The Kremlin leader has turned his country into a war industry for three years, not caring about the loss of hundreds of thousands of soldiers on the front in Ukraine. Now, a Western economist is announcing the beginning of the end for Putin.
Russia could be crippled by the fact that it is about to run out of an essential, financial reserves, by the fall.
Anders Åslund, a Swedish economist and expert at the Atlantic Council, claims that Russia’s foreign exchange reserves have fallen sharply to $31 billion in 2024, down from $117 billion in 2021, according to Business Insider.
Limited funds could hamper Russia’s future war efforts, and Putin would have to stop the conflagration. Russia faces a critical challenge to its war effort in 2025: The nation is rapidly running out of cash, financial reserves may be depleted before the end of the year, according to estimates by a European economist.
Russia’s national currency reserve fund could be exhausted by the fall of this year. That spells trouble for the nation’s military efforts in 2025, the economist said, given how much Russia has relied on its wealth pool over the past few years.
Liquid reserves in the foreign exchange reserve fund were cut from $117 billion in 2021 to $31 billion at the end of November, Åslund said. However, according to its 2025 budget, Russia is on track to spend a record $130.5 billion on defense this year.
“The most serious shortfall, however, is budget funding, as Russia’s last liquid reserves will likely run out in the fall of 2025,” Åslund wrote in an opinion piece for Project Syndicate.
“Budget cuts will then become necessary. Meanwhile, the war economy might also require price controls and rationing—old Soviet sins. As the risk of a financial collapse grows, Russia’s ailing economy is about to put serious constraints on Putin’s war.”
The rapid decline in Russia’s foreign exchange reserves was partly driven by Western sanctions, which prevented Russia from borrowing from other countries. The nation’s total foreign debt has collapsed over the past decade, with foreign borrowing falling from $729 billion in 2023 to about $293 billion in September 2024, Åslund noted.
Russia’s limited ability to finance the war also spells bad news for the health of its economy, which is plagued by a host of other problems.
It is also complicated by other issues affecting its economy, Åslund said. He pointed to rising inflation, the falling value of Russia’s currency and a severe labor shortage in the country, all factors that economists have warned could hurt Russia’s long-term growth prospects.
“Russian President Vladimir Putin frequently boasts about the strength of his country’s economy, claiming that Western sanctions only strengthen it (while calling for their lifting). In fact, ‘stagflation’ – inflation combined with minimal growth – is seen in Russia,” Åslund said.
Other experts also issued gloomy forecasts for Russia’s economy, with some noting that economic weakness could interfere with Russia’s ability to continue its war. At the moment, Moscow can’t seem to afford to either win or lose the war, according to Renaud Foucart, another European economist. Meanwhile, the nation’s economic woes could force an end to its conflict with Ukraine in 2025, according to another US think-tank expert.
Source: ziare.com
