Putin is Losing the Battle (But Not Against Ukraine)

The Ongoing Challenges in Russia: War and Inflation

It has been 2 years since the outbreak of the war in Ukraine, when President Putin authorized the incursion of Russian soldiers, starting the so-called special operation.
The extraordinary resilience of the Ukrainian people, along with the support of NATO and the US indirectly in the conflict, has prolonged the situation far beyond Putin’s initial expectations.

The Battle Against Inflation

While Putin must pay attention to the incursions of Ukrainian soldiers on Russian soil, another battle he is facing is that of inflation.
In 2022, Russia saw a record peak in inflation at 17.8%.
By 2023, the country managed to bring inflation down to just over 2%.
However, a significant increase in prices is once again underway, with a 9.1% rise from January to July 2024.

Inflation and Soaring Prices

As soldiers fight on the Russian-Ukrainian border, Putin’s administration is grappling with inflation, driven by various factors.
Food prices have risen by 10% annually, with eggs seeing a staggering 50% increase compared to 2023.
Beetroot, garlic, and bananas are among the most expensive products.

The Russian economy is heavily focused on military spending to win the ongoing conflict, leading to substantial investments in weapons and military equipment, as well as a significant rise in wages.
Despite military spending exceeding 8% of GDP, Putin believes it has not reached critical levels, citing higher defense spending in the Soviet Union in the mid-1980s.

The Impact on Labor and Salaries

Russia is experiencing a drain on its workforce, with more individuals leaving factories to enlist in the army.
To incentivize laborers, wages for professions like machinists, welders, and weavers have quadrupled.
This surge in income among Russian citizens has indirectly contributed to the rising inflation rates.

To curb inflation, the Russian central bank has raised interest rates to discourage borrowing.
Over the past year, the benchmark interest rate has been increased six times, including a substantial 2% rise to 18% in the latest July meeting.

Conclusion

Putin is not only facing the harsh realities of the war but also dealing with internal economic challenges posed by soaring prices.
A discontent among the Russian population, exhausted by international isolation and high prices, is palpable as these issues persist unresolved.

For further insights, read also: The Russian Army is in Trouble: Putin’s Confirmations.