Donald Trump Is Right to Refuse to Be Bullied by Vladimir Putin
Trump has come to realize he holds the leverage while Putin stares down bankruptcy and total collapse.
President Donald Trump’s new post on Truth Social threatening new economic sanctions on Russia shows that Putin has finally met his match. It now looks as if Donald Trump may not be bullied by Putin’s empty holster of threats, bluster, and bluffs.
Trump has come to realize he holds the leverage while Putin stares down bankruptcy and total collapse. Putin’s regime, according to our research, is on pace to run out of cash by the end of the year, if not sooner, if stronger sanctions are implemented. [time-brightcove not-tgx=”true”]
Putin has been obfuscating how weak the Russian economy is by hiding and fudging the numbers. Putin now refuses to disclose major economic indicators as required by the IMF and as Russia used to release regularly. This ranges from foreign trade data, monthly output data on oil and gas, capital inflows and outflows, financial statements of major companies, central bank monetary base data, foreign direct investment data, domestic value added by industry, and lending and loan origination data. Even Rosaviatsiya, Russia’s federal air transport agency, has stopped publishing data on air passenger volumes.
Our new analysis shows the true nature of the Russian economy. Putin is strangling his own nation with inflation approaching Weimar Germany’s collapse. As Trump pointed out, Russian inflation has gone through the roof with annual inflation near 10%. Even food is becoming prohibitively expensive, with milk and dairy inflation near 20%; bread and bakery inflation near 15%; and fruit and vegetable inflation near 30%. Inflation across gasoline, housing, and utilities is similarly in the double digits. These skyrocketing costs are borne entirely by regular Russian citizens, not by Putin’s cronies.
That pain extends across Russian society with no relief in sight. Putin cannot slay inflation because Russian interest rates are already at a whopping 21%, and the Russian ruble is collapsing. Companies and individuals cannot afford to pay usurious 25% interest on mortgages and loans, so lending has plummeted. Over 1,000 multinational businesses have exited from Russia. The few companies that remain cannot hire workers as Putin cannibalizes the productive economy.
Putin has been able to get away with these economic cracks because he has been sustained by windfalls from oil sales in last few years. Trump has grasped the strength of this leverage in a way the Biden Administration, which was fearful of sparking global inflation through tougher sanctions, did not. Those worries were misplaced because, Russian commodity exports amount to less than 10% of global supply. The world doesn’t need Russian oil, but Putin is desperate to sell oil to stave off bankruptcy.
Few appreciate how close Putin is to running out of cash. The value of Putin’s sovereign wealth fund and foreign exchange reserves have dwindled by half as he draws down his rainy-day funds, even with windfall oil sales. That is because Putin is running unsustainable budget deficits to fund his war machine, totaling in the tens of billions.
If President Trump cuts off the spigot of Putin’s windfall oil profits through economic sanctions, Putin will have to beg for a deal by the end of the year—or else he will run out of money.
Putin’s bluff can now be called.
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