Mass Media: Russia May Go Broke By The Summer

Good news for Ukraine.

Four years after Vladimir Putin ordered the invasion of Ukraine, Russia's economy has entered a "death zone," writes Fortune.

"The Russian economy is stuck in what can be called a negative equilibrium: it is supporting itself while gradually destroying its own future," said Alexandra Prokopenko, a research fellow at the Carnegie Russia Eurasia Center and former adviser to the Central Bank of Russia.

The economy is not on the verge of immediate collapse, but GDP growth has stalled, oil revenues have halved amid Western sanctions, and the budget deficit is rapidly depleting reserves.

At the same time, two economic systems have emerged: one is the military and related industries prioritized by the Kremlin; the other is all other sectors. The Russian economy now operates on what might be called "military rent" - budget transfers to defense enterprises that generate wages and economic activity.

These funds, however, are diverted to assets destined for destruction. Money that keeps factories running goes to produce tanks, armored vehicles and other weapons that are subsequently destroyed or damaged and provide no basis for future economic growth.

Analogously, money spent to hire new military personnel does not increase their productivity in the civilian sector. Instead, many die or return with injuries. The Center for Strategic and International Studies estimates total Russian troop losses at 1.2 million, of which 325,000 are dead.

"The body is burning its own muscles for energy," Prokopenko concluded.

Although the central bank has cut interest rates to support growth and the Kremlin is trying to rein in the budget deficit, the Russian economy's problems are not being solved by monetary or fiscal policy. Interest payments on the national debt this year will already exceed total spending on education and health care.

Putin can't just stop, though, because the economy is increasingly dependent on the defense sector, and demobilization could cause a crisis. Instead of ending the war, he continues it, waiting to see who fails first - Ukraine or its Western partners.

In recent months, concerns have been voiced inside Russia as well. According to The Washington Post, Russian officials have warned Putin of the risk of a financial crisis by summer. They point to weak oil revenues, which fell 50 percent in January from a year earlier, and a growing budget deficit - even after tax hikes.

One Moscow businessman said the crisis could come in "three to four months" amid accelerating inflation. Restaurants are closing and thousands of workers are being laid off, he said. Because of expensive credit and weak demand, companies are cutting hours or sending workers on unpaid vacations. Citizens are finding it increasingly difficult to service their loans, increasing risks for the banking system.

You can support the website Charter97.org

MULTI-CURRENCY ACCOUNT FOR ASSISTANCE:

Bank's name: Bank Millennium S.A.
Address: ul. Stanislawa Zaryna, 2A, 02-593, Warszawa
IBAN: PL97116022020000000216711123
SWIFT: BIGBPLPW
Name of the account holder: Fundacja “KARTA ‘97”
Purpose/title of payment: Donation for statuary aims

You can contact us by the e-mail [email protected]