Vladimir Putin is increasingly concerned about the Russian economy, while Donald Trump considers increasing sanctions
The president of Russia, Vladimir Putinis increasingly concerned about the distortions of the Russian economy in times of war, just when donald trump pushes to end Ukraine conflict, news agency told Reuters five sources familiar with the situation.
The country’s economy, driven by oil, gas and mineral exports, has grown strongly in the last two years despite multiple rounds of western sanctions imposed after their invasion of Ukraine in 2022.
However, internal activity has been affected in recent months by labor shortages and high interest rates introduced to tackle inflation, which has accelerated under record military spending.
This has contributed to a sector of the Russian elite considering a negotiated solution to the war desirable, according to two of the sources familiar with the thinking in the Kremlin.
Trump, who returned to power on Monday, has promised to quickly resolve the Ukraine conflict, Europe’s largest since World War II. This week he said he was likely to impose more sanctions on Russia, as well as tariffs, unless for Putin to negotiateand added that Russia was headed for “big economic problems.” A senior Kremlin official said on Tuesday that Russia had so far not received any concrete proposals for talks.
“Russia, of course, is economically interested in negotiating a diplomatic end to the conflict,” Oleg Vyugin, former vice president of the Bank of Russia, said in an interview, citing the risk of growing economic distortions as Russia turbo-charges military spending and of defense.
Vyugin was not one of the five sources, who spoke on condition of anonymity because of the sensitivity of the situation in Russia. The extent of Putin’s concerns about the economy, described by sources, and the influence of this on views within the Kremlin on the war, are documented here for the first time.
Reuters has previously reported that Putin willing to discuss ceasefire options with Trumpbut that Russia’s territorial advances in Ukraine must be accepted and that Ukraine must abandon its attempt to join the US-led NATO military alliance.
The Kremlin did not immediately respond to requests for comment on Putin’s views on the economy and the Ukraine talks.
Trump “is focused on ending this brutal war” by engaging a wide range of stakeholders, White House National Security Council spokesman Brian Hughes said in response to questions from Reuters. In recent weeks, Trump’s advisers have walked back their boast that the three-year war could be resolved in a day.
Just days before Trump’s inauguration, the administration of outgoing US President Joe Biden imposed the most extensive sanctions package to date against Russia’s oil and gas revenues, a move that the security adviser Biden’s national official, Jake Sullivan, said he would give Trump the upper hand in any talks by applying economic pressure on Russia.
Putin has said that Russia can continue fighting as long as it takes and that Moscow will never bow to another power over key national interests.
Russia’s $2.2 trillion economy had until recently shown remarkable resilience during the war and Putin has praised top economic officials and businesses for circumventing the toughest Western sanctions ever imposed on a major economy.
After contracting in 2022, Russia’s GDP grew faster than that of the European Union and the United States in 2023 and 2024. This year, however, the central bank and the International Monetary Fund predict growth of less than 1.5%, although the Government projects slightly more promising prospects.
Inflation has approached double digits despite the central bank raising the benchmark interest rate to 21% in October.
“There are some problems: inflation, a certain overheating of the economy,” Putin said at his annual press conference on December 19. “The Government and the central bank already have the task of slowing down,” he said.
By Darya Korsunskaya, Guy Faulconbridge and Gleb Stolyarov (Reuters)
