Russian President Vladimir Putin is becoming increasingly concerned about the economic strain caused by the ongoing war in Ukraine, even as newly sworn-in U.S. President Donald Trump steps up pressure on Moscow to end the conflict. According to five sources familiar with the matter, the Kremlin is now facing mounting internal challenges due to a struggling economy.
When Russia launched its invasion of Ukraine in February 2022, the West responded with successive sanctions aimed at crippling Moscow’s economy. However, Russia’s economy, heavily reliant on oil, gas, and mineral exports, managed to push through these sanctions and continue its operations with resilience. Despite this, in recent months, the country has been dealing with a labor shortage and inflation driven by high military spending, causing internal economic pressure. Rising interest rates have further compounded these issues, making it more difficult for businesses and consumers to maintain stability.
This economic strain has led to a shift in the Kremlin’s thinking, with a growing number of influential figures in Russia now calling for negotiations to end the conflict. Oleg Vyugin, a former Deputy Chairman of Russia’s Central Bank, highlighted the growing risks posed by the massive military expenditures that continue to escalate.
Trump, since his election campaign, has been outspoken about his desire to end the Russia-Ukraine war swiftly. Upon taking office, he issued a stern warning to Putin: if Russia does not engage in dialogue, it will face new tariffs and sanctions. Trump has been particularly vocal about the enormous economic problems Russia is facing, calling it a “huge problem” for the country. The U.S. administration has indicated its readiness to push for negotiations, with National Security Council spokesperson Brian Hugues noting that Trump intends to involve broad coalitions of partners to end what he calls “this brutal war.”
Putin, who previously claimed that Russia would continue the war for as long as necessary and would never bow to outside powers, has seen his country’s economy show signs of strain. Russia’s $2.2 trillion economy had until recently weathered the effects of war relatively well, surpassing the European Union and the United States in growth for two consecutive years after the invasion. However, despite this growth, inflation has soared, with the central bank raising its benchmark interest rate to 21% last October. Yet, inflation is still in double digits, further putting pressure on everyday Russians.
Internally, the war has begun to take its toll. Putin himself acknowledged that inflation and economic overheating are significant issues, and the government, alongside the central bank, is working to control the rising costs. The increase in military spending has also led to a situation where nearly one-third of Russia’s budget is now allocated to defense, contributing to inflation and causing private investments to plummet.
Some of Russia’s wealthiest and most influential businessmen, including figures like Igor Sechin and Oleg Deripaska, have been vocal in their criticism of the high interest rates and the economic toll of the war. During a meeting with business leaders in December, Putin expressed his frustration at the state of private investment, noting the difficulty in maintaining economic stability amid the ongoing conflict.
Despite these internal economic challenges, Putin’s government remains steadfast in its military objectives in Ukraine. According to reports, Russia has achieved many of its initial goals, including annexing Crimea and weakening Ukraine’s military capabilities. However, as the economic pressures mount, there are growing calls within Russia for a shift in approach, with some hoping that diplomatic negotiations could bring an end to the costly conflict.
