Putin growing increasingly concerned about Russia’s economy amid war, Reuters reports
Pravda Ukraine
Kremlin leader Vladimir Putin is increasingly concerned about problems in Russia’s war economy, just as Donald Trump is actively calling for an end to the conflict in Ukraine.
Source: Reuters, citing five sources familiar with the situation
Details: Over the past two years, Russia’s economy—which is primarily dependent on the sale of minerals, gas, and oil—has grown steadily in spite of multiple rounds of Western sanctions put in place following the 2022 invasion of Ukraine.
However, labour shortage and high interest rates—which were implemented to control inflation—have hampered recent domestic economic progress. Because of high military spending, this inflation has gotten worse.
According to two people acquainted with the situation inside the Kremlin, some members of Russia’s elite are now thinking about the prospect of pursuing a negotiated settlement to the war.
Donald Trump has promised to quickly end the war in Ukraine. This week, he warned that new sanctions and tariffs against Russia are likely if Putin refuses to negotiate, adding that Russia’s economy is heading towards “really big problems”.
Putin has repeatedly stated that Russia can fight for as long as necessary and will never compromise its interests with another state. However, the Russian leader also acknowledges the strain the war is placing on the economy, with one source pointing to “very serious problems,” such as the impact of high interest rates on civilian businesses and industries.
This year, Russia increased defence spending to a post-Soviet record of 6.3% of GDP, representing a third of the national budget. These expenditures have contributed to rising inflation.
Putin’s dissatisfaction was apparent during a meeting with business leaders in the Kremlin on 16 December, where he criticised senior economic officials, according to two sources.
One source mentioned that Putin was visibly frustrated when he learned that private investment was declining due to the high cost of loans.
Background:
- Donald Trump stated that he would impose high taxes, sanctions, and tariffs on everything Russia sells to the US if Russian leader Putin does not reach a peace agreement with Ukraine.
- Russia ended 2024 with a record budget deficit of RUB 3.5 trillion (about US$35 million), the highest in recent years.
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