Russia’s Stalling War Economy Could Be The Best Hope to Push Moscow Towards Peace Talks

Russia seems reluctant to pursue peace at the moment as the country is widely believed to be planning a new summer offensive in Ukraine to consolidate territorial gains in the southern and eastern parts of the nation. Moscow’s increasing economic and military pressures at home could be the factors that drive Russia to the negotiating table.

The country has shown little appetite for peace negotiations with Ukraine despite Russia making a show of what war analysts described as a performative ceasefire. There have also been a number of attempts by U.S. President Donald Trump to persuade Russian President Vladimir Putin to talk to Kyiv.

Russia’s struggling war economy might be what drives it to negotiate

Moscow’s alleged plans to push an offensive this summer in Ukraine to capture the eastern part of the country could give Russia more leverage in any future talks. The country’s economic and military strain, ranging from supplies of military hardware and recruitment of soldiers to sanctions on revenue-generating exports like oil, might be what eventually drives Russia to the negotiating table.

Jack Watling, senior research fellow for Land Warfare at the Royal United Service Institute (RUSI) in London, said in an analysis Tuesday that Russia will seek to intensify offensive operations to build pressure during negotiations. He also believes that the country’s pressure cannot be sustained indefinitely.

“At the same time, while Russia can fight another two campaign seasons with its current approach to recruitment, further offensive operations into 2026 will likely require further forced mobilization, which is both politically and economically challenging.”

-Jack Watling, Researcher for Land Warfare at the Royal United Service Institute.

Watling also noted that Moscow’s military equipment stockpiles left over from the Soviet era, including tanks, artillery, and infantry fighting vehicles, will be running out between now and mid-fall. He believes that Russia’s ability to replace losses will be entirely dependent on what it can produce from scratch.

Russia’s economy slows amid continued war tensions

The country has signaled a decline in its war-focused economy, which has faced international sanctions as well as homegrown pressures largely resulting from war. Russia is facing rampant inflation and high food and production costs that even Putin described as alarming.

Russia’s central bank (CBR) has maintained high interest rates (at 21%) to lower the inflation rate, which was at 10.2% in April. The bank acknowledged earlier this month that a disinflationary process is underway. The CBR also argued that a prolonged period of tight monetary policy is still required for inflation to return to its target of 4% in 2026.

Liam Peach, senior emerging markets economist at Capital Economics, said last week the sharp slowdown in Russian GDP from 4.5% year-on-year in the fourth quarter to 1.4% in the first quarter is consistent with a sharp fall in output. He also believes the data suggested that Moscow’s economy may be heading for a continued sharp downturn than was expected.

Peach noted that a sharp drop in GDP growth surprised them since they had expected a slowdown to take hold in 2025. He argued that a technical recession is possible over the first half of this year, and GDP growth over 2025 as a whole could come in significantly below their current forecast of 2.5%.

Alexander Kolyandr, a senior fellow at the Center for European Policy Analysis, maintained that the growth that remains in the Russian economy is concentrated in manufacturing, especially the defense sector and related industries.

He noted in an analysis for CEPA that Russia’s economy is cooling after three years of militarizing the country. Kolyandr said the slowdown in inflation, less borrowing by companies and consumers, declining imports, industrial output, and consumer spending all pointed to the slowdown continuing.

The Economic Development Ministry also predicted that Russia’s economic growth will slow from 4.3% in 2024 to 2.5% this year. Kolyandr added that the economy is not demobilizing, but it is just running out of steam. According to him, bad decisions by policymakers, a further dip in oil prices, or carelessness with inflation could result in dire consequences for Moscow.

Source: CryptoSlate