Putin сoncerned about Russia's economy amid threat of new Trump sanctions – Reuters
Photo: Vladimir Putin (Getty Images)
Vladimir Putin is increasingly concerned about the distortions in Russia's wartime economy. This is happening against the backdrop of US President Donald Trump's insistence on ending the war with Ukraine and promising new sanctions, Reuters reports.
According to two sources familiar with the Kremlin's position, the assessment of the situation in the Russian economy has contributed to forming an opinion among part of the Russian elite about the desirability of resolving the war through negotiations.
Trump promised to end the war quickly. This week, he stated that additional sanctions and tariffs could be imposed on Russia if Putin does not engage in negotiations, adding that Russia is heading toward "big problems" in its economy.
Just a few days before Trump's inauguration, the administration of US President Joe Biden imposed the broadest sanctions package aimed at Russia's oil and gas revenue. As Biden's national security advisor Jake Sullivan stated, this would give Trump leverage in any negotiations and exert economic pressure on Russia.
"War's objectives achieved"
Last year, Russia made its most significant territorial gains since the early days of the war and now controls almost a fifth of Ukraine.
According to one of the sources familiar with the Kremlin's position, Putin believes that the main objectives of the war have already been achieved, including control over territories connecting the Russian mainland with Crimea and weakening the Ukrainian army.
The source also said that Putin is aware of the pressure the war is placing on the economy, mentioning "really big problems," such as the impact of high interest rates on non-military businesses and industry.
Russia has increased defense spending to a post-Soviet maximum of 6.3% of GDP this year, accounting for a third of budget expenditures. The spending has been inflationary. Along with the shortage of labor during wartime, this has led to an increase in wages.
In addition, the government has sought to increase tax revenue to reduce the budget deficit.
Russia's economy, driven by exports of oil, gas, and minerals, has shown growth over the past two years despite numerous rounds of Western sanctions imposed after Russia invaded Ukraine in 2022.
The growth was based on government stimulus. However, signs emerge after three years that it's time to pay the bills.
Russia's economy, valued at $2.2 trillion, is more than 10 times smaller than the US economy ($27.4 trillion in 2023).
