Putin’s war economy has jammed

MILANO – It may seem like a paradox, but the last bad news for the Russian economy risks bringing the signature of Moscow. Nevertheless, Today the major oil producing countries gathered in theOpec+ They will win a new increase in the production of crude oil. In addition, even higher than the decisive one and reiterated in recent months. For example, Arabia

Saudi. Similarly, Russia, Arab Emirates, Kuwait, Oman, Iraq, Kazakhstan e Algeria In fact, they have reached, a general agreement to further open the taps of the extraction of 548 thousand barrels per day starting from August. Furthermore, A surprise decision. Consequently, when most observers expected an increase of 400 thousand barrels, in line with the increases decided in the previous months.

For the countries of the cartel it is a move to regain market shares: the more offer it translates. In putin’s war economy jammed addition, into lower prices by cutting the countries outside with higher extraction costs. Meanwhile, A gamble in an international context in which the slowing down of the world economy suggests a decrease in demand. In addition, with the risk that the excess of supply further push the prices further down.

Ugly if not bad news for Russia. Meanwhile, whose war economy – explains the Wall Street Journal -Ist begins to show the first cracks. Moreover, The manufacturing activity is falling. inflation is still on the threshold of the double figure, consumers continue and reducing the expenses putin’s war economy jammed and the state budget is increasingly under pressure.

The end of a model – Putin's war economy jammed

“The growth model based exclusively on military spending has failed. ” he said Janis Klugeexpert in Russian economics at the German Institute for International and Security Affairs, cited by WSJ. “The skills of the civil sector must reduce, freeing workers so that the war machine can continue to grow. But it is not sustainable”. The Minister of the Russian Economy Maxim Reshetnikov instead he warned last month that Russia “is on the verge of recession”. while the Minister of Finance Anton Siluanov He defined the situation as a putin’s war economy jammed “perfect storm”.

The economy slows down – Putin's war economy jammed

Macroeconomic indicators confirm these signals. In the first quarter of the year, Russian GDP grew by 1.4% compared to the previous year, down 4.5% compared to fourth quarter 2024. The manufacturing SMEsthe index of the directors of the purchases of the companies considered the most updated “thermometer” on the state of health of the manufacturing companies. in June it recorded a worrying 47.5. the lowest figure for three years now and below the 50 points threshold, which separates the contraction phases from those of expansion of the production activity.

War no longer pays as before

The maxi investment on the war therefore seems to no. longer pay as before. There military expenditure Today he travels around 6% of GDP. double the United States and the highest since the time of the Soviet Union. Expenses for defense. security – always recalls the Wall Street Journal – They represent about 40% of the Russian total public spending this year.

The price race

But the surge of military spending has pushed theinflation Ullow. forcing the central bank to keep the rates high to contain the flame of prices, in May for the first time, from 21 to 20%. High rates that obviously limit credit possibilities for businesses. families, to the detriment of the country’s growth in the growth.

Alarm bells also recorded by the main banks in the country which in recent months have seen putin’s war economy jammed the share of Nplthat is. deteriorated credits that are difficult to pay off, with VTBthe second largest credit institution in the country and controlled by the State, recorded a rate of deteriorated credits in the retail segment of 5% in May 2025, increasing compared to 3.8% of the end of 2024. Numbers that do not scare the Russian central bank. which hastened to reassure that the risks of insolvency are largely covered by the Buffer of Banks.

The risk of low cost oil

But the Russian war machine. although super sanctioned, has fed over the years putin’s war economy jammed thanks to the substantial sale of oil, although already sold at a discount compared to the prices of international prices. Now the descent of prices “guided” by the producers’ cartel would bring further elements of uncertainty. A recent Report of the Finnish Central Bank shows Moscow as a Moscow has set an oil price in. its budget forecasts at 70 dollars per barrel. If the prices still descended the public deficit could grow further. In detail. according to the study, if the average export price of Russian crude oil was 55 dollars per barrel in 2025 and 54 dollars in 2026, instead of the 70 and 60 dollars expected respectively by the budget framework, the Russian GDP would lose a point each year. Not a little for an economy already in braking.