Storm around Donald Trump's "peaceful" policy and confusion about the Istanbul negotiations They diverted attention from Russia’s interior circumstances — as if they did not affect Putin’s willingness or deficiency of it to end the war. Although the Russians obey him, they begin to feel the economical deterioration of the country. But is it strong adequate to force him to negotiate?
In order to answer this question, the pace of worsening the situation and the temper of the Russian economy's "captains".
As planned.
Currently, there is neither a failure of control nor a peculiar confusion among the highest state managers. Putin's Technocrats, of course, complain and lament, but They are implementing a plan that arose in their heads erstwhile they realized that this year the war would cost again more than in the erstwhile year.
It is simple — it assumes strong Increase in interest rates, which is intended to halt inflation, inhibit the improvement of non-military industries and reduce real public spending on private consumption. Measures withdrawn from the civilian sector could be utilized for military purposes. The Russians will not spend the “surplus” of their nominally increased income and will place it in state banks. Finally, the money gathered in their accounts will be taken over by the authorities — There will be no trace of the Russians' savings.
A lot of things are going along with this plan right now. In fresh months, the industrial index in the military industries has been increasing and in civilian sectors it has been falling. In addition, analysts close to the government stated that "inflation has declined sharply: this can now be spoken of reasonably unequivocally and (almost) unreservedly". They didn't surprise themselves with specified a turn of events.
Real consumption expenditure (excluding seasonality) declined in March and April. This happened despite a sharp increase in nominal income (by 17.9% in the first 4th of the year-to-year period). However, the Russians did not spend "surplus" money, they just put it in banks, and their savings in the first 4th reached a evidence value of 10%.
The overall expenditure of the national budget (the main direction of which is war straight or indirectly) increased by 21% between January and April (on a year-to-year basis). It shows that in 2025 the authorities will be able to accomplish the stated mark of 8% of GDP (18 trillion rubles, 847 billion zlotys) for military production.
Uncertain militarisation
However, there is besides the another side to the medal. The technocrat plan does not take into account many of the issues that citizens and authorities gotta deal with.
In itself Increase in military expenditure up to $200 billion ($757 billion), which the Kremlin plans to do, seems to be a realistic goal. Between 1960 and 1980, the share of specified expenditure in the GDP of the USSR was besides between 8 and 10% of GDP. The accompanying increased militarisation, however, is implemented according to the temporary and unrestrained flaws of the plan.
In fact, only pensions are decreasing, wages are inactive increasing. The highest bureaucratic circles hope to put an end to this quickly. “ Most likely this year, virtually in the next quarter, the wage increases race that we have seen in fresh years will be over,” stated chief Russian economist Dmitri Bielousov.
But these are only expectations — it is not known if the Kremlin will succeed. And most importantly, the Russians already have much more money than they can offer in the Russian Federation. All they gotta do is panic and throw themselves at banks to save money, and the marketplace will collapse. Stopping inflation depends not only on advanced interest rates, but besides on the unexpected and alternatively short-term strengthening of the ruble and the alternatively irrational and besides temporary fluctuations of public purchasing activity.
Prices in Russia have stopped increasing not due to excess products. — Technically complex goods of long-term usage – specified as gadgets, cars, electrical equipment – are bought less. In addition, trade itself faces debt problems, increases in logistics costs and rent increases," said Dmitri Bielousov.
At any moment, however, the Russians may change their head and want to buy not less, but more, specified products. The full total savings in the accounts of individuals is approaching the amount of 60 trillion rubles (PLN 2.8 trillion) and is increasing rapidly. Only interest payments on deposits this year are forecast at 9 trillion rubles (423 billion zł) — in 2024 it was 7 trillion rubles (329 billion zł).
Short-term triumph over inflation
In fact, these deposits of tens of trillion rubles are nothing but a military loan. The Russian economy is improbable to be able to pay savings to the Russians without their considerable devaluation. Authorities are looking for a way to make it harder, and even better to completely block Russian access to this money.
You don't gotta frost the deposits. For example, they can be transferred to long-term securities and transferred from them to the next authorities whenever they appear. However, the Russians are not willing to voluntarily agree to their solutions and the authorities are not yet ready to take forced measures.
That's why the authorities pretend to be generous. The immeasurable deposit rate irritates financial managers, but the possible panic of depositors will inevitably trigger a sharp increase in inflation and immediately destruct the hard-earned economical triumph announced by Russian analysts.
This triumph is already being tested by another problem – low oil prices. The authors of the updated version of the budget reduced the expected gross from oil by 2.6 trillion rubles (PLN 122 billion) — from 10.9 trillion to 8.3 trillion rubles (from PLN 512 billion to PLN 390 billion). However, planned military spending increased by 0.8 trillion dollars. Their cut is presently banned in Russia.
Critical point
That's why they grow. Between January and April, they increased so rapidly that the deficit reached 3.2 trillion dollars (12.1 trillion zlotys), surpassing the deficit from that period in each erstwhile war year. Analysts estimation that in 2025 the proceeds to the Kremlin's budget will be respective trillion lower, and spending higher than expected. The budget deficit in Russia can thus emergence to 5 trillion rubles (234 billion PLN).
So far Putin's managers have managed to keep a material and financial balance. However, the stableness of the Russian economy is decreasing and approaching a critical point. Most of his supporters would be pleased with the truce. However, they do not make decisions.
Putin will surely be able to proceed the war if he wants to. However, for his regime, the minute of election is near: either to search peace of mind, or to control to the alleged mobilization model. If they choose the latter, the appeal to the members of the government will be simple — halt playing with savings, openly expanding taxes, and possibly even delegate workers to businesses. I think in 2025 the Kremlin will face specified a choice.
