Vladimir Putin’s grip on power has remained resilient despite the economic woes caused by his invasion of Ukraine, but the seeds of an eventual decline may have already been planted, according to a former Russian central bank advisor.
A telltale sign is the Kremlin’s abandonment of any fiscal discipline as the costs of fighting the Ukraine war, which is now in its fifth year, strain existing resources.
Alexandra Prokopenko, who is now a fellow at the Carnegie Russia Eurasia Center, pointed out in a recent Financial Times op-ed that the war has forced Russia to unwind its long-touted fiscal restraint.
In a striking example of the turnaround, Russia’s parliament recently gave the finance ministry a blank check to spend more and borrow past its debt ceiling without a formal budget or explicit legislative approval.
That’s as the budget deficit through May is already double 2025’s full-year level, hitting 2.6% of GDP, or about $83 billion. At the same time, Russia’s sovereign wealth fund, which has been tapped to cover budget shortfalls, is being rapidly depleted and just a fraction of prewar levels.
