Reuters: The Kremlin Faces A Difficult Choice

War declares itself in full voice.

A right-wing American Influencer, a sitting U.S. official and a German retail billionaire are due to attend Kremlin dictator Vladimir Putin's "Russian Davos" on Wednesday, as the Kremlin grapples with stagnant economic growth and a standoff with the West over the war in Ukraine.

Russia's main investment forum, the fifth since Russia put troops into Ukraine in 2022, opens just hours after a deadly drone and missile attack on Kiev that Russia said was in response to a deadly strike on a dormitory in Russian-controlled Luhansk, Reuters.

The war is reportedly asserting itself in full voice, even if Ukraine is never once mentioned on the official program. "The question is: will this war end or are we looking into a much more difficult future?" - one Russian participant said on condition of anonymity.

Putin's Economy

Putin, who has been Russia's supreme leader as president or prime minister since 1999, has delivered a massive jump in prosperity in his first 15 years in office. The economy grew tenfold to about $2.3 trillion in 2013, the year before Russia annexed Crimea from Ukraine, according to the International Monetary Fund.

Since then, Russia's economy has been paying the price for its confrontation with the West over Ukraine: despite growing better than expected in 2023 and 2024, it is projected to grow by about $2.9 trillion this year, a fraction of the combined economic power of the NATO alliance, estimated at $45 trillion, according to Russian government data.

Russia's commodity-dependent economy slowed sharply to about 1 percent growth last year, down from 4.9 percent in 2024, and shrank 0.2 percent in the first quarter of 2026, which officials blamed on high interest rates, Western sanctions and a strong ruble.

Now growth this year is forecast at a modest 0.4%.

War, spies and oil

Oleg Vyugin, a former deputy central bank governor, said Russia has a choice between recession or cutting funding for what the Kremlin calls the "Special Military Operation" ("SMO") in Ukraine.

"Russia is faced with a choice: either cut military funding, which will give the economy a boost to growth by lowering the key interest rate more quickly, expand lending to the civilian sector, partially lift sanctions and restore supply chains, or continue the SWO, which will constantly require increased spending and further tax increases, intensifying the economy's slide into recession and the fall in real incomes," Vyugin explained.

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