Putin faces echoes of Soviet economic strain amid war crisis
"Vladimir Putin is reportedly feeling the strain of economic pressures that resemble those that led to the collapse of the Soviet Union," writes the British "Express." Russia is increasing defence spending while simultaneously cutting funds for things such as pensions.
According to the "Express," the Kremlin plans to reduce social spending by 15%, while the defence budget is set to increase by 25%, reaching 6.3% of GDP—the highest since the Cold War.
Interest rates climb
The war in Ukraine is significantly impacting the Russian economy. Recently, the Central Bank of Russia raised interest rates to 19% due to Western sanctions and a lack of labour in critical sectors of the economy.
- This is a very high interest rate, and it's not really addressing the underlying inflation, the critical shortages in componentry [caused by Western sanctions] and in manpower - stated a Western official in an interview with the "Express".
No immediate financial crash threatens Russia
Nonetheless, the United States emphasises that although Russia's economic situation is difficult, there is no immediate threat of financial collapse. Russian military spending will reach 13.5 trillion roubles (107,5 billion GBP) in 2025, constituting 32% of the entire state budget. "Defence spending will account for 32 per cent of the overall budget, a figure not seen since the late Soviet era when the USSR was engaged in the costly war in Afghanistan," the statement reads.
Although Russia avoids further mobilisation fearing even more significant economic problems, daily casualties on the front are extremely high. It is estimated that Russia loses about 1,200 soldiers a day.
Russia's economic problems are also exacerbated by the decline in revenues from the oil and gas sector, which has been the foundation of the Russian economy for years. According to Finance Minister Anton Siluanov, the country is gradually moving away from dependence on oil and gas, but this transition leads to increased economic uncertainty.
"Panicking Putin 'fears Soviet-style collapse' as Russia feels soaring Ukraine war pressure," comments the "Express".
