Putin taps pension fund: Russia's economy in crisis mode!

Putin taps pension fund: Russia's economy in crisis mode!

Russia's economy is under severe pressure from Western sanctions and high interest rates. The situation has become so dire that President Vladimir Putin now has to resort to Russia's welfare fund to cover increasing budget deficits. Loud fr.de In 2025, the Kremlin plans to withdraw about 4.8 billion euros from the reserves of this important fund, which has been used to provide financial support to the pension system since 2008.

Russia's budget deficit is expected to triple over the course of the year. There is growing concern among the population that the Kremlin could potentially access private savings. Oligarchs close to the Kremlin have even expressed proposals to abolish pensions or consider children as a retirement plan. Alexandra Prokopenko, a former advisor to the Russian Central Bank, also warns about the long-term stability of the Russian economy.

Economic developments and challenges

Despite the tense situation, there are also positive economic developments. A British analysis from January 2025 by the Royal United Services Institute (RUSI) reports an increase in gross domestic product (GDP) of almost four percent in 2024. Richard Connolly, an economist and Russia expert, points out that Western expectations of an economic collapse are unfounded. Surprisingly moderate budget deficits of 1.5 to 2.9 percent of GDP since 2022 indicate a certain degree of resilience in the economy.

Russia's public debt is about 15 percent of GDP, the lowest ratio among the G20 countries. In December 2024, budget revenues reached over four trillion rubles (about $40 billion), increasing by 28 percent year-on-year. These financial results are also supported by a rebalancing of foreign trade and an expansion of government spending.

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Challenges posed by the oil market

Nevertheless, dependence on oil and gas exports remains a key issue. Profits from these exports are a mainstay of the Russian economy, and experts warn that the sovereign wealth fund could quickly lose cash if oil prices fall below $50 a barrel. The G7 countries have imposed sanctions to curb these gains, with an oil price cap being introduced.

Unilateral measures by the Kremlin, such as investing in a shadow fleet to ship oil under a false flag, show the pressure Russia is under. Falling oil prices and increasing production from OPEC+ and the USA are increasing the pressure to find new sources of financing.

Russia's economic challenges are complex. While short-term weaknesses are highlighted by the sanctions and internal problems such as labor shortages and high inflation, the long-term outlook for the Russian economy remains ambivalent, taking into account the structural weaknesses. Connolly cautions against confusing these long-term weaknesses with short-term vulnerabilities. Russia has enough economic resources to pursue its political goals and prepare for a long-term confrontation with the West telepolis.de.