Amid huge outlays on its war in Ukraine, tax rises, stubborn inflation and nervy consumers are all weighing on Russia's small companies."My business is on its last legs. I'm thinking about shutting down completely," the owner of a pharmacy in Mytishchi, on the northeastern outskirts of the Russian capital, told AFP.In business for 12 years, she spoke anonymously, citing security concerns as she criticised the government's decision to raise taxes and regulations that are squeezing profits."As soon as the military action in Ukraine began, we started to feel inflation," she said.Rising prices and a volatile currency have been among the major domestic economic fallouts of Moscow's four-year offensive on Ukraine, which has seen it hit with unprecedented packages of Western sanctions.
Rising prices and a volatile currency have been one of the major economic fallouts of Moscow's four-year offensive © Igor IVANKO / AFP
The billions of dollars being spent on the war every month had initially helped shield the Russian economy from the negative fallouts of the campaign.Military spending has surged to around eight percent of GDP -- the highest level since the Cold War.But the civilian economy has been left behind.Russia posted its first quarterly economic decline for three years at the start of 2026.For small businesses in the commuter town of Mytishchi, the slowdown has come on top of fierce competition from online retailers and tighter rules on alcohol sales, the main money-maker for small restaurants and neighbourhood food stores.'Most precarious'"The Russian economy is a two-tier economy -- the state dominated defence industry, doing pretty well, and basically everything else," London-based expert on the Russian economy Alexander Kolyandr told AFP.
