Putin is Digging Russia Into Economic Disaster

It’s been more than eighteen months since Vladimir Putin ordered his full-scale invasion of Ukraine and Russia has been plagued by several problems on and off the battlefield. 

August saw the Russian ruble reach its lowest point in 16 months according to Business Insider, and its continued poor performance has forced Russians to cut back on spending. 

A recent survey published by Romir found that 19% of respondents noted that they had reduced their spending on food and basic goods in order to save money.

Against the backdrop of the current economic situation and rising prices, Russians are trying to save money," Romir Senior Director Ksenia Paizanskaya said according to Business Insider. 

The current economic situation in Russia isn’t good and Jerusalem Post’s Alexei Bayer pointed out Putin is facing a number of serious problems that are affecting the economy. 

Russia’s oil and gas industry has been effectively shut out of the European market while Western sanctions have made imports into the country more difficult and more costly. 

Moscow is also facing a major labor shortage and accelerating inflation resulting from all of those factors has helped bring the Russian ruble to new lows against the dollar. 

The troubles facing the ruble will also likely have a direct impact on the war in Ukraine since the Kremlin is now spending a huge chunk of its budget on the country’s military. 

Reuters reported on August 4th that Russia had doubled its defense spending by more than $100 billion dollars based on government documents the news agency reviewed. 

This increase allegedly brought the Kremlin’s spending on the military up to one-third of all Russia’s public expenditure, a situation that actually helped to buoy Putin's economy. 

However, this amount of spending likely cannot be sustained without lasting damage to the Russian economy according to Russian independent newspaper Novaya Gazette. 

Teplyakov reported manufacturers of vehicles, computers, and other hardware required by the military were seeing huge growth rates of 25% to 35% while non-military sectors were seeing their industries shrink—one example was Russia's pharmaceutical sector. 

Where all these issues lead is still anyone's guess but it's unlikely we haven’t seen the last of Russia’s economic woes. With an interest rate of 12% and a deepening drive to defeat Ukraine, things might get a lot worse economically for Putin and his advisors.