Russian state bank dismisses economist who warned of losing war of attrition

Russia's state development bank VEB has dismissed its chief economist, Andrei Klepach, after he publicly warned that Moscow was losing the economic and technological race against the West and China, according to two sources familiar with the matter.

Klepach, one of Russia's most prominent macroeconomists, made the remarks at a financial forum in May, but they were only reported in Russian media last week. VEB confirmed in a written response that he was no longer chief economist, without giving a reason. Klepach, who had held the role since 2014, also confirmed his dismissal.

In his speech, published on the website of the Nikitsky Club, a forum of economists and officials, Klepach said: "We are falling behind. We are losing both the technological and economic competition in the world. And we are losing it not only to China and the United States, in some ways we are losing it to Ukraine too." He attributed Ukraine's edge to Western financial support.

He predicted that Russia would not win the "war of attrition," saying: "We have the illusion that everything there will collapse. It has not collapsed and will not collapse. Our costs are mounting." He also warned of a possible social crisis.

The speech was a rare public critique from a senior figure at a state institution about the costs of the war that Moscow launched in 2022. Klepach, who worked at the economy ministry for a decade before joining VEB, also criticised Russia's over-dependence on China and said uncoordinated monetary, budgetary, and industrial policy had contributed to the economic slowdown.

He pointed to rising income inequality and slower GDP growth than in the U.S. and Ukraine. In July, the central bank suggested the economy might not grow at all this year. Repeated Ukrainian strikes on Russian oil refineries and warehouses have created supply shocks, raising inflation risks and public unease.

President Vladimir Putin has said the economy is stable despite external attempts to undermine it. Klepach, however, said: "Economically we will not collapse, but our lag will continue to grow, with all the resulting consequences." He added that a social crisis could arise "precisely when nobody is particularly expecting it."

There is currently no sign of serious social unrest in Russia, amid tight censorship, protest bans, and long jail sentences for dissidents. Klepach also said the quality of governance was "almost constantly deteriorating," with decisions made that have "extremely low level of justification but long-term strategic consequences."