Could Russia's faltering economy end the war?

Nearly three years after the invasion of Ukraine, Russia's economy is stumbling. The ruble is falling, inflation is rising and sanctions are taking their toll. What does all this mean for Vladimir Putin's war effort?

The crisis comes at a "pivotal time" in the war, said The Wall Street Journal. Russia is making advances in Ukraine, and President-elect Donald Trump has promised to put a peace deal at the top of his agenda. But the outgoing Biden administration also recently decided to "ratchet up" sanctions on Gazprombank — one of Russia's last unsanctioned banks, which Moscow uses to pay soldiers — triggering the slide in the ruble's value. Meanwhile, Russia's wartime spending is crowding out investment in nonmilitary sectors like healthcare and education. The result is that "difficulties are expected to mount the longer the war persists," said the Journal.

"If you're an entrepreneur in Russia who doesn't make, say, ballistic missiles, then you're having a tough time," Alexander Kolyandr, an expert at the Center for European Policy Analysis, said to The New York Times. But it's dangerous for business leaders to blame the slowdown on the Ukraine war, "which would risk Putin's ire." Russian elites have turned instead to blaming each other. As the war continues in the meantime, the country's economic problems appear to be "far from provoking the kind of crisis that might compel Putin to curtail his ambitions."

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What did the commentators say?

"The economic bill for the war is at last coming due," said The Economist. Russia "confounded many analysts' gloomy predictions" by maintaining a strong economy for the first two years of the Ukraine war, despite a strict regime of sanctions by Western countries. That may not be sustainable — not that Putin is willing to admit that publicly. "There are certainly no grounds for panic," he told reporters in late November. That kind of talk is "usually a sign that something is wrong," said The Economist. And it's troublesome for the war effort: The devalued ruble will make imports more expensive, "which will raise the cost of military equipment" purchased from China.

There is also an economic cost to ending the war. Russia's wartime military spending has "enriched elites and boosted domestic demand," Alexander Mertens said at The Atlantic Council. That helped "foster pro-war sentiment and bolster support" for Putin's regime. Ending that spending could cause a "significant drop in real incomes for much of the population." This leaves Putin caught between hard choices. Russia's economy risks "overheating" if wartime spending continues, Mertens said. But if that spending ends, the "economic repercussions could be dire."

What next?

Putin is sticking with the status quo. He just signed a new budget to "boost defense spending to a record level next year," said Business Insider. Military spending will take up nearly a third of the government's budget, up from 28.5% this year. Russian business elites like Andrei Kostin, CEO of VTB bank, are bracing for the results. "It is impossible," he said, "for the economy to go through such events without consequences."