Russia is currently battling two major blows to its economy as it continues to funnel staggering amounts of money into its war machine. The annual inflation rate in the country hovers at just above 10%, recording a two-year high of 10.1% in February, though the Central Bank (CBR) projected an average annual inflation rate of 7-8% for this year.
This comes as the Ministry of Defence (MoD) issued a statement warning that Moscow may not be able to fund its war effort for much longer due to “inflationary pressure”. It said: “Labour shortages, alongside high levels of government spending, almost certainly mean inflation will remain above the CBR’s target. Long-term inflationary pressure will highly likely exacerbate pressures on Russia’s ability to sustain high defence spending.”
Compounding this is the tanking oil prices following Donald Trump’s widespread “Liberation Day” tariffs that he said would make trade conditions better for the US.
Despite Russia not receiving any levies, the tariff policy caused a slump in oil prices for the country that relies on the resource for roughly half of its export income.
International oil benchmarks dropped by roughly $10 a barrel in just a few days at the beginning of April, while the price of Russian Urals crude oil went close to $50 per barrel for the first time in nearly two years.
Elvira Nabiullina, the governor of the CBR, warned of the looming consequences Russian energy resources face.
She said: “If such tariff wars, and we are seeing an escalation of tariff wars, continue, it usually leads to a decline in global trade, the global economy, and possibly even the demand for our energy resources.
“There are risks here, but we need to watch how the situation unfolds.”
Kremline spokesperson Dmitry Peskov said Moscow was keeping a close eye on the situation as Mr Trump’s tariffs create a ripple effect across global economies.
He said: “We are monitoring closely the situation, which is currently extremely turbulent, tense and emotionally charged.”