Putin has run out of moves

Key Points:

• Russia is experiencing stagflation, with growth unlikely to exceed 1% and inflation stuck at 6% or higher, while the war in Ukraine continues to strain the economy and limit military spending options.
• President Vladimir Putin appears to have accepted a war of attrition, maintaining national security spending at similar levels for 2025 and 2026, but rising budget deficits and limited financing options threaten fiscal stability.
• The government relies heavily on state-owned banks and indirect money issuance, contributing to a disconnect between official inflation rates and public inflation expectations, while public debt remains low due to lack of foreign borrowing.
• Putin faces a dilemma between potentially ordering another military mobilization, risking mass emigration and economic harm, or seeking a ceasefire, which could destabilize his regime amid high war casualties and veteran unrest.
• Political instability is growing within Putin’s inner circle, marked by high-profile dismissals, arrests, and deaths, reflecting deepening challenges to his leadership amid ongoing economic and military pressures.