In Brussels, a top European economist has raised concerns about the strain on Russia’s economy due to the prolonged conflict in Ukraine and the impact of Western sanctions on President Vladimir Putin’s ability to sustain the war. Torbjörn Becker, Director of the Stockholm Institute of Transition Economics, warned that should Russia emerge victorious, EU governments may need to significantly increase defense spending for years to come.
Speaking to reporters after briefing EU finance ministers, Becker highlighted the mounting pressure on Russia’s financial system and macroeconomic performance, emphasizing the need for continued vigilance despite the challenges. He underscored the country’s reliance on oil and natural gas revenue, as well as imports of high-tech equipment to support its military operations.
Despite predictions, Russia’s economy has shown resilience, driven by high defense expenditures that have fueled growth and kept unemployment rates low. However, inflation and a lack of foreign investments pose long-term risks to the economy, raising questions about the sustainability of its current economic model.
To further pressure Russia’s economy, EU envoys are considering new sanctions targeting the country’s tanker fleet and the Nord Stream II gas pipeline consortium. These measures aim to reduce oil and gas revenues and deter investment in key projects. Becker also called on international cooperation, urging U.S. President Donald Trump to engage with China and India on their economic ties with Russia.
In a recent analysis, Becker’s institute highlighted the impact of sanctions on Russia’s oil revenues, leading to a depletion of its sovereign wealth fund. With dwindling resources, Russia faces economic challenges that could escalate into a banking crisis if not addressed. The institute warned that without a significant shift in economic policies, Russia’s financial stability could be at risk in the near future.
“Becker stated that this trend continues to rise annually,” reported David McHugh from Frankfurt, Germany.
