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Ukraine’s best hope may be a faltering Russian economy
Sanctions are hurting Russia's economy more than President Vladimir Putin wants anybody to think. Keeping the pressure on might ultimately help Ukraine win.
And of course China being China.Yet difficulties persist. Russia’s official inflation rate is an uncomfortable 7.8%, and the Russian research firm Romir reports that overall price levels for common consumer goods have nearly doubled since the 2022 invasion. Vegetables, as one example, have shot up in price because of sanctions on Western supplies of seeds, fertilizer, and other staples of agricultural production.
To plug some of the holes, Putin is planning tax hikes on businesses and the wealthy, but that could backfire. Foreign investment in Russia has plummeted, and most businesses can’t afford loans at double-digit interest rates. So the only source of investment is companies' own profits, which new taxes will take a bigger bite out of, discouraging investment. The whole cycle is a recipe for collapsing output, similar to what caused the dissolution of the USSR in the late 1980s.
Gazprom plunges to first annual loss in 20 years“Russia is learning the hard way that China is not interested in being Russia’s donor,” the Milov report says. “China is only interested in Russia economically as a supplier of cheap raw materials with sizeable discounts, as a market for Chinese finished products sold at a premium, and not interested in investing in seeing Russia emerging as a competitor at international markets of manufactured goods.”