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Vladimir Putin is increasingly concerned with economic issues in the country, according to a Reuters report.
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Russia is facing stagflation risk, sanctions, and labor shortages as its war in Ukraine drags on.
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A source told the outlet that Putin considers Russia’s wartime goals in Ukraine as already met.
Russian President Vladimir Puting isn’t feeling as upbeat about the prospects for Russia’s economy as the conflict in Ukraine intensifies and sanctions create domestic challenges with no easy solution. Sources told Reuters that the leader is increasingly concerned about the country’s wartime economy, which is strained by labor shortages, sanctions, high inflation, and weakening domestic activity. According to the sources close to the Kremlin, the president has privately acknowledged the war’s strain on the economy, specifying “really big problems.”
At a December 16 meeting with business leaders, Putin criticized top economic officials and was reported to be clearly displeased by rising borrowing costs faced by Russian businesses. Restrictive credit costs have upset corporate leaders in the country, as interest rates have hit a historic 21%. Despite criticism and stagflation warnings voiced by Russia’s biggest business leaders, the central bank has had no choice but to tighten policy as inflation keeps rising. On an annual basis, price growth hit 9.5% at the end of 2024. That’s been driven heavily by massive wartime spending. Defense and security spending is expected to account for over 8% of GDP and 40% of all government expenditures in 2025. The war has also deepened a worker shortage, pushing up wage prices and slashing skilled labor in the economy. Sources told Reuters these difficulties have fostered a willingness to reach a negotiated settlement with Ukraine, at least among some of Russia’s elite.
One source noted that Putin already considers wartime objectives as being met, including the control of land linking Russia to Crimea. The Russian president is reportedly open to ceasefire discussions, with two caveats, Reuters said — Russia maintains its territorial gains, and Ukraine ends its bid to join NATO. So far, plans previously backed by US President Donald Trump did not account for the second stipulation and have been dismissed by Moscow. Now in power, Trump recently threatened to bolster tariffs and sanctions on Russia if a peace deal isn’t reached soon. Although trade between the countries has dwindled substantially since the war began — Russian goods accounted for just 0.14% of total US imports in 2023 — sanctions have proven detrimental to Russian revenue, particularly from its energy trade. Outlooks vary on how long the economy can keep fueling the war in Ukraine. While one think tank suggested that Russia can support itself for up to five years, others have said that the economic pain could end the conflict this year.