Putin, leaning into the wall. His wonderful plan is falling apart like a house of cards [ANALIZA]
Moscow boasts low inflation, which is to be proof of the effectiveness of the Kremlin's war policy. Only that, as noted by the Institute of War Studies (ISW), short -term data is misleading.
As if that wasn't enough The labor market is distorted – and maybe even destroyed – by Putin's war strategy. How much can you try to cover staff shortages in the army, tempting with high rates? “Russia effectively smokes a candle from two sides”, ISW analysts write, describing the war -powered war economy. Loans in banks, which are increasingly declaring bankruptcy.
Putin will have to face the real economic Tsunami and the Domino effect. Unless he takes a postponed step related to widespread mobilization. For now, he avoids it like fire.
July 17 this year The Russian Central Bank published a report for June 2025, in which it gave seasonally a corrected annual inflation rate (Saar) at 4 percent. – Exactly as much as the government of the Russian leader Vladimir Putin has long been given as an economic control indicator.
Russian officials celebrated the achievement of 4 percent. Saar as proof of the effectiveness of his war policy, and Bloomberg called this early success in the fight against inflation.
However, analysts from the Institute for the Study of War (ISW) warned this week that Short -term data is misleading. The official annual inflation rate lasts above 9 percent, and even the central bank itself admits that full correction can only take place in 2026 – if current trends persist.
ISW noticed that the decline of Saar “probably will not have a positive impact on the Russian economy in the long term.”
In order to limit prices, the Central Bank has tightened the conditions for granting loans and forecasts that in the next quarter the basic interest rate will be below 18 percent.
At the same time, it still alleviates monetary policy in other areas to stimulate short -term demand – even despite the increase in budget expenditure on military salaries, recruitment bonuses and subsidies for industry.
“Russia effectively smokes a candle from two sides”, ISW analysts write, describing the war -powered war economy.
Reinforced ruble – a reason for pride for the Kremlin officials – can temporarily alleviate the effects of sanctions, reducing import prices.
At the same time, the costs of services still increase, even despite the stabilization of the prices of sensitive goods on credit – this discrepancy signals the growing voltages in the domestic labor market.
Distorted labor market
The labor market is distorted – and maybe even destroyed – by Putin's war strategy.
From 2022, the Kremlin consists of huge one -off bonuses to encourage recruits to sign military contracts. In combination with the growing DIB investments, these payments are charged to both the federal and regional budget.
As ISW put it, “” unpredictable high salaries of soldiers and the effects of the resulting labor deficiency in the country will probably distinguish the Russian economy even more. “
The Kremlin's approach is double suicidal. The more money spends on the replacement of soldiers who died on the battlefield, the more inflation in the country fuels.
However, reducing these payments threatens to break down recruitment to the army – especially since the number of victims remains high, and the enthusiasm of society for the war seems to weaken.
ISW has repeatedly assessed that Russia cannot forever replace its armed forces at the current level of loss without universal mobilization – A step that Putin is avoiding so far. Analysts also say that the Kremlin cannot afford to further increase payments to fill the gaps.
Added to this is quietly growing debt crisis in the banking sector.
In 2025, Russian banks have already noted an increase in loans at risk of 1.2 percent, which gives a total amount of 4 percent. -And some analysts warn that by 2026 it can increase to 6-7%.
So far, the president of Central Bank Elwira Nabiullin rejects the risk of systemic crisis, citing 8 trillion rubles (PLN 371 billion 677 million) of reserve capital. However, behind the scenes, the bank seems reluctant to recognize the full range of the problem.
Instead of facing a wave of bad loans, he advises lenders with quiet debt restructuring and absorption of losses internally – Tactics, which ISW describes as risky and contradictory.
Analysts suggest that the central bank probably does not want to finance rescue programs that would force banks to publicly announce losses – or, worse, to bankruptcy.
However, this reluctance can cause a broader crisis in itself. The bankruptcy of even one large lender could cause a chain reaction that would destroy the illusion of stability that Putin has built over the years.
The war reaches home
July 16 this year Ukrainian drones hit many industrial facilities in Russia, including a large oil refinery in Nowokujbyszewsk. Both objects are located over 800 km from the border with Ukraine and significantly beyond the reach of Ukrainian drones confirmed so far.
Kiev did not officially confess to responsibility, but Ukrainian drone designers suggested that they had a long range range, and the Russian authorities directly accused Ukraine.
On the other hand, Russia spent the last week bombing civil cities throughout Ukraine, including Kharkiv, Dnieper and Krzywy Róg – sometimes hundreds of bullets and drones in one night.
However wider Russia's military strategy may also change.
This week there was a rare symbolic exchange: Russia returned the bodies of 1000 Ukrainian soldiers killed in battle, claiming that this is the first party with a larger delivery of 3000 bodies. Ukraine returned in return only 19 bodies of Russians.
The huge discrepancy raises questions. Russia can overstate its offer to look generous or suggest a balance of losses.
Kyiv does not intend to risk. President Wołodymyr Zelanski publicly called on the United States to help Ukraine in the production of 50 percent. He defends for national needs – this goal would reduce dependence on Western help and would help in the construction of a more sustainable defense industry.
However, this industry remains Russia's main goal.
While Kyiv increases the production of drones, Moscow is still losing his labor force, capital and credibility in the warwhich he claims he wins.
The Kremlin may fuel economic optimism for several quarters, but contradictions underlying the Russian war economy – easy money, heavy losses and a system forced to pretend that both may last – they are becoming more and more difficult to hide.
