The economic hurdles waiting for Putin if he gets re-elected

In this post:

  • If re-elected, Putin faces the ongoing economic strain of the Ukraine conflict and its impact on Russia’s global relations.
  • Putin’s term will likely focus on strengthening ties with non-Western countries and managing Russia’s nuclear capabilities amid strained U.S. relations.
  • Domestically, he must address the economic challenges of trade shifts, military spending’s impact on the budget, and rising inflation and interest rates.

As Russian President Vladimir Putin gears up for another potential six-year term following the March election, a victory largely perceived as inevitable, he faces a labyrinth of economic challenges. His re-election would not only continue his long-standing tenure but also bring to the forefront several critical economic hurdles that need urgent attention.

Persisting Ukraine Conflict and Its Economic Implications

The war in Ukraine, now lingering past 21 months, has placed Russia in a strategic yet strenuous position. Despite controlling over a sixth of Ukraine’s territory, the conflict has stagnated into a war of attrition with no significant shifts in the frontline.

Putin’s initial ambitions of capturing Kyiv and ousting the Ukrainian leadership have evolved into a more complex scenario, with partial control over four declared Russian territories in Ukraine.

Analysts speculate on Putin’s long game, considering whether he expects the West’s support for Ukraine to wane, especially in light of potential political shifts in the U.S. presidency next year.

The choice Putin faces is stark: further escalation through additional mobilization, despite the first wave’s unpopularity and chaos, or settling into a ‘frozen conflict,’ maintaining a grip over southern and eastern Ukraine indefinitely.

Shifting Foreign Policy and Nuclear Posturing

Putin’s decision to wage war in Ukraine has drastically transformed Russia’s international relations, especially with Western countries. In response, Putin has sought closer ties with China and India, aiming to create a “multipolar world” and reduce U.S. global dominance. His meetings with leaders from North Korea and Iran, countries known for their antagonism towards the U.S., highlight this shift.

A new term for Putin would likely see an intensified focus on strengthening Russia’s alliances, particularly within the BRICS group, expanding beyond trade to areas like space cooperation and cultural exchanges.

Another significant challenge for Putin is the management of Russia’s nuclear arsenal. With conventional forces stretched thin in Ukraine, Putin has frequently emphasized Russia’s nuclear capabilities. The possibility of resuming nuclear testing, which hasn’t occurred since 1990, looms, though Russia insists it will only do so if the U.S. tests first.

This stance complicates the prospects of extending or replacing the New START treaty, the last nuclear arms control pact between Russia and the U.S., set to expire in 2026.

Economic Realities: Trade, Energy, and Domestic Concerns

The ongoing war has cost Russia its substantial energy market in Europe. To counteract this, Moscow is banking on three major projects: a new gas hub in Turkey, the Power of Siberia 2 pipeline to China, and the expansion of the Northern Sea Route, facilitated by melting Arctic ice. These projects will be crucial in mitigating the impact of Western sanctions and pivoting Russian trade eastwards.

On the home front, Putin prides himself on Russia’s resilience against Western sanctions. While the GDP showed a 5% year-on-year increase in October, this growth is primarily attributed to a surge in military production. Defense and security are expected to consume about 40% of the next year’s budget, potentially overshadowing other vital sectors like education and health.

Additionally, the exodus of skilled professionals and IT experts since the war’s onset has resulted in labor shortages in key industries. Inflation hovers above 7%, and interest rates are at a daunting 15%. Putin’s challenge will be to prevent further erosion of living standards, a cornerstone of his appeal to the Russian populace.

At 71, Putin’s next term would see him at 77, younger than U.S. President Joe Biden at his inauguration. However, age is also a factor for key figures in Putin’s circle, raising questions about potential leadership renewal. Watchful eyes are on younger leaders like parliament speaker Vyacheslav Volodin and agriculture minister Dmitry Patrushev, who might bring fresh perspectives to Russia’s economic and political strategies.

Disclaimer: The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decision.

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