The next year will be challenging for Russia. Yes, we’ve heard this for almost four years. We’ve been told that the Russian economy is about to collapse under Western sanctions and the cost of war, yet it stumbles on. There may be no breadlines or toilet paper shortages, but the bill for the Kremlin’s past political and economic decisions has finally landed, and it is ordinary Russians who will foot it.

What a difference a year makes. Economic growth, fuelled by Vladimir Putin’s profligate spending on the defence industry, has virtually evaporated. Oil revenues, which provide a fifth of the government’s income, are down nearly a quarter owing to lower global prices and tighter sanctions. Yet the main cause of Russia’s economic troubles is homegrown; sanctions imposed on the country over the war in Ukraine are merely compounding the misery.

Last December, Putin boasted of the country’s admirable 4.3 per cent economic growth and an equally spectacular 8.5 per cent annual expansion in manufacturing. He also talked about a comfortable fiscal deficit of 1.7 per cent of GDP and 7.4 per cent investment growth, all despite the ever-tightening sanctions.

There are no palatable options for the Kremlin

One year on, the picture is considerably less rosy. The economy registered a modest 0.6 per cent expansion between July and August and manufacturing crawled forward by just 0.5 per cent in the same period. Meanwhile, the budgetary deficit has widened by half and may hit 2.6 per cent of GDP this calendar year; investment has stalled entirely. The outlook for next year is grimmer still.

For almost three years, the Kremlin has used oil revenues to fuel a Keynesian policy of stimulating demand with budgetary largesse. As predicted, this has produced higher inflation, which Moscow’s central bank is now taming with punishing interest rates – which have in turn throttled expansion. And yet Russia’s current near-stagnation is not cyclical but structural.

This is because the money generated by oil........

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