A pitstop for medium Pirellis gave Russell and team-mate Lewis Hamilton the tyre advantage in the closing stages at Marina Bay as they piled the pressure on leader Carlos Sainz and Lando Norris for victory.
While it became increasingly clear that Ferrari driver Sainz would seal his second F1 win, Russell continued after the McLaren before Norris clipped the outside wall on approach to Turn 10 on the final lap.
Although Norris came away unscathed, Russell was drawn in and made heavier contact to damage the front-right corner of his W14 and send him careering into the barrier to classify down in 16th.
Mercedes motorsport boss Wolff reckoned that his driver, who qualified second, had otherwise delivered a nigh-on perfect weekend.
The Austrian said: “I'm sad for George because he delivered a 99.9% fantastic weekend and a split-second lack of concentration, clipped the wall and it happened.”
But Wolff reckoned the shunt would pay off in the longer term, with the mistake “engraved” in Russell so he would not repeat it when Mercedes recovers to fight for wins and championships.
“What I said to him is I'd rather have this happening now, and the learning is there, than when we race for a victory or for a championship,” said Wolff.
“That's going to be engraved in him, this mistake.”
Wolff acknowledged his driver was “devastated” but anticipated a steep learning curve.
“We must not forget it's his second year in a competitive car and he was really giving it all he had,” continued Wolff.
“He was pushing hard in order to win the race. At that stage, the only way of overtaking Norris and maybe Sainz was to just not leave a millimetre on track.
“Lando kissed the wall and he was behind him when he hit harder, so that cost him the race but if you push like this, things can happen.”
Wolff added: “I think George is of course an out-and-out racer and is devastated.
“But what I said to him was, we played for third place and not a win.
“It is a steep learning curve and with such situations, a second year at Mercedes, it is not going to happen again when it is for a victory or a championship.
“But obviously he is very upset.”