For the past two decades, the Russian gas giant Gazprom was a financial powerhouse, enriching insiders and sustaining Vladimir Putin’s government. However, this era has come to an end, with Gazprom recently announcing a $6.9 billion loss in 2023 due to the ongoing war in Ukraine and sanctions that have severely impacted its sales.
The entire Russian economy, like Gazprom, is beginning to buckle under the dual pressures of massive wartime spending and stringent sanctions. Despite Russia's surprising resilience since invading Ukraine in February 2022—thanks largely to adept central bank management and strong oil and gas revenues—the U.S.-led sanctions are gradually crippling the economy. The Biden administration has hinted at further sanctions, and Russia's war production may be peaking, with critical equipment shortages looming by 2025.
“The Soviet Union was a war machine, and it ran out of steam,” said Fiona Hill, a Russia expert at the Brookings Institution, during a May 28 conference. “This will, as well, eventually run into considerable consequences. Putin wants us all to think he can’t be defeated. He knows he can be. And he is genuinely worried at this particular moment.”
This year, the most significant news regarding Russia’s war in Ukraine has been the precarious situation of Ukraine’s frontline troops, who are outgunned, outmanned, and gradually losing territory. A six-month delay in vital U.S. military aid, coupled with manpower shortages and other issues, has allowed Russia to exploit weaknesses, bombard Ukrainian infrastructure, and threaten Kharkiv, Ukraine’s second-largest city.
However, Russia's time may be limited, and the real test will be whether its economy can sustain itself long enough to outlast Ukraine and its occasionally unreliable allies.
On the surface, Russia’s economy appears stable, with the International Monetary Fund predicting a 3.2% GDP growth this year, better than the U.S. forecast of 2.7% GDP growth. Yet, some analysts believe this outlook masks significant underlying problems. “Putin still has some ability to finance the war, but this is running out very fast,” said Vladimir Milov, a Russian economist, on a recent podcast for the UK’s Royal United Services Institute. “The signs that sanctions are working are there, but it really takes more time. Putin’s economy is a big beast. It takes time to strangle.”
Among Russia’s issues is its national wealth fund, which has plummeted from $113 billion before the war to about $56 billion now. Not all of the $56 billion is liquid, and Russia needs to reserve some funds for genuine emergencies. “Their reserves are fast depleting,” said Agathe
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