Econ Data, FSB Excesses Reveal Putin Regime Failing Like Historic Dictatorships

The history of dictatorships has been scrupulously studied and their social, economic and military trends are well understood. What makes that applicable to today's Russia is that recent economic events and authoritarian actions are consistent with the historic record of such regimes in their final stages. This does not necessarily mean that Putin's leadership is in imminent danger of collapse but that without changes it could signal a downward spiraling.

The key appears to be simultaneous overlap of severe economic problems, military failure abroad, primarily in Ukraine, and the consolidation of power by secret police agencies directly controlled from the Kremlin which is meant to forestall discontent, let alone protest, among elites as well as the common people. While this may work in the short term, it is unlikely to prevent broader and deeper challenges to the ruling clique as conditions inevitably worsen. JL 

Jason Smart reports in the Kyiv Post:

Economically, militarily, and socially, Putin’s regime is cracking. In June, oil and gas revenues plunged 34%. Moscow real estate sales crashed 42% in May. Restaurants saw a 33% collapse in traffic as food prices spiked 50%. In six months, $3.7 billion in loans defaulted. Ukrainian drone strikes signal he can no longer guarantee the war is “somewhere else.” Authoritarian regimes consolidate power in their final stages by turning inward. Now Putin, as dictators before him, is consolidating control. It signals he no longer trusts his institutions - the police or military - and is handing raw power to the only organ he truly controls: the secret police. The FSB consolidating power, ministers dying, the military failing, oil giants drowning, the ruble teetering, the people broke, the regime looting its own welfare fund to keep zombie firms alive is systemic failure.

Today, once again, Ukrainian drones struck Moscow. Airports were closed. Russian air defenses fired and Russian social media lit up with panic. But the real story isn’t just about a drone strike.

It’s that the Russian state is collapsing – structurally, economically, and psychologically. Not just on the front lines, but deep within the Kremlin’s own walls. Economically, militarily, and socially, Putin’s regime is cracking.

Putin wants the world to believe he’s weathering the storm. But the reality is this: His regime is bleeding from every artery.

 

Now Putin falls back on his instincts, to do, as many dictators before him: He is seeking to consolidate control, relying on those he trusts.

The secret police are seizing power

 

On July 8, the Russian Duma passed a law granting the FSB – the modern successor of the Soviet KGB—the power to build and operate its own private prison system. This marks a historic and chilling shift in the architecture of Russian state power.

For the first time since Stalin’s NKVD, Russia’s secret police now bypass both the Ministry of Justice and the Ministry of Internal Affairs. No military agency, no civilian ministry – not even Putin’s national guard – has this privilege.

The FSB now controls the arrest, the investigation, and the imprisonment of anyone it targets. This is not merely centralization – it is the consolidation of a parallel state, one that operates outside constitutional oversight, legal restraint, or public transparency.

 

It signals that Putin no longer trusts his own institutions – like the police or military – and is handing raw coercive power to the only organ he truly controls: the secret police.

The Kremlin is arming the FSB with unchecked tools of terror, because the regime’s foundations are too rotten to hold without force.

Authoritarian regimes consolidate power in their final stages by turning inward – by elevating fear over law, repression over governance. This move by the Duma is not about managing criminals. It’s about preparing for mass purges, silencing dissent, and locking down the collapsing state through intimidation.

 

Private FSB prisons mean whistleblowers vanish without trace. Rival factions are neutralized without trial. Even ministers are now expendable. The Kremlin is arming the FSB with unchecked tools of terror, because the regime’s foundations are too rotten to hold without force.

In modern Russian history, the last time an intelligence agency wielded this kind of unilateral power, the result was the Great Terror. Today, it’s not ideology that drives it – it’s regime survival.

Russia’s economic core is imploding

Russia’s energy empire – the financial backbone of the regime – is unraveling. In June, oil and gas revenues plunged by nearly 34%, forcing the Kremlin to more than triple its projected 2025 deficit.

Urals crude is now trading at just $52 per barrel – far below the $70-per-barrel baseline baked into the federal budget. For a state that relies on oil and gas for almost 40% of its revenue, this is not turbulence. It’s structural collapse.

Industry profits have cratered. In Q1 2025, Russia’s oil and gas sector saw a 50% drop in net profit. Rosneft’s income fell by 7.6% year-on-year, while Lukoil reported a 26.5% decline in net profit over the last fiscal year. The sector is bleeding from every direction – hammered by sanctions, price caps, tanker blacklists, and shrinking demand.

 

Even coal is buckling. Russia’s state railways announced they would not renew coal export agreements with major mining regions, threatening to derail one of the last profitable sectors left.

The contagion is spreading across the domestic economy. Moscow’s real estate sales crashed by 42% in May. Nationwide, developers are freezing projects. Restaurants have seen a 33% collapse in foot traffic – even as food prices spike by up to 50%.

The middle class has stopped spending. Construction is stalling. Private capital has exited. This isn’t stagnation – it’s a consumer economy in full retreat.

To cover the widening fiscal crater, the Kremlin has already burned through nearly $6 billion from the National Welfare Fund in the first five months of 2025 – more than half the amount spent in all of last year. Economists warn that if trends continue, the fund will be empty by 2026. But the crisis doesn’t stop there.

The ruble is cornered. Analysts now warn that it must be devalued to 120–130 per dollar to stabilize government finances. But doing so risks triggering a bank run – ordinary Russians pulling their savings to avoid losing everything. Meanwhile, household credit has collapsed. In just six months, over $3.7 billion in delinquent loans were handed to collectors. Not postponed – defaulted.

 

This isn’t just fiscal strain. It’s systemic breakdown. And the worst may not be behind Russia – but just ahead.

The Kremlin’s elites are under pressure

Just hours before Russia’s new FSB powers law passed, Vladimir Putin abruptly fired his transport minister, Roman Starovoyt. That same day, Starovoyt was found dead of a gunshot wound – labeled a “suicide,” despite reports suggesting he died before his official dismissal.

Starovoyt had been under investigation for embezzling nearly $246 million intended for fortifying defenses around Kursk, a region bordering Ukraine. When Ukraine attacked, those fortifications failed catastrophically – because they had never been built.

Ukraine pushed across the border, occupying parts of the region. Starovoyt didn’t steal that money alone. A heist of that scale required coordination with senior officials in the military and intelligence services.

Now that corrupt system, sensing its own vulnerability, is cannibalizing itself. Starovoyt is just 1 of over 30 Russian insiders who have died “suddenly” since 2022. And the purge isn’t stopping at bureaucrats.

 

Just a day earlier, in a dramatic escalation of state seizures, prosecutors moved to nationalize Yuzhuralzoloto – Russia’s third-largest gold producer. Its owner, Konstantin Strukov, a United Russia party leader and regional assembly deputy, now faces charges of illegally acquiring and siphoning off company assets to relatives abroad.

The FSB raided his firm, citing “environmental violations,” but the real motive is clear: in Putin’s Russia, loyalty no longer guarantees safety. The regime is devouring oligarchs and officials alike – not just to tighten control over strategic industries, but to eliminate witnesses before the economic collapse turns into political collapse.

Ukraine is bringing the war to Russia

Ukraine is no longer just defending its territory – it is taking the war deep into Russia. On July 5, a Ukrainian drone strike hit the Borisoglebsk airbase in Russia’s Voronezh Oblast, a key site used for training pilots on Su-34 and Su-30SM fighter jets.

The strike ignited fires that burned for nearly two days, reportedly damaging a bomb storage facility and at least one aircraft. Satellite imagery showed significant heat signatures following the blast.

 

This was not an isolated incident, but part of a growing campaign by Ukraine to degrade Russia’s military capabilities far from the front lines.

Over the past weeks, Ukrainian drones have reached targets across the Russian interior – from Belgorod to Kaluga, and deep into Moscow’s suburban airspace. These strikes have triggered temporary airport shutdowns and exposed vulnerabilities in Russia’s layered air defenses.

The Kremlin can no longer guarantee that the war will remain “somewhere else.” The illusion of safety inside Russia’s borders has cracked. Ukraine is doing what Putin cannot: projecting force into the enemy’s homeland.

And with each successful strike, the psychological cost for Moscow compounds – revealing that not even 11 time zones of distance can protect the regime from its own war.

This is the endgame

The FSB is consolidating power. Ministers are dying. The military is failing. Oil giants are drowning. The ruble is teetering. The people are broke. The regime is looting its own welfare fund to keep zombie firms alive.

This is not just economic trouble. It’s systemic failure. As Russian propaganda grows louder, its objective is unchanged: divide the West.

Putin’s last hope is twofold – tighten his grip at home, and deceive the West into believing the Kremlin’s lies. That’s why I’m honored to advise Ukraine’s Centre for Strategic Communication, led by Ihor Solovey – the world’s top team for dismantling Russian disinformation.

Their mission has never been more vital. The truth that Putin seeks to hide must be exposed.

Putin’s regime isn’t transitioning. It’s collapsing. From every direction.