Why Putin Won’t End the War Despite Economic Crisis, According to an Economist

Russia and Crimea Face Deepening Economic Strain

Economist Vladislav Inozemtsev argues that the Kremlin shows no signs of halting its war in Ukraine because Vladimir Putin’s decisions lack economic rationality. Territories occupied since the full-scale invasion, which were already dependent on subsidies from Moscow before the conflict, have become a severe financial burden on Russia. While authorities had planned to allocate roughly one trillion rubles over two to three years for rebuilding these areas, the actual costs of waging war have far exceeded those figures.

Crimea’s economic woes continue to worsen as the tourism sector collapses and fuel shortages persist. Inozemtsev noted,

“Businesses, especially in Crimea, are falling apart due to the collapse of the tourist season and the lack of fuel, and this trend will continue.”

The current economic crisis is putting pressure on employment, tax revenues, and Russia’s gross domestic product. Yet, according to the economist,

“Russia is led by a mentally unstable person who does not think in rational economic terms.”

Social Fallout from the Economic Crisis

Putin’s inner circle does not suffer from the economic downturn the way ordinary Russians do. Inozemtsev points out that

• “if you look at any Forbes report, you’ll see that all Russian billionaires get richer every year.”

Meanwhile, average citizens bear the heaviest burden of the economic hardship. The economist emphasizes that “a Russian running a small business, who cannot deliver goods to the store because there is no gasoline, and is still asked to pay taxes a month in advance—this is complete hopelessness.”

Despite the prolonged economic difficulties, Putin’s closest associates are only worried about the risk of losing the war, because “if the conflict drags on and ultimately results in defeat, the regime could collapse.” At the same time, Inozemtsev says the fuel crisis alone is unlikely to significantly weaken the Russian military, as “strikes on logistics routes, supply bases, and oil infrastructure are far more effective.”

Given the above, it is clear that the economic situation in Russia and the occupied territories remains critical, yet the Kremlin continues its military operations. This indicates that political decisions in Russia are made without sound economic assessment, which could further worsen the plight of ordinary citizens. Consequently, the country’s circumstances may lead to greater social tension and economic hardship, with unpredictable consequences for the regime as a whole.

As the economic situation in Russia continues to deteriorate, many analysts believe that military responses from Ukraine may be necessary to compel a shift in Kremlin strategy. This perspective is echoed by various experts who argue that Ukraine's strikes could be pivotal in influencing Putin's decisions amidst the ongoing conflict and economic turmoil.