Putin to travel to China in September seeking war funding — economist

Economist Oleh Pendzyn, a member of the Economic Discussion Club, said this on Espreso TV.

“Today, the state of Russia’s economy is extremely difficult. The Russian budget shows a deficit of 3.8 trillion rubles, with the actual deficit close to 5 trillion rubles. The main source for covering the deficit, which Russia has relied on until now, is the National Wealth Fund, which has only 2.6 trillion rubles left. Raising taxes and devaluing the ruble will not fix the situation, as this will hit Russia’s economy even harder. Simply put, by October, Russians will have no money to cover the budget deficit,” Oleh Pendzyn noted.

He added that in 2023, Russia asked China for a stabilization loan in yuan, but Beijing refused. Russia also turned to African countries, which likewise declined.

“Even Russian outlets report that Putin plans to visit Xi Jinping for the 80th anniversary of victory over Japan in World War II and will raise the issue of obtaining a stabilization loan from China in yuan, roughly 7–8 trillion rubles, to continue financing the war. This will be the moment, the Rubicon, the bifurcation point, when everything becomes clear to everyone. If China provides this loan, it will essentially side with Russia, since currently Russia is cut off from international financial markets. This would allow Russia to finance the war and clearly position China, which is now trying to demonstrate neutrality. To some extent, this would also allow European countries to impose broader sanctions on China as a country that sided with Russia,” the economist commented.

In his view, China is in a “tight spot” because it is highly dependent on the European market. To put it in context, the annual trade volume between China and the EU is about $750 billion, and with the U.S. around $650 billion, totaling roughly $1.4 trillion.

“China is now actively seeking mechanisms to halt the hot phase of the conflict because it does not want to wait until it has to make a decisive choice. But I am deeply convinced that the Russia-Ukraine war will not be stopped by decisions in Moscow, but through negotiations between Xi Jinping and Trump, because Ukraine will be used as leverage by one side or the other in achieving their trade relations. In this scenario, both Russia and Ukraine will be objects of negotiation, not active participants,” Pendzyn concluded.

• On July 18, it was reported that Chinese leader Xi Jinping plans to invite U.S. President Donald Trump to Beijing for the celebration of the 80th anniversary of the end of World War II, which will take place in September. Russian leader Vladimir Putin has already accepted the invitation.