Russia’s SMEs Face New Pressures Amid Escalating Conflict and Economic Shifts

The Russian government has long positioned support for small and medium‑sized enterprises as a cornerstone of resilience, even during wartime, shielding them from Western sanctions.

However, the state has struggled to protect this sector, and multiple shocks have hit businesses since the beginning of the year.

In January, VAT rose from 20% to 22%, with additional funds allocated to defence, while tax incentives for certain firms were discontinued.

According to data from the analytics platform Kontur.Fokus, 209,000 small and medium‑sized firms shuttered in the first quarter of 2026, representing a 9% increase over the same period in 2025.

Broad internet outages and a crackdown on widely used messaging platforms have compounded the difficulties, with Moscow businesses reportedly losing tens of millions of dollars in a single week of March, per certain estimates.

The situation then escalated into a fuel crisis, sparked by Ukrainian strikes on oil depots, refineries and transport routes.

“We have already seen many setbacks, and each new blow only deepens the wound,” said Professor Ruben Eniklopov of Pompeu Fabra University in Barcelona in an interview with the BBC. “Yes, this attack on Wildberries warehouses is undoubtedly another nail in the coffin.”

While Russian small businesses have historically shown resilience, they now confront high inflation, an expanding budget deficit, and oil and gas revenues that are 23% below their level in the first half of the previous year.

Russia possesses substantial financial reserves built up during peacetime, yet its war in Ukraine continues to consume resources, depriving the civilian economy of growth potential.

Additional reporting by Olga Shamina.

Source link