Industrial Production Decline in Russia Accelerates, Intelligence Reports

The Ukrainian Foreign Intelligence Service (SZRU) has disclosed information indicating that at the start of 2026, Russia is witnessing a significant acceleration in the downward trends of its industrial production, contrary to the typically optimistic data released by Russian statistics. The pro-Kremlin Center for Macroeconomic Analysis and Short-Term Forecasting (CMACPF) has confirmed that the Russian industry is facing stagnation, which is causing serious concern among analysts.

According to data from Rosstat, industrial production showed a slight increase of 1.7% from December to February. However, as noted by the SZRU, estimates from the CMACPF indicate a contrary situation: following a brief uptick in December, production decreased by 0.6% in January, with a partial recovery in February. Overall, a decline of 0.3% was recorded over the three-month period.

The civil sectors of the Russian industry are experiencing a significant downturn at the beginning of 2026, as highlighted by the analytical center. In February, production of construction materials fell by 1.4%, black metallurgy by 1.1%, and machine engineering by 2.2%. The overall contribution of most sectors to the dynamics remains negative, with oil refining and metallurgy also showing negative indicators.

Intelligence reports indicate that the March PMI index from S&P Global fell to 48.3, marking the lowest figure in the past three months, compared to 49.5 in February. This suggests that production has been contracting for the 13th consecutive month, with export demand declining for five months. Purchasing activity has dropped at the fastest pace in four years, as companies reduce raw material purchases due to decreasing orders and rising fuel prices. Employment in the sector has decreased for the fourth consecutive month, raising further concerns.

The Russian metallurgy sector, long considered a stable source of foreign currency inflows and a flagship of the country's economy, has entered a systemic crisis in 2025-2026. Profitability across the industry has plummeted to 9.6%, falling below the cost of servicing debts. For instance, Urals Steel, a key city-forming enterprise in Novotroitsk, has shifted from a profit of 11 billion rubles to a net loss of over 22 billion rubles within a year.

The Russian tax service has been forced to manually postpone the collection of debts from court claims until the end of April to avoid halting operations and laying off 9,000 workers. Meanwhile, the metallurgy giant Severstal reported a fivefold decrease in profit and a 42% reduction in EBITDA.

Small and medium-sized businesses in Russia are facing a double blow: falling demand and increasing tax burdens. Nearly half of businesses experienced a collapse in profits in 2025. The number of entities in trade alone decreased by 11,500. Estimates suggest that another 250,000 to 300,000 enterprises may vanish in 2026.

Additionally, over the course of a year, wage arrears in Russia have increased by 1.7 times, totaling approximately 2 billion rubles. Experts estimate that 99% of payment delays are due to a lack of funds in enterprises. By the end of 2025, hundreds of thousands of workers were already on forced leave, creating social tensions.

The Ukrainian Foreign Intelligence Service stated that 'the only support for production remains state financing, but it does not ensure sustainable growth.' By the end of 2025, Russia's national debt had risen by 21%, or by 6.1 trillion rubles, reaching 35.1 trillion rubles. The internal debt increased by 29.1%, totaling 30.7 trillion rubles.

The decline in investment activity and domestic demand is accelerating the transition from stagnation to a full-blown recession, as emphasized by SZRU analysts. As reported by Ukrinform, a mass collapse of data center infrastructure has begun in Russia: outdated equipment is failing en masse, and due to sanctions and the costs of the war against Ukraine, Russia has effectively lost the ability to promptly and fully replace it.

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