A brewing financial crisis in Russia reportedly has joined a list of problems for President Vladimir Putin.
After more than two decades of consolidating power, Putin faces an increasingly brittle economy, tightening Western sanctions, and rising anxiety inside the Kremlin — challenges some analysts say are exposing cracks in his once-unshakable grip.
According to The Telegraph, Russia's economy is showing severe strain from the war in Ukraine, sky-high interest rates, and the mounting cost of government borrowing.
Economists warn that years of reckless wartime lending, much of it funneled into the defense sector, could soon trigger a wave of bad debt and potentially a full-blown banking crisis.
Craig Kennedy of Harvard's Davis Center for Russian and Eurasian Studies told the British newspaper that roughly 23% of all corporate loans in Russia, worth about $190 billion, are tied to arms manufacturers, many made without proper credit checks.
"This is just a dark pool of debt," Kennedy said. "Nobody quite knows how much is going to default once it matures."
Russia's central bank has dismissed talk of systemic collapse as "unfounded," but cracks are appearing.
Several major banks have reportedly sought quiet bailouts, and loan defaults are rising. Sergey Chemezov, the powerful head of state arms giant Rostec, cautioned last year that borrowing costs were unsustainable.
Ordinary Russians are feeling the pain too.
Ukrainian drone strikes on refineries have slashed domestic fuel supplies, driving gasoline prices up 40% this year. Some regions have begun rationing, while others have seen fuel stations shut down altogether.
Hundreds of protesters this month gathered in St. Petersburg Square to sing an outlawed song calling for Putin to be overthrown, The Telegraph reported.
Also, Russia's public finances are spiraling. With oil prices depressed and war spending surging, Moscow's budget deficit is on track to hit its highest level since the pandemic.
The Finance Ministry has more than quintupled its deficit target for next year, and reserves in the National Wealth Fund have fallen by more than half since before the invasion of Ukraine in February 2022.
The Russian crisis deepened this week when President Donald Trump and the European Union launched coordinated sanctions aimed at crippling Russia's energy exports, the financial lifeline of Putin's war effort.
The Trump administration on Wednesday sanctioned Russia's two biggest oil companies, Rosneft and Lukoil, and warned of secondary sanctions on foreign banks facilitating Russian trade.
The EU followed with fresh restrictions targeting Russian liquefied natural gas, port access for hundreds of shadow fleet oil tankers, and bans on high-tech exports used in weapons manufacturing.
Oil prices spiked more than $2 a barrel on the news, though analysts said the global glut would limit the damage.
Trump said India and China, Moscow's two biggest buyers, were already cutting back "very substantially," threatening to choke off Putin's last major source of revenue.
Putin called Washington's move an “unfriendly act” and warned it could destabilize global markets, but acknowledged the sanctions will have "certain consequences."
Trump's team has prepared additional sanctions targeting Russia's banking system and energy infrastructure if Putin refuses to engage in peace talks.
The measures, officials said, could "up the ante further" as the administration looks to force progress in ending the nearly four-year war.
The U.S. president, who once described Putin as a "friend," has turned sharply critical, saying Moscow "has to really settle this war."
Trump told reporters this week, "All of a sudden, this [Russian] economy is going to collapse."
The tightening squeeze from abroad coincides with rising nervousness inside Russia.
Earlier this month, the Federal Security Service accused exiled dissident Mikhail Khodorkovsky and members of his Anti-War Committee of plotting a coup, a move observers see as a sign of Kremlin paranoia.
"The Kremlin is being paranoid," said John Herbst of the Atlantic Council. "Putin is looking for enemies to try to bolster his regime."
The Associated Press and Reuters contributed to this report.
Charlie McCarthy ✉
Charlie McCarthy, a writer/editor at Newsmax, has nearly 40 years of experience covering news, sports, and politics.
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