Russia is struggling with major economic problems after almost three years of a full-scale war with Ukraine. The Telegraph draws attention to high interest rates, inflation and dwindling reserves.
Russia is facing growing economic problems after almost three years of war in Ukraine. High interest rates and a lack of investment are putting increasing pressure on the economy, writes Focus.de.
Russian President Vladimir Putin is nervous about the economic situation. Russia is suffering from high interest rates of 21 percent, which are hurting companies. Some experts speak of a "slow death" of the Russian economy, but others point out that it has turned out to be more stable than expected.
According to The Telegraph, the Russian National Welfare Fund has shrunk to just $38 billion due to high military spending. Russia could continue to print money to finance the war, but that would further fuel inflation. Economist Benjamin Hilgenstock emphasizes: “Ultimately, you can print money for war, but that is a very bad idea.“
Corporate bankruptcies are forecast to continue in Russia. Now Russia faces a high risk of a banking crisis. Initially, Russia's economic resilience surprised many analysts, but now signs of instability are becoming increasingly apparent.
The Kremlin publicly claims that the federation is in a stable economic state and even growing, but it is increasingly clear that this was only a temporary phenomenon, not a trend. Russia is facing a severe labor shortage, and its huge military spending has brought virtually no economic value.
Economists say the U.S. role is now even more important because Western countries could jointly impose tough new economic sanctions on Moscow to dissuade it from waging war in Ukraine. Trump has already threatened Moscow with such sanctions if it refuses to sit at the negotiating table. Most experts agree: the Russian economy survived the initial Western sanctions over the invasion, but Putin’s time is running out and the country’s finances are deteriorating.
The tension in the country is so great that Russian dictator Vladimir Putin has begun to pressure officials over a “drought” in private investment, The Telegraph reports. It is noted that the cost of loans and interest rates in Russia have risen to painful levels, which puts pressure on local businesses.
Economic problems cannot but worry Russian oligarchs. The publication recalls that the head of “Rosneft“ Igor Sechin and aluminum tycoon Oleg Deripaska publicly criticized high interest rates. Back in 2023, Deripaska warned that Russia could soon run out of money. According to The Telegraph, other high-ranking Russian officials also share this concern, Faktor.bg writes.
Inflation in Russia is increasing by an average of 9.5% per year, and immediately after the invasion of Ukraine it was 17.8%. According to Benjamin Hilgenstock, a senior economist at the Kiev School of Economics, Russia is experiencing a “slow death”. Although it is not facing an immediate risk of bankruptcy, Russian authorities are increasingly resorting to unconventional measures to keep the economy afloat.
Hilgenstock also believes that the new US administration led by Donald Trump will not be able to end the war on its own. He emphasizes that tightening sanctions is necessary to force Russia to rethink its military ambitions. “If you really remove some of Russia's oil production from the market, I think Russia will quickly face serious macroeconomic instability. But we do not live in such a world at the moment,“ he concludes.