Putin praises the strength of the Russian war economy; others doubt
Putin praises the strength of the Russian war economy; others doubt
Since the comprehensive invasion of the Ukraine
Russia's message to the world
These statistics send a clear message to both domestic and the international public, explains Elina Ribakova, Senior Fellow at the Peterson Institute for International Economics. The message is to the Russian public: "We are still standing." To the allies of Ukraine: "We can hold out."
The illusion of economic strength
Configuring an image of Russia's economic strength has a noticeable impact on the geopolitical situation. Some in the West question whether the sanctions imposed by the supporters of Ukraine are effective at all by President Vladimir Putin as a mere "logistical hurdles". If not, why then do effort?
However, other experts believe that this image of resilience is an illusion - a presentation carefully curated by the Kremlin that makes his opponents believe that the Russian economy is in good shape. However, this mask begins to crumble with the approaching third anniversary of the war.an analysis of growth
To explain to Russia's supposed economic strength, analysts have taken a metaphor. Some use the expression "on steroids" to describe growth that is quick, but unnatural and not sustainable. Ribakova confessed: "'Steroids' is a suitable term, but they still create muscles. I would not call it a muscles; it is more like running around under cocaine."
The consequences of war financing
Russia will soon feel the consequences of the celebrations. Always more dissatisfied Russian officials have warned that the Russian economy reaches its production borders, which leads to increasing prices. Inflation accelerated itself last year, although the central bank raised interest rates to 21 % in October - the highest value in two decades.
While he signed a flood of decree on his first day back in the White House, the US President Donaldvid " Trump that Russia's economy is a sign that the country is in "great difficulties" and that Putin destroys "Russia by not closing a deal" to Ukraine.
the shadow budget
During the entire war, the Kremlin has extensively used a strategy called "reflexive control" that aims to form the perceptions of an opponent in such a way that this - in this case the western allies of Ukraine - will benefit Russia. The arms deliveries are an example of this.
Every time the West was considering sending new technologies to Ukraine - first modern tanks, then fighter jets and finally long -distance weapons - the Kremlin warned of devastating episodes, possibly even with a nuclear blow. This slowed down the arms deliveries to Kyiv and thus benefited Moscow. The economy is no different. The Kremlin wants to convince the allies of Ukraine, especially the United States, of the economic strength of Russia. If Russia can finance its war over the years, the US government could agree to a ceasefire that meets the goals of the Kremlin.
The pressure on the civilian population
The analysis of Craig Kennedy, an employee of the Davis Center for Russian and Eurasian Studies at Harvard University, shows that Russia is wearing out the true costs of his war by a shadow financing system. While Russia's "strongly checked" defense budget remains at a sustainable level, there is a parallel and "largely overlooked" increase in corporate debt. These loans work privately, but are actually state expenditure in disguise.
The effects on trust in the banking system
Kennedy's analysis has triggered different reactions. A comment from the Financial Times described her as proof that Putin is sitting on a "ticking financial time bomb". Others are more leisurely. Prokopenko and Alexander Kolyandr, a scientist at the Center for European Policy Analysis, contested some of Kennedy's findings and wrote in a current article that the fears of a banking crisis were "exaggerated".
The conditions for a crisis are available, but what is the trigger? A possible trigger could be the panic among ordinary Russians who know what it feels like to lose their savings. If you believe that your deposits are at risk, this could trigger bank runs.
The challenges of the future
Even without a banking crisis, Russia is facing serious challenges in 2025. The international monetary fund estimates , However, the fact that the Russian GDP 2024 has grown by 3.8 % only has a growth of 1.4 % this year. Inflation accelerated to 9.5 %, 7.4 % in 2023.
Putin recently admitted: "The amount of products has not grown as much as consumption" - a classic prerequisite for price increases. Even if wages rise, this reflects problems on the labor market. The Russian president boasts a record -low unemployment rate of 2.3 %, but this medal has a downside. Low unemployment means higher wages because Russian companies - the 1.6 million qualified workers are missing - have to pay more to win workers.
The persistent economic burdens endanger the social contract of Russia, said Prokopenko. "The population no longer expects justice from the Kremlin, but financial support," she said. With this support that "disappears", Prokopenko warned, now "a clear divergence between the expectations of the population and the ability of the Kremlin". Moscow can not continue to finance the war and the regular economy at the same time and maintain a broader economic stability. Although the Kremlin has brought all three points under one roof so far, something could soon falter.