The economic crisis caused by the war in Ukraine fuels Putin’s fears of a possible coup – writes The Telegraph.
Russia’s President, Vladimir Putin, has increasingly more reasons to worry, say Western analysts. The European Union and the US impose new sanctions, economic activity is paralyzed by high interest rates, state debt is growing, prices are rising, and Russia’s Minister of Economy, Maksim Reshetnikov, warns that the economy is “on the brink of recession”. Since the beginning of the war, inflation has exceeded 40%, even according to official Rosstat data.
According to the Ministry of Finance’s forecasts, Russia’s budget deficit in 2025 could reach 2.6% of GDP, equivalent to 5.7 trillion rubles (about 55 billion euros). This is five times more than the initially planned level of 0.5%. To cover the deficit, authorities are forced to raise taxes – from 2026 VAT will be increased to 22% – and to massively contract domestic loans, leading to a dangerous expansion of public debt.
The government increasingly refuses to resort to the National Welfare Fund, whose reserves have halved compared to the level before the war: from almost 10 trillion rubles to 4.2 trillion (approx. 40 billion euros).
Oil revenues are falling, and gasoline is becoming increasingly hard to find due to Ukrainian attacks on refineries. In addition, there is a risk of triggering a banking crisis, warns Craig Kennedy, a researcher at the Center for Russian and Eurasian Studies at Harvard University. According to him, the debt of companies in the military-industrial complex amounts to about 190 billion dollars – about 37% of the country’s annual budget. Kennedy recalls that Russian banks have massively credited the defense industry without solid guarantees, to support production for the front. A large part of these loans are now at risk of default. According to Bloomberg, some major banks are already preparing to ask for help from the Central Bank.
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