors are also at play.
Our qualitative research shows that disapproval of key political events darkens perceptions of their consequences. Opponents of the military intervention in Ukraine tend to focus more on accompanying economic problems and undersell their own financial situation, while supporters, on the contrary, are less moved by those economic problems since they are associated with political decisions that they support.
In fact, among supporters of the intervention, at the beginning of 2024 the share of Russians who said their financial situation had improved was higher than the share of those who noted a deterioration. Yet after just six months, amid the fourth phase of adaptation to the wartime economy, this began to change, with the index value falling below one, to 0.74.
Meanwhile, among opponents of the special military operation, the backward-looking personal prosperity index has risen since 2022 (0.13-0.29), indicating their gradual adaptation to the new reality. Intervention supporters are more driven by current events, with their assessments more fluid. As Russians’ perception of their standard of living has stabilized, their assessments of their financial situation have grown more “political” and less “economic.” Opponents of the special operation continue to understate their financial situation, while for supporters it depends on the situation on the battlefield.
People take out loans for different reasons. Some do not have enough money until their next paycheck, while others have enough and decide to borrow more to buy a car, household appliances or even an apartment.
In Russia, borrowing from a credit company most often suggests a deterioration in the borrower’s financial situation. Among respondents who took out such a loan, the share whose financial situation rhetorically worsened in the last year was 34% in 2022, 38% in 2023 and 41% in 2024. Still, the share of those who took out a loan has declined.
These dynamics correlate even more strongly with the stated purpose of the loan. A mortgage or car loan does not allow for conclusions to be made about the borrower’s financial situation. But a sign that a borrower is facing financial difficulties is the history of a cash loan to buy consumer goods or a loan from a microfinance organization (34%), as is borrowing money from friends and relatives (49%).
The success of one’s adaptation to the changing reality is driven chiefly by the source and size of one’s income, access to loans and consumption behavior. Noneconomic factors are also at play.
Our qualitative research shows that disapproval of key political events darkens perceptions of their consequences. Opponents of the military intervention in Ukraine tend to focus more on accompanying economic problems and undersell their own financial situation, while supporters, on the contrary, are less moved by those economic problems since they are associated with political decisions that they support.
In fact, among supporters of the intervention, at the beginning of 2024 the share of Russians who said their financial situation had improved was higher than the share of those who noted a deterioration. Yet after just six months, amid the fourth phase of adaptation to the wartime economy, this began to change, with the index value falling below one, to 0.74.
Meanwhile, among opponents of the special military operation, the backward-looking personal prosperity index has risen since 2022 (0.13-0.29), indicating their gradual adaptation to the new reality. Intervention supporters are more driven by current events, with their assessments more fluid. As Russians’ perception of their standard of living has stabilized, their assessments of their financial situation have grown more “political” and less “economic.” Opponents of the special operation continue to understate their financial situation, while for supporters it depends on the situation on the battlefield.
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