Russia’s economy under strain as Trump talks loom – Bloomberg
Photo: Vladimir Putin (Getty Images)
Under pressure from the war with Ukraine, the Russian economy is sliding into recession: oil revenues are falling, the budget deficit is growing, and banks are warning of a looming crisis. This is happening just as Putin is heading to talks with Trump, Bloomberg reports.
Putin flies to Alaska amid economic pressure
President Donald Trump has already rebuked Russia's Vladimir Putin, saying that he should focus on reviving the economy, which is in bad shape right now.
Trump's assessment may be mild. Putin tried to maintain stability, counting on Russians, who had survived decades of communism, the collapse of the USSR, and economic crises, to withstand any difficulties. However, the strategy cracked amid falling oil revenues.
The summit in Alaska was agreed upon amid the threat of new US sanctions on oil supplies. According to the agency's sources, Putin again demanded the easing of sanctions in a possible agreement, although experts believe that the meeting may be an attempt by the Kremlin to buy time.
Russia ranks second in the world in military spending
According to Alexandra Prokopenko of the Carnegie Foundation, defense and security spending will amount to nearly $172 billion in 2025, about 8% of the country's GDP. "This is not a temporary surge, but a long-term strategic pivot," the expert notes.
The Russian economy, restructured for military needs, is facing a slowdown in growth and a decline in key revenues. GDP in the second quarter of 2025 grew by only 1.1% year-on-year, several times less than a year ago.
Oil revenues have fallen, and the budget deficit reached 4.9 trillion rubles in July, the highest in more than 30 years.
Inflation exceeded 10%, and the key rate rose to 21%, the highest level in two decades.
Banks went to war
After invading Ukraine, Putin ordered Russian banks to issue preferential loans to defense companies, regardless of their profitability or financial condition. This allowed weapons production to continue, but overburdened the credit system.
Key consequences:
- Corporate debt grew by 71% (36.6 trillion rubles) between 2022 and 2024.
- A significant portion of the debt is concentrated in the military and related sectors.
- The Central Bank has relaxed reporting requirements for such loans.
As a result, many banks are earning less than they pay on deposits and loans. Even defense companies admit that if the situation does not change, most of them may go bankrupt.
Oil blow to the budget
Since the start of the war, Russian oil prices have fallen from $100 to $55 per barrel.
This has led to a sharp decline in budget revenues and threatened the National Welfare Fund, which, according to experts, could be depleted by the end of 2025.
Threat of banking crisis
In the summer of 2025, Bloomberg reported that Russia's largest banks were discussing the possible need for state support in private conversations.
Even in official documents, the Central Bank acknowledges the “vulnerability of the financial sector” and the “deterioration in credit quality.”
Less and less money for war in Russia
Earlier, Reuters reported, citing sources, that Putin was increasingly concerned about the state of the Russian economy in the context of the war.
According to the Defense Intelligence of Ukraine (HUR), the Kremlin's strategic documents state that the so-called Ukrainian question must be resolved by 2026.
Intelligence notes that Moscow is rushing due to the enormous costs of the war, which already account for 42% of Russia's budget. This is leading to stagnation in key industries, including metallurgy and mineral extraction.
