Putin's dilemma: military crisis meets economic collapse!

Putin's dilemma: military crisis meets economic collapse!

The current situation in Russia is anything but stable. While the Kremlin continues to pursue its military ambitions, it is also facing massive cuts to the defense budget. Loud The press Russia is not only violating the airspace of its neighboring Baltic countries, Poland and possibly Denmark, but is also increasing taxes to finance the expensive Ukraine conflict. These measures contrast with a budget that is already under enormous pressure.

The economic situation in Russia is alarming. With an inflation rate that has reached the 17 percent mark and a budget deficit that totaled 3.8 trillion rubles in the first half of 2023 - almost three times higher than originally planned - the economy is far from up to speed. Experts fear that this deficit could grow to 6 trillion rubles by the end of 2023. As the German business news report, companies are operating with reduced revenues from oil and gas production and an overvalued ruble, which further aggravates the situation.

Financial challenges and taxes

The Russian government is faced with an urgent need to find new sources of revenue. Increasing military spending - which in 2024 already amounted to 13.1 trillion rubles, a third of the total budget - is directly related to the need to fulfill social obligations. This results in the areas of education and health receiving fewer resources, which contradicts the needs of the population. The Kremlin must be careful to support both the civilian and military economies without further straining the budget, such as Cicero notes.

Economic experts warn about the consequences of a possible planned economy in Russia. The government is struggling to maintain social support programs and is battling a rise in the cost of living. Citizens can already expect an increase in housing costs of up to 40 percent. At the same time, the government is reluctant to impose price controls for fear of driving producers into bankruptcy.

The effects on everyday life

The Russian population is feeling the economic turmoil directly. According to the 2022 census, around a third of citizens relied on government payments. The supply situation in agriculture has deteriorated and acute shortages of staple foods such as potatoes are becoming apparent. In addition, around 200 companies have been expropriated without compensation since the start of the war. Society is therefore under great pressure as Russia tries to rely on domestic measures.

The Kremlin is aware that high inflation and uncertainty over sanctions are influencing public sentiment. The upcoming 2026 budget will be drawn up with more pessimistic assumptions about economic development. It remains questionable how long Russia can bear this double burden of military armaments and the challenges of civil society.

Overall, the situation in Russia is a complex interplay of military objectives and economic hardship. Policymakers must find a fine line between the demands of war and the needs of the population before the country finally reaches a tipping point.