When the world's at stake,
go beyond the headlines.

Why would the West underwrite the very system it has spent four years trying to contain? Yet that’s exactly what Russia has proposed, and what some leaders in Washington might be willing to entertain.

In February 2026, Russia proposed an economic reintegration plan (the “Dmitriev package”) that it claims would be worth $14 trillion. The package includes sanctions relief, aeronautics contracts and restoration of access to dollar-based financial systems for Russia, preferential treatment for Western firms in the Russian market, and joint ventures in energy and mining. While the Russian wish list is fanciful at best, including points like a tunnel between Russia and Alaska, the overarching concept will resonate with those Western policymakers who assume that postwar stability would be predicated upon reintegrating Russia into global markets.

This belief stems from a misunderstanding of both the nature of the contemporary Russian state and the security environment it has spent two decades creating. The West cannot facilitate Russia’s return to the global economy without reinstating the coercive instruments that Moscow has long used to undermine Europe and the United States.

Russia’s Economy Is Calibrated for Long-Term Conflict

Since 2022, the Russian economy has changed dramatically. Defense and security-related spending is now the primary driver of growth and, although the exact figures are obscured by the Kremlin’s penchant for obfuscation and redaction, it is clear that Russia is pouring massive resources into militarization.

In the Russian federal draft budget, over 29 percent of spending in 2026 is earmarked for national defense, and around another 9 percent for national security (both domestic and foreign). This means defense and security already account for more than 38 percent of planned federal expenditures, even before classified items and intra-year reallocations are considered. For context, that is more than double the percentage of the U.S. federal allocation for defense and security, indicating preparations for continuing conflict.

Western economists agree that true Russian war spending exceeds published amounts, but the recent estimation by the German foreign intelligence agency goes the furthest. It asserts that over 50 percent of federal spending is related to the war and the broader development and expansion of military capacities. The Economist estimated that Russian war spending in 2023 accounted for 5 percent of GDP, but German intelligence is claiming that this was already an underestimation, and that the number has since risen to 10 percent of GDP. This tracks with other estimates, including those based on reading between the lines of Russian government data. Russia’s own Centre for Macroeconomic Analysis and Short-Term Forecasting attributes 60 to 65 percent of Russia’s increased industrial output from 2022 to 2024 to the sectors most implicated in the war on Ukraine, while showing that unrelated industries are declining. In other words, Russian civilian industry has been progressively cannibalized to feed military production.

The war is starving Russia of physical and human capital, worsening its long-term economic future and making it an exceptionally unappealing partner for a major economic deal — or, viewed differently, making it increasingly susceptible to economic leverage. Managing the peacetime fallout of Russia’s ailing and war-dependent economy would be a high bar to clear for a state which was, in living memory, the textbook case of dual economic and regime collapse. Russia’s economy is vulnerable, relying on highly concentrated revenue sources (energy exports, defense-industrial production, and state spending) with an incredibly weak small- and medium-enterprise layer. The lessons of previous Russian financial crises have been thoroughly internalized by the current leadership and are likely to lower the tolerance for policies of managed decline. Even with continued military overspending, Russia’s own GDP forecast expects only 1.3 percent growth in 2026, while the International Monetary Fund’s growth forecast for Russia in 2026 is only 0.8 percent, leaving it on the brink of another recession.

To keep its economy afloat, the Kremlin has relied on emergency measures: sanctions-dodging through third countries, draining fiscal reserves, and controlling double-digit inflation by pushing interest rates to an eye-watering 21 percent (before bringing them down to a still-exceptional 15.5 percent). These tactics are unsustainable in the long run — Russian federal expenditures are expected to so wildly exceed the published plan that the true deficit may be triple the official 2026 prediction.

Ironically, in addition to a tight labor market, high casualties have created an opportunistic social elevator in Russia, masking the realities of economic decline and reducing domestic resistance to the war. Indeed, public sentiment has been buoyant, with Russian life satisfaction reaching 57 percent in July 2025 (the highest recorded since 1993), driven in part by improved expectations among the most disenfranchised members of Russian society. The family of a 35-year-old man killed in action could receive a total of over 14.5 million rubles ($150,000) — more than a lifetime’s earnings in some parts of Russia — via several channels. This vast compensation scheme has lifted some families out of poverty and inflated purchasing power: a short-term gain that comes with lasting drawbacks. On a macro scale, these payouts cannot meaningfully offset the present capital destruction, loss of labor, and long-term productivity decline.

Russian “deathonomics,” the phenomenon where soldiers are worth more dead than alive, only works in small doses, and has rapidly become a massive drain on government resources. Russian war casualties (dead and wounded) have surpassed 1 million and compensation costs for killed and injured servicemembers were variously estimated at around 6 to 8 percent of the 2024 federal budget and up to 9.5 percent in 2025, leaving Russia seeking to reduce or evade these payments in creative ways. At the same time, the Ukrainian long-range airstrike campaign against Russia’s energy industry has increased fuel prices domestically while falling global oil prices have hurt government revenue. Adding to its woes, Russia faces an enormous labor shortage and divergent trendlines between social payments and entrepreneurial activity.

Russia has passed a point of no return in sacrificing non-military industrial capacity, is too committed to a victory narrative to pivot, and is continually widening the structural gap to a sustainable economy — sacrificing the core pillars of peacetime growth even as it depletes finite military resources. Russia may have proved more resilient than anticipated in the face of Western sanctions, but in many ways it is now operating on borrowed time, and the Russian economic reintegration proposal indicates that the Kremlin knows it.

An Unaffordable Security Risk

Russia’s post-Soviet history is a continuous cycle of territorial acquisition: the creation of a de facto exclave comprising 10 percent of Moldova in 1992, expanding territorial claims in the Arctic in 2001, 2015, and 2021, the seizure of 20 percent of Georgia in 2008 with further expansion since, the invasion and annexation of Crimea in 2014, and of course the full-scale war to capture the rest of Ukraine since 2022. Each time, “peace” has been restored through real Western concessions paired with unenforceable Russian promises, and the new status quo becomes the staging ground for further Russian aggression.

Russia’s reputation is finally catching up with it. Even if the war ended tomorrow, a reduction in sanctions could not save Russia’s economy — public pressure and social norms would still hinder the return of Western companies. Therefore, a “peace shock” would not necessarily restore prewar capital inflows or access to technology, but it would collapse the fragile equilibrium Russia has created to survive sanctions.

Neither would it reverse Russia’s anti-Western direction of travel — the momentum of decoupling is too great. After years of President Vladimir Putin’s anti-Western narrative being disseminated through state media, the public diplomacy case for economic interdependence no longer holds. Western trade is unlikely to generate goodwill in Russia, and economic re-engagement would carry a far greater cost: undermining political cohesion with the NATO states that anchor Europe’s eastern defenses. It also ignores the reality of Russian strategic culture, which views any “goodwill gesture” as a concession — an opponent unilaterally giving up leverage would be perceived as a sign of weakness to be exploited. There is also an obvious strategic issue related to enriching one’s enemy: Any significant Western assistance or attempts to “buy” moderation would bankroll Russia’s rearmament and expedite the next confrontation.

Nevertheless, the fault lines between Western governments over financial containment policies are growing, all while the Kremlin is actively soliciting the return of Western companies. There was never true consensus on how to respond at the beginning of the war, and even less beforehand; with the erosion of the trans-Atlantic alliance and of multilateralism more broadly, a postwar landscape of incoherent and divergent Western policies seems all too likely.

This is the future that Putin is gambling on: one just like the past. For two decades, Russia used its access to Western capital markets, supply chains, and energy networks to exfiltrate intelligence, cultivate political proxies, manipulate energy prices, and embed oligarchic influence from Berlin to “‘Londongrad.” Reopening those channels would recreate the same vulnerabilities that weakened NATO’s deterrence posture and enabled the invasion of Ukraine. Even in peacetime, trade with Russia poses significant risks: The Kremlin has been described as a “criminocracy,” which financially endangers Western business assets and poses a permanent risk of contaminating healthy economies with corrupt business norms. On the flip side, Moscow frames Western influence as corrosive to Russian social cohesion, justifying sweeping constraints on non-governmental organizations, media, education, and cross-border engagement as a fight to protect Russian traditional values. Deep integration with any liberal democracy would undermine the ideological boundaries upon which the regime bases its authority.

That may be the crux of the challenge with economic and financial statecraft: Nearly everything is a two-way street. Economic engagement creates leverage for both sides, while cutting off trade imposes costs on both (though rarely in equal measure). Peace also goes both ways: Relations with Russia ought to acknowledge that Russia does not consider itself to be at peace with the West and Russian actions will continue to reflect this belief system, with significant implications for strategy and deterrence.

Unlikely though it is, even change at the top would not be enough. There have been too many years of purging moderates and crushing democratic sentiment for Putin to be replaced by a leader of meaningfully divergent values — and even the most prominent dissidents share anti-Ukrainian views, so a democratic transition would not guarantee geopolitical moderation.

Now or after the war, the structural economic and strategic risks of reinvestment in Russia overwhelmingly outweigh any plausible gains. The two are toxic to one another: Neither is likely to achieve its core objectives through economic détente and both would immediately face more risk through rapprochement. Washington should distrust any Russian economic overture, but the Dmitriev package is a particularly obvious Trojan horse.

The Takeaway

Negotiations notwithstanding, Russia has little reason to truly end the war — and significant economic incentives to sustain one. Whether through continued operations in Ukraine, renewed territorial revisionism elsewhere, or an expanded campaign of hybrid and sub-threshold activity, Moscow’s militarized economy has created a self-reinforcing dynamic that resists de-escalation. There is no realistic path back to the pre-war status quo and attempts to engineer one would only undermine Western security interests.

Bailing Putin out at the precise moment that Russia’s economic vulnerability becomes a viable point of leverage would cement Russia’s strategic gains from the war and, ironically, increase the probability of future conflict. The Dmitriev package won’t change the fundamental nature of the Russian economy, and it only has real value to Russia to the extent that it is implemented. Given the likelihood of a discontinuity in foreign policy between the Trump administration and its successor, the benefits to Russia are unlikely to be durable or fully realized. Russia knows this, so regardless of the scale of any agreement, the chance of demilitarizing the Russian economy remains close to zero. In any event, the proposal is ludicrous in scope. Russia’s GDP is a meagre $2.5 trillion and, to date, the single largest economic commitment of the Trump administration was the $1.2 trillion deal with Qatar, making the Russian figure of $14 trillion nearly impossible — but some form of a post-war reconstruction package may be on the table, despite the risks.

Continuing conflict while maintaining an illusion of economic collaboration is currently the Kremlin’s lowest-risk path. A lasting peace is possible only when Russia is forced to abandon the economic logic of permanent confrontation, and the West ceases to entertain the political logic of appeasement. This should give Washington a clear strategic mandate: to defeat the opponent, secure Ukraine within Western defense architectures, and demonstrate that democracies still take collective security seriously. Western governments should exploit Russia’s weaknesses and shore up their own defenses while sustaining economic and financial controls after the war. If the West wishes to buy peace, it should invest in weapons for Ukraine, rather than seeking an illusory peace settlement. The only relevant question to ask when considering easing the pressure on Russia should be: What strategic concession has Russia offered in return, and how easily can we hold them to it?

Emma Isabella Sage is a co-founder of the research software startup LIVINI and a research affiliate at the University of Glasgow. She is a 2026 International Strategy Forum fellow and was the 2025 Young Professionals in Foreign Policy Rising Expert in National Security. Her work has been presented at GLOBSEC, submitted as evidence to the United Kingdom Parliament, and discussed on U.S. national television. She writes regularly on counterintelligence, geoeconomics, and irregular warfare.

Savannah Taylor is a risk and compliance consultant for a global firm located in Washington, D.C. She previously worked in Global Partnerships for a technology startup in Frankfurt, Germany, and has conducted various project work in the United States, European Union, and the Middle East. She is a 2025-2026 Future Leaders Fellow under the Euro-Atlantic Resilience Centre and was a 2025 Young Professionals in Foreign Policy rising expert in economics.

Image: Kremlin.ru via Wikimedia Commons