The economies of Russia and Ukraine in the war

by Rounak Hande, Ayush Patnaik, Ajay Shah, Susan Thomas.

The war that began in February 2022 had substantial implications for the economies and measurement systems of both countries. Long-running wars, or strategic wars, are wars of attrition. These are shaped to an important extent by the working of the economy. The outcome on the battlefield relies on the ability of the state to foster a well functioning economy and produce or obtain adequate resources including soldiers and their supporting civilian teams, their food and health care, and their materiel.

The traditional understanding of strategic war, with its focus on the functioning of the economy and the productive capacity in the defence industrial base, has evolved and changed in this war. A new age of standoff weapons has given attacks deep inside Russia, the likes of which did not happen even during World War II. The sanctions imposed upon Russia reflect a new level of capability in economic statecraft, which was not in play in any important conventional war prior to this. These developments in the conduct of war encourage us to observe the facts as we see them unfold, and not go by our traditional knowledge about strategic war.

Understanding the true state of the economy is thus an important element of understanding the Russian invasion of Ukraine. Conventional economic measurement faces difficulties in this environment, which has encouraged an alt data literature in bring pieces of the puzzle together. A new paper Shedding light on the Russia-Ukraine War by Rounak Hande, Ayush Patnaik, Ajay Shah, Susan Thomas contributes to this literature by carefully harnessing night time light data to obtain fresh insights into the war. The major ideas from this paper are summarised here.

The difficulties of measuring economic activity through nighttime lights data

Alas, the simple economists' dream, of using nighttime lights data as an easily observed GDP proxy, has been belied. In previous work (Patnaik et. al. 2021), we found important gains over the conventional NASA/NOAA or World Bank data, through a bias-correction algorithm that thinks better about clouds.

There are unique problems in working with nighttime lights data for Russia and Ukraine. These include the far longitudes, gas flaring, and aurora borealis. We carefully solve each of these questions and develop a sound methodology for the measurement of nighttime lights in places like Russia and Ukraine.

Aggregate economic impact

At an aggregate level, how are the economies of Russia and Ukraine faring, after the war started?

The aggregate nighttime lights for Russia shows roughly zero growth from 2022 to 2025. As the Russian economy has been turned into a war economy with a significant increase in military expenditures as a share of GDP, the stagnation of nighttime lights suggests a decline in the civilian economy.

Figure 1: Time series of aggregate nighttime lights of Russia (measured in January):

Most Russian gas production takes place in the Yamal-Nenets Autonomous Okrug, and economic activity there has been strong, which runs against the conventional understanding that Russian gas exports have declined sharply.

With Ukraine, there was a sharp decline from 2022 to 2025. For both countries, 2023 was a low and then there has been some recovery.

These measures focus on the boundaries of the two countries. Their interpretation for the military aspects of the war needs to reckon with the extent to which relevant production capacity extends beyond the border. In Russia's case, North Korea is an important site for war production. In the case of Ukraine, the defence industrial base and the economy of Europe is available, as long as relatively few voters in Europe support Russia.

The economy near the front

Close to the battlefront, we expect a combination of the impact of fighting, evacuations, blackouts, destruction of productive capacity, and the presence of troops and their logistics tail.

The oblasts where the war is taking place, and Crimea, have fared surprisingly well. Perhaps the nighttime lights associated with the logistics tail of armies in action -- which cannot quite be interpreted as economic activity in the way that nighttime lights data is normally interpreted -- exceeds the adverse impact of destruction of the productive economy.

The footprint of standoff weapons

Further away from the battlefront, there would be an adverse impact upon the economy through the new level of presence of stand off weapons. Modern war is unique in the extent to which a trench is hard to overcome, but it is not that difficult to hit a factory that is 200 kilometres in the rear. Hence, we expect to see a footprint of standoff weapons deep into the backfield.

Figure 2: Difference in pre-war and post-war growth rates:

A growth reversal is visible in locations within Russia that are hundreds of kilometres inside the Ukraine border. The radiance at the regions of Russia near Ukraine contracted by 10-58.8%, while eastern regions maintained growth of 8-18.56%.

Reversal of gains from trade

At various elements of the Russian international border, the natural economic geography had unfolded in response to the proximity to economic activity across the border. The adverse impact upon the local economy, the distortion away from the natural organisation reflecting proximity to the economy across the border, is likely to vary based on the intensity of new restrictions imposed by the bordering country.

A growth reversal is visible in the map above, at locations near the border with European countries -- which have imposed sanctions more completely -- as opposed to the border with other countries.

Changing economic geography

Over the many years of the ongoing war, the economic geography has been reshaped through government and private decisions. Understanding this map of shifting economic geography is important from the viewpoint of understanding regional economics, and for resource allocation in long range strikes and in air defence.

Figure 3: Shifting centre of gravity of the Russian economy (map):

The Ukrainian economy has shifted West, away from the war zone. The Russian economy has shifted East, away from Europe and the war. There was an eastward shift of the economic center of Russia by 245 kilometers between January 2019 and January 2025. We are able to see maps of levels and growth rates of subnational nighttime lights that yield fresh insights into the working of the Russian economy.

Conclusion

Nighttime lights data is one tool in the arsenal of economic measurement. In combination with other pathways to measurement, this gives fresh insights into the Russian and Ukrainian economies, and insights into this important strategic war. We are at the edge of the seat, waiting to do our January 2026 update.

Reproducible Research

For transparency and reproducibility, all data processing and analysis for this study can be replicated using our open Google Colab notebook. The notebook allows users to download satellite data, run the code, and generate all results and plots in a fully reproducible cloud-based environment—no manual installation of libraries or dependencies required.

The vector boundary data and the notebook will be made available here:

GitHub repository
Google Colab notebook

 

The authors are researchers at XKDR Forum, Bombay.