Is Russia's economy really on the brink of collapse?

All these bellicose statements by Putin, where he once again showed Europe 'Kuzka's mother' (Kuzka's mother is part of the Russian proverb "to show Kuzka's mother", an expression of an unspecified threat or punishment, such as "to teach someone a lesson" - ed.) and once again put Oreshnik on combat alert, should not be misleading.

In 2022, Russia had money, weapons, a trained army, and the element of surprise. Now everything that could get worse has gotten worse.

"Russia has exhausted its accumulated reserves of petrodollars. 30 years of savings have been burned in the war. The Russian economy has stopped working in the "take money, spend it on war, have economic growth" mode. Economic growth has ended. Because it was based on burning state money, which has run out."

There's nowhere to get money, they can only print it. Each day of printing will bring them closer to a conditional 'Venezuela,' with galloping inflation and a shortage of goods. Not immediately, but very definitively. And the budget deficit will remain at an insane level as long as the war continues.

Because war is very expensive. And they cannot allow inflation, because they need to lower the key rate so that the non-military economy can somehow start working. That's the trap. And there is no solution to this dilemma. Because the war requires printing. And printing doesn't allow forgetting about inflation. And inflation doesn't allow having long-term cheap money, which is needed for the economy. They can weaken the ruble and this will help cover a small part of the budget deficit. But this will provoke greater inflation. And again the same circle.

Of course, if they cover the budget deficit with the printing press for only a year, catastrophe won't happen. The crisis will simply deepen. And this may feed Putin's irrationality, who doesn't feel that his clock is ticking. However, the situation will worsen with each day of printing. Weakening an already weakest position since 2022.

"Moreover, right now oil prices are at their minimum since 2021. And the market itself has become more limited for Russia. The European gas market has been completely lost. And it cannot be recovered in the medium-term perspective."

Russia has a shortage of labor resources. Russia needs migration for its economy. But at the same time, fascism dominates in Russia, where they call for hating "others." And again a trap. Without migration, stagnation in the economy will be even greater. And migration is impossible, because they spread an atmosphere of hatred in society, and they want to send migrants straight to war. Again a trap.

Russia has exhausted the stockpile of weapons accumulated over 80 years, since the times of the Soviet Union. Yes, they make missiles, they make more drones, but they have no more of all those tanks, APCs, and other things that lay in warehouses since Brezhnev's times and were prepared for a march on Berlin, Paris, or Washington. Drones and missiles can strike our energy infrastructure. But they are not decisive on the front. So this is a weapon for the Ukrainian rear. And there's a lot of it. But it's intended for strikes on our brains. And there we are still our own masters. At least we should be.

Well, and what would be unexpected now would be Russia's pacification, not the continuation of the war.

And this is not an analysis of the balance of forces between Ukraine and Russia or Russia and Europe. This is about the dynamics of Russia itself. And this is the only thing that can motivate Putin to conduct negotiations for real. If he is rational. But here is the biggest question. And when he carries on about "guinea pigs," the question of his rationality only grows. Especially when a person who very quickly weakened his country puffs out his cheeks and says that Russia has finally gained true sovereignty.

*Published preserving the author's style

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About the author. Serhii Fursa, investment expert, blogger.

The editorial board does not always share the opinions expressed by blog authors.