Russia in a predicament: power play and economic crisis looming!

Russia in a predicament: power play and economic crisis looming!

The political and economic situation in Russia is becoming increasingly tense amid unscrupulous sanctions and an ongoing state of war. According to a recent report by Mercury The European Union plans to further tighten sanctions against Russia's economy. A central element of this is the adjustment of the price cap for Russian oil exports from 60 to 50 US dollars per barrel. This is happening in a context in which Russia's military attacks on Ukraine have intensified in the spring of 2025.

However, there does not seem to be an end to the fighting in sight. Peace negotiations between Russia and Ukraine are being sought, but the Russian government has signaled its willingness to “fight to the end.” According to the Institute for the Study of War (ISW), Russia has carried out some of the most violent attacks since the start of the war, further exacerbating tense military and political conditions.

Economic impact of sanctions

However, the sanctions imposed by the EU do not only include restrictions on oil. A 16th package of measures was adopted, which includes export and import bans and the exclusion of Russian banks from the Swift system. The aim of these measures is to increase the pressure on President Putin, such as Deutschlandfunk reported. However, Russia continues to have success selling oil, coal and gas, particularly to countries such as China and India, despite an embargo in place.

The economic situation in Russia is also reflected in worrying inflation. In March, consumer prices rose 0.65%, an annual rate of 10.3%. A central factor in this development is the high war spending, which is fueled by a Kremlin plan to finance the war. The Russian central bank has set the key interest rate at 21% per year, hindering investment and making it difficult for companies to access credit. Such economic conditions lead to stagnation, which, according to forecasts, could continue in the coming years.

Skilled labor shortages and social spending

Another challenge is the shortage of skilled workers. At the end of 2024, Russia had a shortage of 2.6 million employees, partly due to military conscription and flight from this conscription-like measure. The production, trade and transport sectors are particularly affected. Employers increase salaries to attract people willing to work; However, the question remains as to how long this can be maintained.

Social spending in Russia is also in jeopardy: education, healthcare and internal security are suffering under the pressure of rising military and war budgets. Against this economic horizon, the ISW warns that Russia's economy may not be strong enough to maintain the state of war in the long term. President Putin may face further difficult decisions as early as 2026 or 2027, as the current strategy is met with uncertain success and society increasingly moves away from financial burdens.

So the dynamics continue to be critical. While Russia is increasingly relying on its military power, the economic foundations of its actions appear to be fragile. An outlook for possible normalization is not very concrete, especially in view of planned negotiations between Donald Trump and Vladimir Putin, which are seen as potentially damaging to the current punitive measures. In this delicate situation, the harsh reality may become even more difficult for the country to bear.