Note: Images available at original link above. – Natylie
So I want to begin with a simple question for you, dear reader.
When you see the terms “humanitarian aid”, what images immediately come to mind? It’s relatively subjective. Some might picture medical tents setup in some remote outpost of civilization treating fever or a contagious disease. For others, it might be grain shipments, water shipments to starving people in times of famine, or emergency housing after a natural disaster. Blankets for refugees. It could be any number of things meant to alleviate human suffering. But odds are, it’s something good. Something humane.
And it’s under that simple premise, I’d like to introduce you to but one of several Ukrainian “charities” currently operating in the United States, 1Team1Fight, and their definition of “humanitarian aid”:
(Screenshot from 1Team1Fight’s co-founder, Dmitro Drei’s Twitter/X account 1/9/2024)
Now let’s go back in time. The first half of 2022, as the Russians had freshly invaded Ukraine. A former Estonian sales manager named “Harri” found himself waiting at a checkpoint between the two countries, already delivering body armor on behalf of an Estonian aid organization when, according to Estonian publication “Postimees”, Harri came up with a business plan to help bring in equipment for the military to fight the war, with “the funding scheme and social media strategy playing an important role”.
But despite helping to found the organization he was already working with, “Ukraine Aid Ops”, Harri wanted to take the effort in a different direction, apparently, as by the latter half of the year, a chance encounter in a Kyiv taxi would put Harri in touch with Dmitro. You see, Dmitro had been forced – according to the story – to driving a taxi after Russians had reportedly shelled his private business. Assuming anyone had the motive to get back at the Russians in a substantive way while developing a stable income, Dmitro would.
And so, with indications of some resentment between Harri and Ukraine Aid Ops, they parted ways and the independent 1Team1Fight began in earnest. Just two guys – a local Ukrainian who knew the lay of the land, and Harri, motivated to start receiving donations and expand the catalogue of equipment they were able to provide. A few months later, in 2023, 1Team1Fight then expanded it’s operations in the USA, filing for and receiving approval as a non-profit 501(c)3, allowing any donations received to be labeled “humanitarian aid”.
I hope it’s rather explicit where my concern is. You see, after doing just a bit of light research, it’s rather evident that equipping a foreign military for combat operations is NOT a cutout that’s been made for Ukraine. Generally, equipping a foreign military alone wouldn’t, but after years of their fundraising efforts, it’s clear what type of equipment has been provided.
“Kamikaze drones”, cheap, consumer-grade drones, likely put together by civilian volunteers with the aid of 3D-printed parts, meant to drop munitions on the enemy. All sorts of equipment is ran through 1Team1Fight to the Ukrainian military: thermal sights. trucks. ATV’s. laptops and Starlink systems,. By browsing their social media on Twitter/X alone, you can find the organization and it’s members frequently boasting of and showing images of equipment meant to fuel combat operations and make the military more effective:
(Screenshots from 1Team1Fight’s Twitter/X account)
After gaining 501(c)3 status, both Harri, Dmitro, and the organization began proudly displaying it on their website and almost every social media post, reminding those inside the US that donations could be written off as charity under US tax code, and that their affairs were managed by a certified public accountant. Again, being a public charity, this information was easy enough to verify so I reached out to the person listed on their documentation as being the CPA.
Curious to have a conversation with this person as to what in the US tax code allowed a cutout for funding the Ukrainian military’s equipment needs, I contacted the CPA who was a bit confused as to why. You see, she had apparently only been approached to establish the charity, and had no ongoing responsibility of monitoring their donations or preparing their tax forms. Which makes it even stranger, considering her name was associated as the CPA filing on behalf of the charity for both 2023 and 2024. The CPA assured me this was done without her knowledge and participation and that she would reach out to the IRS to have this corrected.
Deana is but one of two directors listed in the US for the 501(c)3. Neither she, nor the other, seem to have much of a public footprint, but one thing is clear. Reviewing her timeline on social media shows an almost rampant furor on behalf of the Ukrainian cause.
Now, in all this, I attempted to make contact with all three of these individuals, Dmitro, Harri, and Deana. Naturally, in Ukraine, to receive a beneficial tax status for equipping their military is a bit different. They have a vested reason to allow more favorable tax status to organizations providing weaponry and aid. Our system, not so much.
Harri was the least forthcoming of them all. When I brought up simple questions as to how this is allowable by US tax code, I was blocked on social media. Dmitro, for his part, was kind enough to reply, but when asked about the equipment he was purchasing qualifying as humanitarian aid, only had thinly veiled threats to “come visit him” and slurs in response:
Deana Brown, the US-based director of the organization, for her part, replied to my emails, simply telling me I had “wrong information” about them, and that she wouldn’t respond to drama or attacks. She did note that I should pay attention to other groups, like hers, currently operating in the United States. Sort of a “everyone else is doing it so why can’t we?”, as I took it, and told me to spare myself the embarassment.
Now, as it appears that donations are dying down the longer the Ukraine war continues to harangue Eastern Europe, though, it does seem that “Harri” himself has, in the past few weeks, decided to jump ship once again, leaving the organization for greener pastures. Maybe he feels like it’s not a viable business plan any longer. Maybe he’s concerned about scrutiny eventually sneaking in. No way to really know.
I make no secret that I’ve never seen the point of US government spending on Ukraine, unless it were to provide the basics of what, I argue, is normally defined as “humanitarian aid”. Relief for the injured and the displaced. Medicine. Heating for those without power. But it doesn’t sit well that this group, amongst others, is operating in the US, freely soliciting donations on social media with the disclaimer that they are a tax-exempt charity managed by a certified accountant, when indeed, they are apparently not.
Over $200 billion was spent during the Biden administration on Ukraine, enough, in theory, to provide a $200k home to every single homeless American man, woman, and child. This, without Ukraine being a US ally or having a treaty between our nations requiring that we provide so much as a dollar for their material defense. In our current economic situation here in the US, I feel it lax oversight that would enable groups like this to continue taking from the American tax system to benefit a foreign fighting force in combat operations.
So I leave it up to you to judge. If you, like I, believe that this activity is questionable (at best) and, as a responsible citizen, I plan to make both the IRS and the State of Florida aware of what I’ve learned and I would encourage you to reach out to them as well, as a thorough review of ther tax situation may be warranted. Please note I will continue digging into 1Team1Fight as well as the other, larger Ukraine aid organizations operating here in the USA, each with a distinct set of curious connections to NAFO and other well-known figures in the Ukraine propaganda sphere.
If you like the work, please feel free to support what I do on the main page of Buymeacoffee, as it’s always appreciated. I’m really interested in approaching the bigger groups, and any assistance helps buy me time to focus. Either way, I appreciate you for reaching the end.
It has been difficult for me to accept and to write about the impact of this illegal, dangerous, and highly complex war. Hopefully, this essay will help me get back on track.
The immorality and utter savagery of this war, both on Iran and Lebanon, is deeply troubling. It does not bode well for future world peace. The war was launched during peace negotiations, killing the Iranian negotiators, making future negotiations difficult. The US wants to end the war without resolving the underlying issues or accounting for the damage to Iran or the Gulf region.
The consensus within the US financial elite is that the war will end in 2 to 4 weeks, and that the closing of Hormuz will not be a major issue. What if this consensus is incorrect, the damage is greater, or the war continues for several more months–or even longer?
As this Substack has discussed the American economy is massively dependent on the AI buildout with trillions in venture capital pouring into artificial intelligence and building data centers. AI is not currently profitable, consumes a lot of energy, and the data center build out is facing growing public opposition as the public backlash to data centers continues to grow.
Oil industry and other experts have just begun to acknowledge that a crisis from Hormuz closing is now within sight. It could end up involving vastly rising energy costs, disrupting agricultural supply chains, and straining global transportation networks. If this happens, it will force Big Tech to face up to the AI profitability crisis. The sector that was supposed to carry the US economy forward is currently structurally unprofitable, dependent on cheap energy and stable supply chains, both of which are now under direct threat. The war is placing the AI bubble under stress at the worst possible moment.
This is similar to the internet bubble of the late 1990’s. Many of the high-flying internet stocks crashed in 2000, but the crash did not impact the long-term future of the internet. People like Elon Musk and Eric Schmidt may be correct that artificial intelligence, as a technology, will dominate and radically change the future. The tools will improve. Applications will find footing. The real question is whether the continuation of this war will disrupt the financial edifice built around AI, the expectations, the capital allocation, and the growth assumptions, especially if those assumptions are predicated on a world of cheap energy, stable geopolitics, and endless scaling. The war on Iran has called that world into question, at least for now. As this essay will demonstrate, the billionaires and the financial players do not see the Iran war as a threat, even as it eats into the financial security of most Americans.
Will the effect of the Gulf War be to reinstate the primacy of the physical world over the virtual world? Will other consequences lead to the bursting of the AI bubble? The answer to these questions is currently unknown.
Energy Shortages Begin to Bite
We finally have a time frame for when inventories will be drawn down and shortages begin to bite–June–oil executives and industry insiders are warning that the world is heading for an energy and global trade shock if the maritime chokepoint of Hormuz remains closed for another month
Here’s Bloomberg on May 9th: “The world has burned through oil inventories at a record speed as the Iran war throttles flows from the Persian Gulf, eating into the very buffer that protects against supply shocks.”
“The rapidly shrinking stockpiles mean that the risk of even more extreme price spikes and shortages is getting ever-closer, leaving governments and industries with fewer options to cushion the impact of the loss of more than a billion barrels of supply, two months into the near-closure of the Strait of Hormuz. The sharp depletion will also mean the market stays vulnerable for longer to future disruptions even after the conflict ends.”
“Morgan Stanley estimates global oil stockpiles dropped by about 4.8 million barrels a day between March 1 and April 25 — far exceeding the previous peak for a quarterly drawdown in data compiled by the International Energy Agency. Crude accounts for almost 60% of the decline, and refined fuels the rest.”
“Crucially, the system also requires a minimum level of oil, which means that the “operational minimum” is reached long before the inventories hit actually zero, said Natasha Kaneva, JPMorgan Chase & Co.’s head of global commodities research.”
““Inventories are acting as the shock absorber of the global oil system,” she said. But “not every barrel can be drawn.””
Here’s the litany of warnings over just the last few days:
—Chevron CEO: “We’re starting to see risks of supply outages in some of these economies.”
–Frederic Lasserre, head of research at Gunvor, one of the world’s largest oil traders, warned earlier this week: “The tipping point is clearly June. This is the point at which something has to give.”
–JPMorgan analysts warned that the world is spiraling toward a catastrophic cliff-edge shortage of crude oil if the maritime chokepoint is blocked for another four weeks.
–Here’s Maersk CEO on CNBC’s “Squawk Box Europe” last week, saying a “new wake-up call“ has emerged beyond energy markets and that if the Hormuz chokepoint remains shuttered, it could severely impact global trade in the coming months. Clerc was speaking to CNBC after Maersk reported a plunge in profitability and kept its guidance unchanged but warned that the US-Iran war and the resulting Gulf energy shock are “dominant forces shaping the macroeconomic outlook, as well as the trade and logistics environment.”
JPMorgan’s Kaneva warns that inventories in the Organization for Economic Co-operation and Development could reach “operational stress levels” early next month, if the strait doesn’t reopen, and then “operational minimum” floors by September. That’s the point when the world hits the bare minimum amounts of oil needed for pipelines, storage tanks and export terminals to function properly.
The chart below provides the duration variable. They are operational stress level by June, operational floor by September. This is the hard infrastructure timeline. The forward question is whether absorption outlasts depletion. The data here says 4 months to test it. This is a relatively short time frame.
• “It’s not going to be a short-term issue, because it can’t be easily solved,” Matt Smith, director of commodity research at Kpler, the energy data and analytics platform, told Forbes, having likened the jet fuel shortage to a “slow-motion car crash.”
* “We’re going to be in crisis mode,” John Gradek, who teaches aviation risk management at McGill University, told Forbes, noting “the industry has never seen this before, where the actual supply of the product needed to support aviation, that pipeline, is drying up.”
* Europe’s jet fuel inventories are expected to dip below the International Energy Agency’s critical 23-day shortage threshold sometime in June, according to a recent Goldman Sachs research note to investors.
What about other inputs
The above discussion focuses mainly on oil and certain derivatives such as jet fuel and diesel; other inputs are equally important such as shortages of fertilizer, plastic, and the other inputs discussed in previous essays.
Plastics are needed for endotracheal tubes, syringes, pill bottles, IV kits, CPAP and BiPAP headgear, ventilators, peel-apart bags, water-proof gowns and drapes, trash bags, bags for dripping blood, antibiotics, etc., chucks, dialysis ports, gas sterilization, and on and on. Shortages could greatly affect the one-use, disposable, sterile protection of many of these products. The impact could explode the cost of medicine.
Then there’s fertilizer and the prospect for food shortages.
The biggest impact on food availability is likely to be in West Asia, Africa and South America. Here’s a report from Thailand by Rebecca Tan: “Thailand is one of the first ag countries to enter a planting season since the Iran war. We went to document the impact of supply shocks to fuel/fertilizer — It was worse than I anticipated. Farmers are leaving huge tracts of land barren because they can’t afford to plant.”
What will this mean for global food security in the future? If crops are not planted now, it means less food will be harvested.
The Damage Could Be Long Term
There has been a great deal of discussion about the potential damage to Iranian energy assets if Iran is forced to stop pumping oil. Iran disputes this and even US intelligence has said that Iran can hold out for at least another 3 to 4 months.
What about the damage this shut in has caused to other gulf suppliers like Iraq, Bahran, Qatar, Kuwait, Saudi Arabia and the UAE. The Saudi’s and UAE have pipelines that can avoid Hormuz, but it will take time and money for the other countries to resume production.
The issue of confidence cannot be discounted. When will insurance become available, when will transport companies be willing to expose assets and crews to transit Hormuz.
It will take time and a real peace deal to resolve these issues and get gulf energy production back to where it was before February 28th. This may take much more time that market players assume at this time.
US Financial Elite–What Me Worry?
Financial traders point to this contradiction; if the US and the world is facing an energy and economic shock, why is the US stock market hitting new highs? Financial players do not see the closing of the Strait of Hormuz as a threat to US markets. They point to ample liquidity and the fact that global financial flows still favor US markets. Some acknowledge the potential for a short-term squeeze in immediate delivery, but the market does not expect it to last. For example, the future’s contract for April 2027 oil delivery is only at $74 a barrel.
Big finance does not see Hormuz as a threat to economic growth: OECD/IMF forecasts show global GDP growth cut by 0.3–0.5% or more in 2026. This decline is just a rounding error for GDP forecasts. Such a decline is trivial and an indication that there is NO Global Economic Crisis. It is also noted that the Iran war took place at a time of oversupply and falling prices in the oil markets. Mr. Market anticipates that in 3-6 months oil traders will work out new ways to spread the oil around.
According to the Financial Times, the former “Predators Ball” organizer i.e. the Milken Economic conference, was characterized byexuberance as the financial elite basked in the glow of roaring US financial markets. One “high-powered banker” asked, “Does anyone really care if the Strait of Hormuz is open?”
Insulated by their wealth and social position, the Financial Times reported that attendees were living in “blissful ignorance” of the economic pain hitting workers in the US and around the world. Ted Koenig, chief executive of Monroe Capital, told The Financial Times that, while people at the conference were vaguely aware of the suffering of middle-class and working-class Americans, “at the end of the day, everyone’s focused on their own investment portfolios, especially here”.
Is big finance right to be unconcerned? After all, many past scares turned out to be non-events–this one may as well. Yet, war has changed, for example, during the last Hormuz crisis in the 1980’s (the tanker wars) there were no drones or cheap missiles. US war ships could safely escort tankers. This is no longer possible. Also, most traders today have never witnessed a disruption of this magnitude. You have to go back to the 1970’s and 80’s to grasp the potential impact. Then, the oil embargoes led to a decade of high inflation that ended only when US interest rates were raised to 20%–something that would be impossible today given current debt levels.
According to Jeff Currie, every analyst he speaks with calls the current disruptions unprecedented across supply chains. Yet oil and other commodity prices remain strangely calm, as if none of it matters. The market’s dangerous disconnect could be correct or it could be due to flawed assumptions and short-term thinking. It could soon prove catastrophic.
The result, according to Jeff Curie, is that markets are discounting this crisis because of recency bias, surface-level notional metrics, and a total failure to respect volumetric shocks that actually move the real economy. If this is correct, the calm you see today is simply the quiet before inventories run dry and reality hits hard.
US Consumer Sentiment
While the mood at the Milken conference may have been buoyant thanks to the record-setting stock market, fresh data released Friday showed Main Street America is feeling the exact opposite. The University of Michigan’s latest Surveys of Consumers found that consumer sentiment has hit another all-time low, driven in large part by anxiety over price increases caused by the Iran war.
“Taken together, consumers continue to feel buffeted by cost pressures, led by soaring prices at the pump,” explained Joanne Hsu, director of the Surveys of Consumers. “Middle East developments are unlikely to meaningfully boost sentiment until supply disruptions have been fully resolved, and energy prices fall.” Meanwhile, Tahra Hoops, director of economic analysis at Chamber of Progress, noted 30% of respondents in the latest Surveys of Consumers said that Trump’s tariffs were driving up their expenses.
McDonald’s CEO Chris Kempczinski said this week that signs of real strain are starting to appear. As CNBC reported Thursday, Kempczinski described the current economic environment as “challenging,” and warned that “it’s certainly not improving, and it may be getting a little bit worse. “The fast-food CEO pointed to high gas prices as a particular strain on working-class consumers, who are the most regular customers at McDonald’s.
It’s not only the fast food industry that is being impacted, According to a Thursday report from Market Watch, Whirlpool CEO Marc Bitzer said during a quarterly earnings call that the appliance industry had seen a 7.4% drop in demand in the first quarter of 2026.
“This level of industry decline is similar to what we have observed during the global financial crisis,” said Bitzer, “and even higher than during other recessionary periods.
Financial Valuations Remain Stretched
How stretched? Equity valuations sit at 172% above the long-term mean — higher than 1929, higher than 2000. This level of valuation measures risk, not timing. According to the Economic Long Wave Substack, from here, Economic Winter is no longer a forecast. It is an outstanding obligation. Many have warned about the impact of the financial engineering that has been employed to maintain the bull market in stocks–but so far–the bull market rules and the people forecasting an end to the bull market have been wrong.
The chart below, from Hussman Strategic Advisors, compares the market value of U.S. nonfinancial companies with the gross value added they produce. In simpler terms, it asks: How much are investors paying for each dollar of real corporate economic output? And right now, the answer is uncomfortable. Investors are paying one of the highest prices in modern financial history. Higher than 1929.Higher than the late 1960s.Higher than the dot-com bubble. Higher than 2007. Higher than 2021.That does not mean the market has to crash tomorrow. But it does mean the broad U.S. stock market is priced for a very optimistic future.
The most disturbing comparison is set out in the chart below between today’s market and the internet bubble of the 1990’s. Today, the S&P 500 is heavily concentrated. Ten stocks account for 40% of the market cap of the S&P 500. This is a very concentrated market. Most of the economic growth in the US economy last year from the growth of AI especially from the building of data centers.
The NASDAQ 100 and the S&P 500 continue to hit new highs. Meanwhile, Jonathan Krinsky with BTIG posted this chart comparing today’s market to the internet bubble:
Per Jonathan: “If we look at the top 10 performing NDX stocks in 1999, they were up an average of 559%. The top 10 in the year leading up to 3/24/00 were up an average of 622%. The top 10 NDX names over the last year are up an average of 784%, beating both the dot-com periods. The median gain is still 354%, which is less than the 455% into dot-com peak, but well above the ‘99
There are many differences between the two eras. But the chart shows that the most explosive corner of the market has already moved into dot-com-scale territory — and the cast list makes the comparison feel a little eerie.
In the year before the Nasdaq’s March 2000 peak, the index’s top performers included Strategy (MSTR), Qualcomm (QCOM), Sandisk (SNDK), Analog Devices (ADI), Lam Research (LRCX), Regeneron (REGN), Nvidia (NVDA), Cognizant (CTSH), Apple (AAPL), and Adobe (ADBE). Many of the same names are included today in Krinsky’s list. Hopefully, this time is different.
Conclusion
We can argue about the impact of the closing of the Strait of Hormuz, about whether US strategy is failing, Iranian strategy is succeeding, and how Hormuz has changed the balance of power and leverage in the gulf, but until there is peace, the global economy will be at risk.
Maybe Toynbee was right. Civilizations, as the historian Arnold J. Toynbee famously argued, “die from suicide, not by murder.” They collapse from within. They fall prey to moral, social and spiritual decay. They are seized by a parasitic ruling class. Democratic institutions seize up. The citizenry is immiserated; wealth is funneled upwards to the ruling class and coercion is the principal form of control.
Launching a public protest in Russia amid wartime restrictions can get a person fined and thrown in jail. But Lialia Sadykova, who runs a network of beauty salons in St. Petersburg, stumbled upon a work-around by accident a couple of months ago.
Ms. Sadykova was on the website of her organization, the Association of Beauty Industry Enterprises (APIC), posting an emotional commentary about the deteriorating economic conditions she was experiencing in Russia. Suddenly, others started joining in with tales of hardship.
A “digital flash mob,” where people congregate in online forums and chat rooms to share their grievances, was born.
The group began initiating actions on wider platforms. On VKontakte, the Russian version of Facebook, Telegram, and Instagram, users began posting their stories and reposting others’ as comments mounted. Their audience on Instagram at one point reached 360,000. “It’s become the symbol of thousands of small businesses on the verge of closure because of drastic changes to the rules of the game. We never had any idea it would be so big.”
Digital flash mobs have become a key tool for small-business owners in Russia to draw attention to a near-perfect storm of economic headwinds threatening to pull them under. Thanks in large part to the Russian government’s struggles to pay the escalating costs of the 4-year-old war in Ukraine, businesses are facing sky-high interest rates, labor shortages, falling consumer demand, persistently high inflation, toughening regulations, and huge tax hikes.
Russian government budget deficits have been exploding, with falling oil revenues in the first part of this year and growing war spending. They are estimated to be as much as 3.5% of gross domestic product this year. President Vladimir Putin recently admitted that Russia’s GDP shrunk by around 2 percentage points in the first quarter of this year. Taxes have been hastily raised, and formerly generous exemptions for small businesses have been retracted. Hence the flash mobs.
“The tax burden for the majority of small businesses has leapt between 30 and 80 times,” says Ms. Sadykova. “In our industry, profit margins are around 5 to 7%, and now are we supposed to work just to pay taxes?”
“We are Mashenka”
The protesters were inspired by the experience of one small-business owner, Denis Maksimov, who complained personally to Mr. Putin during the president’s annual public digital “town hall” last December. He said that he was being forced to shut down his chain of bakeries – named “Mashenka,” after his daughter – due to the tax burden.
The publicity, and a surge of new customers that followed it, convinced him to keep his bakeries open. Later, the government acted by temporarily exempting a whole class of food businesses from the newly raised value-added tax.
The flash-mob protesters call themselves “We are Mashenka” to underscore that they are in the same boat as Mr. Maksimov. “It’s great that the situation has improved for small businesses in public catering, but the problems remain for all the rest of us, whether we are in retail trade, services, or small educational establishments,” says Ms. Sadykova.
She adds that the changes to the tax code, which include a rise in the VAT, as well as the progressive removal of exemptions that were previously in place for small businesses, was sprung on them almost without warning. “When you’re in business, you have to be able to plan ahead,” she says. “They’ve changed the tax rules three times in the past four years.”
The digital flash mobs organized by APIC asked small-business owners to come online and tell their stories. “Mashenka represents hundreds of thousands of entrepreneurs across the country,” reads the movement’s mission statement, “[who] believed that if you work honestly, you can survive. … This is a systemic story that is happening right now.”
Ms. Sadykova says their online actions had at least half a million participants over two weeks earlier this year.
Kalinka Shoe Stores posted a typical commentary in an impromptu conversation on VKontakte in late January: “We remember [past] crises and hard times, but then our problems were caused by objective reasons. Now we are being ruined with laws and ill-considered decisions, which are made by specific people who think that they can raise a lot of money at once. … Listen to us before it’s too late! Because there are a lot of us ‘mashenekas’ out there.”
Russia’s gray economy
Small businesses in Russia have always existed on the margins, often living in semilegal limbo and subject to extortion from predatory bureaucrats. They are usually last in line for assistance from a state that favors big business, and the first to go bankrupt when an economic shock hits, such as the crisis of 2008 or the pandemic lockdowns. But circumstances have steadily worsened over the past year, with about a quarter of small businesses reporting that they were on the verge of bankruptcy in 2025, and almost a third saying so today.
Ironically, this crisis hits at a time when Russia has a record number of registered small businesses: 6.5 million, accounting for about 20% of GDP. The government has spent several years trying to coax them out of the gray economy with special tax rates, VAT exemptions, and easing of state regulations and inspections. Where official corruption and graft were routine in the past, few entrepreneurs complain about it today.
It’s a complicated issue, say economists, since many small businesses still have one foot in the gray economy and practice various dodges to hide income, avoid regulations, and stay below the tax collector’s radar. One common scheme is for a “medium-sized” business to break itself up into several smaller enterprises in order to take advantage of special income tax rates of 6% for small entrepreneurs and 4% for self-employed people.
“Our prime minister [Mikhail Mishustin] is a former head of the tax service, and he seems intent on squeezing more out of the small-business sector,” says Oleg Buklemishev, a prominent economist. The state also seems determined to roll back the contraband goods, unreported employment, and tax evasion of the gray market, which is estimated to be responsible for up to 25% of Russia’s GDP.
“However, the recent decision to make allowances for the catering industry suggests the government is listening, and might be prepared to show more flexibility,” Mr. Buklemishev adds.
Dmitry Gorelov is proprietor of “Northern Fleet Motors,” which he named after his favorite Russian rock band, “Northern Fleet.” He stands here in his workspace in eastern Moscow, April 6, 2026.
“All the risks are on me”
Dmitry Gorelov started his automobile service center, Northern Fleet Motors, six years ago. He says he keeps his head above water, but can’t expand mainly due to the shortage of skilled labor. Since the war began, workers can earn very high salaries in the military sector that he can’t match.
He pays the 6% tax rate and says he doesn’t feel any pressure from government inspectors. He subsists thanks to his loyal customer base, plus fresh clients that find him through new services such as Yandex Service, a kind of online Yellow Pages that links businesses directly with customers.
Mr. Gorelov says he works an average of 12 hours a day, but he enjoys it and he’s doing fine so far. “Some expenses are rising, but I just raise my prices to compensate. I make more than I would as a hired worker, but then all the risks are on me. No one will help me with my problems.”
With thousands of small-business owners signaling deep and even existential distress, analysts say that authorities may ease up a bit, but are unlikely to fully roll back the tax hikes.
The war in the Middle East and accompanying spike in energy prices may bolster the state budget briefly. But no one expects it to last.
“A lot of small-business people find themselves in a pre-bankruptcy situation. Popular moods are changing,” Communist Party Duma deputy Mikhail Matveev noted on his YouTube channel recently. “This is serious. When people can’t see any light at the end of the tunnel, that’s not just an economic problem.”
Russia’s economy slowed in the first quarter of 2026 broadly as policymakers had anticipated, but the Central Bank of Russia now faces a more complex task as persistent domestic price pressures collide with fresh geopolitical risks abroad.
In its latest Talking Trends bulletin, the CBR said the cooling was partly due to purchases being brought forward into late 2025 and to businesses and households adjusting to tax changes. Yet it added that February data suggested the early-year weakness in demand was “likely only temporary”, implying the slowdown may prove shallow rather than structural.
That leaves monetary policy in an awkward position. The bank said annual inflation in March was little changed at 5.9%, while underlying price dynamics remained elevated through February and March. The desired deceleration of current price growth to 4% annualised “has not happened so far”, according to the bulletin.
For investors, the message is that rate cuts may remain gradual. Markets had already been pricing further easing, helping shape trading in March and early April alongside stronger export commodity prices and the planned resumption of fiscal rule-based foreign exchange operations from July. At the same time, Russia’s government bond yield curve steepened, with longer-dated yields rising.
The deeper concern for the CBR appears domestic inflation persistence. It noted that real wages were still rising significantly faster than labour productivity in January. In the bank’s framing, that supports consumption growth but also risks keeping inflation sticky unless the gap narrows. This reflects a familiar central banking dilemma: incomes growth can sustain demand even as policymakers attempt to cool prices.
The external backdrop has become less benign. The CBR said the escalation of conflict in the Middle East had lifted prices for commodities exported by Russia. In principle, stronger exports can support the ruble and create a disinflationary effect. But the bank warned that higher domestic prices for export goods, increased import costs, more expensive logistics and supply-chain disruption could all push in the opposite direction.
It concluded that the balance between these forces was highly uncertain and would depend on the duration of the Persian Gulf conflict and the scale of lasting production or transport losses. Most of the pro-inflationary shocks identified were temporary or one-off, it said, but policymakers would need to watch carefully for second-round effects on consumer prices.
The recent two-day delay by Ukraine in extending state of martial law was largely the result of the need to adopt a reform of the Kiev’s brutal forced mobilization of men to fight in the beleaguered Ukrainian armed forces. On April 27th the Rada passed an extension of martial law and military mobilization until August 2nd on the basis of the standard three-month term, and Zelenskiy signed the law the next day. But without redressing the population’s increasing alienation from the war effort and the regime as a result of coerced mobilization of men to fight at the front, some deputies were unprepared to pass the martial law resolution. The violent recruitment process has included the killing and maiming of captured draft evaders, mass resistance against the mobilizers’ attempts to seize evaders, and even the use of firearms by both mobilizers and evaders resisting capture. This has raised a firestorm of criticism, resentment, and anger teetering on the edge of open revolt among the public, forcing Ukrainian leader Volodomyr Zelenskiy, the government, and the Verkhovna Rada deputies to at least feign an attempt to right the situation. Even the police are now hated by the public for failing to protect citizens against the mobilizers’ violent methods and often siding with the latter. Many are asking why can not the Rada deputies, government ministers, their sons, the 120,000 police, and 100,000 mobilization center press gangs be subjected to the draft.
Therefore, two days after martial law and mobilization both were extended Zelenskiy ordered a kind of army reform touching the mobilization system and an increase in pay for soldiers at the front from 100,000 to 250-400,000 griven/month and for those in the rear from 33,000 to 100,000 gr/mo. Zelenskiy’s instruction also called for establishing guaranteed rotation from the front to the rear for resting Ukraine’s exhausted frontline soldiers (https://strana.news/news/504704-voennoe-polozhenie-i-mobilizatsija-v-ukraine-prodleny-eshchjo-na-90-dnej-.html). There has been no such rotation for troops leading to the AWOL of some 300,000 troops from the front.
Zelenskiy’s reform envisages an unrealistic reform that would drain the number of troops serving on the constantly receding front lines and is based on increased expenditures Kiev cannot provide if it hopes to purchase weapons at the levels needed. A previous program provided a similarly advantageous remuneration for contract soldiers, which led to only several hundred takers over the course of months. Ukraine needs several hundred thousand new recruits this year at a minimum. Russia recently reported some 35,000 recruits per month this year. None are coerced; there is good pay promoting the number of contract soldiers and steady flow of volunteers.
The only thing that could make Zelenskiy’s army reform marginally workable would be a fundamental shift in the mathematics of Ukraine’s recruitment potential. Ukraine is lucky to garner 25,000 recruits per month. There are virtually no volunteers, and almost all of the mobilized men have been captured or otherwise coerced into the armed forces, hurriedly trained if trained at all, and deployed to the front wholly unprepared for what they are about to face.
The Ukrainian government has proposed reducing the number of people eligible for exemptions, which will not come close to increasing sufficiently the number of recruits but will increase the flight of Ukrainians, particularly men, abroad. Kiev may be counting on the new policy of many European states, including Germany, of terminating subsidies for Ukrainian refugees and returning men to Ukraine to be conscripted. However, the likely outcome of this is Ukrainian violence in Europe by those seeking to avoid de facto extradition to Ukraine as well as in Ukraine by those who are forced to return to their war-torn homeland or are ineligible for, or soon lose exemption or deferment.
The military-building process is further compromised by the massive corruption in the mobilization centers, where release (not exemption) can be purchased for large sums by those who can muster the funds. The process, therefore, has been totally discredited in Ukrainian society, prompting one symbolic search of a mobilization center by the Security Service of Ukraine (SBU). Any promise or empty demonstration by the Zelenskiy Maidan regime to root out violence or corruption in the mobilization process is plagued by its own massive corruption scandals.
The regime’s corruption crisis intensified recently with a new release of ‘Mindichgate’ tapes implication Security and Defense Council of Ukraine Chairman and former Defense Minister Rustem Umerov in corrupt purchases of bulletproof vests among other things. Thus, not only are close personal friends of Zelenskiy, such as Timur Mindich himself, his former chief of staff Andriy Yermak, and his top national security official, Umerov, deeply implicated in massive corruption schemes directly impinging on the military’s fortunes in time of war, but ultimately so are Zelenskiy and the entire Ukrainian elite (www.pravda.com.ua/rus/articles/2026/05/01/8032710/;
From the NABU wiretaps that were published two days ago, it clearly follows that the real owner of the company Firepoint is the corrupt official and criminal Mindich. Because of this, there are calls in Ukraine to nationalize this company and to deny it government contracts
In sum, it is unlikely if not impossible that the return of potential recruits and the decrease in the number of exemptions will stop the bleeding of the Ukrainian army. And it is even more unlikely that the Ukrainian public will see the prospects that the reform will change the dismal fortunes of the Ukrainian state and its embattled army in the NATO-Russia Ukrainian War. The extension of martial law and mobilization means only the prolongation the war agony, the intensification of Ukraine’s multifaceted ruination, and the polarization of relations between the regime and society. Kiev is caught in a self-feeding cycle of deepening crisis in which the war requires forced mobilization, which alienates the population from the regime and the war, which reduces willingness to fight, which requires intensifying forced mobilization. In other words, the war requires forced mobilization, and forced mobilization undermines the war effort and around and around again…until the end of either the war or Maidan Ukraine.
