Russia Policy Monitor No. 2695

September 22, 2025 Ilan I. Berman,  Lindsey Cliff
Related Categories: Energy Security; International Economics and Trade; Warfare; Resource Security; Africa; China; Germany; Russia; Ukraine
A STEADILY WORSENING ECONOMY
Russian President Vladimir Putin has continued to stall diplomatically, failing to engage in meaningful dialogue over his war of choice against Ukraine. But the Kremlin's continued efforts to subjugate its western neighbor are having a real world cost on the country's economy – costs more pronounced than officials in Moscow would like to admit. While Russia has avoided a full-blown recession so far, experts say that the warning signs are both present and growing, as civilian industries stagnate and shrink while military spending continues to grow. Russia’s civilian industries have been shrinking by an average of 0.3 percent per month, impacted by labor force disruptions as more and more working-age males are conscripted or depart to join the Kremlin's war on Ukraine.

Industrial numbers increasingly tell the story. According to ROSSTAT, Russia's Federal State Statistics Service, production of televisions and washing machines fell by 30 percent in the first half of 2025 alone, while that of refrigerators fell by 12 percent and footwear by 29 percent. Russia's national security and defense sectors now make up 40 percent of all government spending – the highest percentage since the fall of the Soviet Union. (Meduza, August 21, 2025)

BLOOD DIAMONDS OF A DIFFERENT SORT
The phrase "blood diamonds" tends to invoke imagery of African conflicts fought over natural resources. But such crisis commodities have a distinct Russian connection as well. "Despite Western sanctions, Russia remains a major player in the world market of diamonds and other gems; and the money from such sales in Europe and the United States overwhelmingly goes into Russian government coffers and has been used by Putin to finance his expanded war in Ukraine," writes Paul Goble in his Window on Eurasia blog. Citing investigative reporting, Goble details that, despite current restrictions, "Russia still supplies nearly 30 percent of the world's diamonds..." In turn, the revenues from these gems, which measures in the "tens of billions of US dollars every year," is funneled back into the Kremlin's coffers and used to bankroll Russia's ongoing campaign against Kyiv. (Window on Eurasia, August 22, 2025)

RUSSIA AND CHINA DEEPEN THEIR ENERGY PARTNERSHIP
The "no limits" partnership between Moscow and Beijing continues to evolve – and deepen. On September 2nd, Alexei Miller, CEO of Russia's GAZPROM energy conglomerate, announced that Russia and China are moving ahead with their plans for the "Power of Siberia 2," a yet-to-be-built natural gas pipeline designed as a supplement for the original "Power of Siberia" route that now operates between the two countries. Currently, the original Power of Siberia brings 38 billion cubic metres (bcm) of gas from Eastern Siberia to China annually. That volume, Miller says, will increase to 44 bcm under a new agreement with the PRC. And when operational, Power of Siberia 2, which will cut through Mongolia, is expected to deliver an additional 50 bcm per year – a sum which would greatly reduce China's energy reliance on the rest of the world. Many variables, however, are still uncertain. Key factors such as the price of gas to be supplied via the new pipeline, the timeline for its construction, and how the costs of the project will be distributed still need to be hammered out between the two sides. (Reuters, September 2, 2025)

RUSSIAN DRONES OVER GERMANY
Amid growing Russian "gray zone" operations in Europe, unmanned drones spotted over key arms transportation routes and military training sites have become a cause for growing concern. Drone flights in eastern Germany, near military bases in Thuringia, are especially worrying. German intelligence believes some of the aircraft were manufactured in Iran and deployed from the Baltic Sea to gather intelligence on weapons that are being produced and transported to Ukraine. Officials are also concerned that information gathered by these platforms could be used to inform future hybrid operations by Russia in Europe. (Kyiv Independent, August 28, 2025)

MOSCOW GREEN LIGHTS TORTURE
Since the start of its full-scale invasion of Ukraine, Russia's numerous violations of the laws of war – from the targeting of civilians to the kidnapping of Ukrainian children – have become broadly understood. Nonetheless, it was a shock to many when the Russian government indicated that it was considering withdrawing from the European Convention for the Prevention of Torture. Russia has been a member of that treaty since 1998, and therefore ostensibly bound by its prohibitions on torture, inhuman or degrading treatment or punishment, and by its requirement to cooperate with the European Committee for the Prevention of Torture (including by allowing inspections of detention facilities, and so forth). In practice, however, has been in breach of the Convention’s tenets for years – and as such withdrawal represents more of a symbolic than a practical move. Nevertheless, there are real world implications for ordinary Russians, among them that they will no longer have standing before the European Court of Human Rights to bring suit against their own government for its violations of their rights. (Meduza, August 26, 2025)