I don’t think there would be too much debate among Americans and Europeans about who constitutes the Axis of Evil in today’s world. The hit parade would clearly consist of Russia and Iran with a bit more debate about China as the U.S. has trashed its longstanding alliances in favor of Trump’s latest tariff and power-grab whims. The lesser evils like North Korea, Venezuela, Cuba or Belarus SW1W not really on par with these bigger axis powers, so while they come up occasionally, they are a far lesser concern in daily life. But Russia and Iran are ever present with China getting lots of attention due less to any overt actions on their part (though that could change to a South China Sea action against Taiwan at any minute), and more because of its scale and very well known authoritarian orientation. In fact, due to the Ukraine and Mideast wars, Russia and Iran are, depending on who you or your loved ones are and where they are located, at top of mind almost every day. The U.S., based on its hemispheric isolation, wakes up less feeling like doom is impending than do the people of Europe and Israel, but that doesn’t stop us from thinking about it and wanting to head trouble off at the pass.
The biggest weapon unleashed by America against these two Axis members has taken the form of economic sanctions. While Ukraine has made us think that modern warfare is conducted completely via drones, the reality is the our most prevalent weapon of late has been the economic sanctions. These two economies make for a fascinating and somewhat parallel study in sanctions-induced stress, though they’re at very different stages of distress. That is based on their respective history of being sanctioned. These two countries have very different sanctions histories with Iran’s going back much further. Sanctions against Iran began almost immediately after the 1979 Islamic Revolution and the hostage crisis. President Carter froze approximately $12 billion in Iranian assets in November 1979. Those initial measures were largely lifted after the hostages were released in 1981, but a baseline of U.S. sanctions has remained in place ever since, covering arms, terrorism designation, and trade restrictions. The sanctions architecture escalated dramatically in waves. 2012 was a major turning point, when the Obama administration targeted Iran’s oil exports and central bank, effectively cutting Iran off from the SWIFT international banking system. This is when sanctions really began to bite economically in a serious way. 2015 brought the JCPOA nuclear deal, which provided significant sanctions relief in exchange for nuclear program restrictions. In 2018 Trump withdrew from the JCPOA and reimposed “maximum pressure” sanctions, which are the foundation of the current regime crushing the Iranian economy today. So, Iran has lived under some form of U.S. sanctions for over 45 years, with the truly devastating economic sanctions dating to roughly 2012.
Russia’s sanctions history is far more recent and came in distinct waves tied to geopolitical events. The first significant modern sanctions came in 2014 following the annexation of Crimea and support for separatists in eastern Ukraine. The U.S., EU, and others imposed targeted measures — asset freezes and travel bans on individuals, plus some sectoral sanctions on finance, energy, and defense. These were meaningful but not crippling. Russia adapted over the following years (some legally and some in the dark corners of the trading world). The truly transformative sanctions package came in February-March 2022 following the full-scale invasion of Ukraine. These were unprecedented in scope for a G20 economy, freezing roughly $300 billion in Russian central bank reserves held abroad, removing major Russian banks from SWIFT, extensive export controls on technology, and broad individual sanctions. The EU, UK, U.S., Japan, Canada, and Australia all coordinated in ways rarely seen.
The key difference between the two countries is depth of experience. Iran has had 45 years to build workarounds, shadow banking networks, oil smuggling infrastructure, and psychological adaptation to economic isolation. Russia was deeply integrated into the global financial system as recently as 2021 and has had only about four years to adjust, which partly explains why the structural damage appears to be accumulating faster despite Russia’s larger and better-resourced economy.
After surprising the world with 4%+ GDP growth in 2023 and 2024 (driven almost entirely by wartime military spending), Russia’s economy has hit a wall. Putin himself acknowledged that full-year 2025 GDP growth came in at only 1%, a stark contrast to the prior two years. The war economy has essentially reached its operational ceiling. Defense industries are running at full capacity but can’t pull the broader civilian economy along anymore. The key stress points are significant. Slowing growth, depressed oil prices, harsher sanctions, and high inflation are the core macroeconomic challenges. Inflation has been persistently elevated, and the central bank has kept interest rates very high to combat it, which is strangling civilian borrowing and investment. Labor shortages, military overspending, falling resource prices, and a dwindling National Wealth Fund compound each other. Ukrainian drone strikes have also taken a real toll. By September 2025, strikes had disrupted nearly 40% of Russia’s oil refining capacity, forcing Moscow to import gasoline from Asian nations. You see, trade has pivoted heavily eastward, with China now dominant, but Russia accounting for just 3% of China’s exports and 5% of China’s imports , leaving Moscow firmly as Beijing’s junior partner. Oil still flows, but at a significant discount, roughly $10/barrel below Brent. Some analysts at LSE argue Russia may actually already be in a mild recession and that true inflation is approximately double official figures, which would significantly reduce reported GDP growth. The bottom line on Russia is that it may not be totally collapsing, but its certainly stagnating under the weight of a war it can’t economically afford indefinitely. The structural damage, labor force depletion, capital flight, technological isolation, warped industrial base will outlast any ceasefire, should that eventually come.
Westerners keep waiting for the Russian economy to collapse. It won’t. But nor will it recover. It has entered what mountaineers and The Economist call the death zone, that place at which the body consumes itself faster than it can be repaired. The Russian economy is stuck in what might be described as negative equilibrium… holding itself together while steadily destroying its own future capacity. Export revenues are falling, and economic weakness means budget gaps that cannot be filled with additional tax revenues. This is not a cyclical downturn that monetary or fiscal policy can fix. The budget deficit has widened rapidly to 2.6% of GDP for 2025, the largest since the pandemic. Interest payments on government debt this year will exceed spending on education and health care combined. Across Russia’s elites, not just the Kremlin, there is near-universal conviction that regardless of how this war ends, the West’s ultimate goal is Russia’s permanent strategic containment, and perhaps the killing of its development potential. This belief has become hard to debunk. Western policymakers openly discuss plans for containing Russia. Russia can probably continue waging war for the foreseeable future. But no climber can survive the death zone indefinitely—and not all climbers who attempt the descent survive it. The question Western policymakers must ask is what kind of Russia will emerge when the descent finally begins, and whether anyone has a plan for what comes next.
Iran’s situation is considerably more dire. As of January 2026, Iran is experiencing its deepest and longest economic crisis in modern history. The Rial has gone from roughly 42,000 to over 1.1 million to the dollar — an almost complete collapse of purchasing power for imported goods. The currency halved in value between July 2024 and March 2025 alone, and reached a record low in December 2025. Inflation is catastrophic with food price inflation exceeded 70% in 2025, and an estimated 22% to 50% of Iranians are living below the poverty line. The IMF placed Iran as the 4th-highest inflation country globally, behind only Venezuela, Sudan, and Zimbabwe. The triggers piling on top of longstanding mismanagement include Trump’s maximum pressure campaign (explicitly designed to drive oil exports to zero), the UN reimposition of snapback sanctions in September 2025 triggered by the UK, France, and Germany, and the June 2025 Israeli-U.S. strikes on Iran’s nuclear facilities. The World Bank projected Iran’s economy would shrink in both 2025 and 2026, with inflation rising toward 60%. Beginning December 28, 2025, protests have erupted in all 31 of Iran’s provinces, including regions typically loyal to the state, the largest unrest since the 2022 protests. The regime has responded with violent repression.
Russia is under significant stress but still has substantial state capacity, oil revenues (even discounted), and a functioning military-industrial apparatus to buffer shocks. Iran is in what multiple analysts describe as its worst economic crisis in modern history, with the currency in freefall, basic goods unaffordable for many citizens, and the social contract visibly fraying. Both regimes remain standing for now, but Iran appears far closer to a genuine breaking point…and that’s even before Trump does another one of his distraction plays by invading Iran. The one thing for sure is that the Axis is certainly crumbling before our eyes.