Putin Hails Strength Of Russia’s War Economy

Russia President Vladimir Putin has halied a stable economy, since Moscow’s full-scale invasion of Ukraine in 2022, as the economy has surpassed expectations. Its figures are, if not rosy, not ruinous either.

Last year, the war economy possibly grew faster than the United States and all major European economies. Unemployment is at a record low. And if the ballooning defense budget has cramped other spending, that’s only temporary.

These statistics send a message to audiences at home and abroad, said Elina Ribakova, senior fellow at the Peterson Institute for International Economics. To the Russian public: “We’re still standing.” To Ukraine’s allies: “We can outlast you.”

Projecting an image of Russia’s economic strength has real-world consequences. Some in the West have questioned whether the sanctions imposed by Ukraine’s backers – and dismissed by President Vladimir Putin as mere “logistical hurdles” – work at all. If they don’t, why bother?

But other experts say this image of resilience is a mirage – one carefully curated by the Kremlin to make its adversaries think Russia’s economy is in good shape. As the war nears its third anniversary, this mask is starting to slip.

To explain Russia’s apparent economic might, analysts have turned to metaphor. Some have used the phrase “on steroids,” to describe growth that is rapid, but unnatural and unsustainable.

“‘Steroids’ is a good one, but it still produces some muscle. I wouldn’t call this muscle,” Ribakova told CNN. “It’s more like running around on cocaine.”

Russia may soon feel the pain after the party. Increasingly disgruntled Russian officials have warned that Russia’s economy is hitting the limits of what it can produce, driving up prices. Inflation accelerated last year despite the central bank hiking interest rates to 21% in October, a two-decade high.

While signing a flurry of executive orders on his first day back in the White House, US President Donald Trump said Russia’s economy was a sign that the country was in “big trouble,” and that Putin was “destroying Russia by not making a deal” on Ukraine.

Evidence of that trouble includes the impact of new sanctions, persistent labor shortages and signs of a credit bubble. Despite recent battlefield gains, analysts say Russia’s worsening economic problems could bring Putin to the negotiating table sooner than expected and may make sanctions relief a more powerful bargaining chip for the West.

Shadow Budget

Throughout the war, the Kremlin has made extensive use of a strategy known as “reflexive control,” aimed at shaping an adversary’s perceptions in a way that leads the adversary – in this case, Ukraine’s Western backers – to choose actions that benefit Russia.

Weapons are a case in point. Every time the West has considered sending new technology to Ukraine – first, modern tanks, then fighter jets, then long-range weapons – the Kremlin has warned of dire consequences, potentially involving a nuclear strike. This has slowed the supply of weapons to Kyiv, benefiting Moscow.

The economy is no different. The Kremlin wants to convince Ukraine’s allies, particularly the United States, of Russia’s economic strength. If Russia can fund its war for years, the US might support a ceasefire that favors the Kremlin’s goals. Controlling perceptions is paramount, observers say.

And so, it helps to boast of Russia’s economic might. At his marathon annual press conference last month, Putin said Russia’s economy was growing “in spite of everything,” outstripping Europe and the US.

CNN/Ejiofor Ezeifeoma