Russia and Ukraine
Why Russia’s chance of winning is falling, and what it means for us
Winning wars requires resources, and Russia’s economy is failing.
Annual inflation is almost 10%, and rising. Interest rates are 21%: 13% above the pre-invasion levels. These rate are unthinkable for a modern developed economy. Business investment would usually collapse - that has not happened in Russia only because armaments firms can raise prices to cover the higher interest costs. Private sector wages are also market-determined - and rose about 7% real this year. That keeps (private sector) workers happy, but again, pushes up armaments prices. The cost of waging war is literally rising for Putin.
This will continue. 2025 defence spending will be 25% above 2024 rates. That rise will exacerbate inflation, unless