Putin's dilemma: peace or economic ruin? Facts at a glance!

Putin's dilemma: peace or economic ruin? Facts at a glance!

The Russian-Ukrainian negotiations in Istanbul failed without any result. US President Donald Trump had already predicted this failure. Ex-CIA analyst Rob Dannenberg described the talks as a “peace theater.” Given the current situation, it is clear that Vladimir Putin has no real interest in an agreement and is instead relying on military strength. Loud n-tv The Russian economy has been prepared for war since the attack on Ukraine.

Defense spending currently amounts to over 7% of economic output and accounts for a third of government spending. This war economy has led the entire Russian economy into a dead end. A sudden ceasefire could result in a massive economic downturn, as reliance on arms production has increased wages and pushed interest rates to 21%. At the same time, civilian companies have little access to financing options. This dangerous situation could also lead to massive unemployment if hundreds of thousands of returning soldiers cannot be integrated into the civilian labor market.

Economic challenges

Historical comparisons suggest that demobilization has often led to economic crises in the past. Putin faces a dilemma: He cannot maintain military spending at current levels without further damaging the Russian economy. The Kremlin could try to expand the conflict to other countries in order to seize resources. Military aggressiveness could continue even in the event of peace in order to take economic realities into account.

For the last three years, Russia has been waging a war of aggression against Ukraine that violates international law. Ukraine's resistance, supported by Western aid, largely halted the invasion. Western sanctions are aimed at weakening the Russian economy and are already showing initial success. These measures have resulted in signs of impending economic collapse, while industrial production and the services sector are shrinking, according to the Purchasing Managers' Index (PMI). Although President Putin claims that the Russian economy has defied the gloomy forecasts, this resilience remains fragile.

Military casualties and the labor market

Gross domestic product (GDP) contracted by 1.2% in 2022 but recovered by 3.6% in 2023 and 2024. Let's look at military spending, which accounts for 8% of GDP and 40% of the national budget. Experts warn that even a ceasefire in the Ukraine war could not lead to lasting peace. British intelligence estimates put Russian casualties at between 175,000 and 200,000, with 40,000 to 60,000 fatalities. The Ukrainian armed forces estimate Russian combat losses at 839,040 men.

Although there is a low unemployment rate of around 2% in Russia, the labor force is shrinking by around one million men every year. Returning soldiers face great difficulties in establishing themselves in the civilian job market. In addition, there are low-interest loans, which make up around 16% of the banks' total portfolio and increase the risk of payment defaults. As time passes, a ceasefire in the Ukraine war may come closer, but the question of lasting peace remains open, as it is Watson reported.