Russia-Ukraine war: Moscow on brink of a recession as sanctions bite
Russia’s “painful” financial reality was laid bare when Kremlin officials had a public spat over the state of the nation’s coffers at a global economic forum. Follow updates.
Russian officials sparred publicly over how to boost the economy, as growth slows more than three years into its Ukraine offensive.
Moscow had shown unexpected economic resilience in 2023 and 2024, despite the West’s sweeping sanctions, with massive state spending on the military powering a robust expansion.
But economists have long warned that heavy public investment in the defence industry is no longer enough to keep Russia’s economy growing.
Businesses and some government figures have urged the central bank to further cut interest rates to stimulate activity.
“The indicators show the need to reduce rates,” Deputy Prime Minister Alexander Novak said at Russia’s flagship economic forum in Saint Petersburg on Friday local time.
“We must move from a controlled cooling to a warming of the economy,” said Novak, who oversees Russia’s key energy portfolio in the government.
He described the current economic situation facing the country as “painful”.
The call for more cuts to borrowing costs comes a day after Moscow’s economy minister warned the country was “on the verge of a recession”.
“A simple and quick cut in the key rate is unlikely to change anything much at the moment, except for … an increase in the price level,” the central bank’s monetary policy department chief Andrey Gangan said.
The central bank lowered interest rates from a two-decade-high earlier this month, its first cut since September 2022.
The bank, which reduced the rate from 21 per cent to 20 per cent, said at the time that Russia’s rapid inflation was starting to come under control but monetary policy would “remain tight for a long period”.
The central bank has resisted pressure for further cuts, pointing to inflation of around 10 per cent, more than double its four-percent target.
Russia’s gross domestic product (GDP) growth slowed to 1.4 per cent year-on-year in the first quarter, the lowest quarterly figure in two years.
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PUTIN TO MEET WITH ZELENSKY DURING ‘FINAL PHASE’ OF NEGOTIATIONS
Russian President Vladimir Putin said he was ready to meet with Ukrainian counterpart Volodymyr Zelensky but only during a “final phase” of negotiations on ending the three-year conflict.
He also suggested Mr Zelensky had no right to sign a peace agreement given his five-year mandate had expired under martial law, a notion Kyiv has dismissed as baseless propaganda.
“We need to find a solution that would not only put an end to the current conflict, but also create conditions that would prevent similar situations from recurring in the long term,” Mr Putin told foreign journalists during a late-night press conference in Saint Petersburg.
“I am ready to meet with everyone, including Zelensky. That is not the issue – if the Ukrainian state trusts someone in particular to conduct negotiations, for God’s sake, it can be Zelensky,” the Russian leader said.
“We don’t care who negotiates, even if it is the current head of the regime,” Mr Putin said.
But he added that this would only happen at a “final phase, so as not to sit there and divide things up endlessly, but to put an end to it.” Talks on ending the three-year conflict have stalled in recent weeks, with Mr Putin pushing maximalist demands for ending his offensive while declining to attend a personal meeting with Zelensky.
Kyiv has accused Moscow of deliberately sabotaging peace efforts to prolong the conflict.
Mr Putin also said that NATO’s push to ramp up defence spending was not a “threat” to Russia, days before the alliance was set to sign-off on a plan to boost its military capacity across Europe.
The Russian leader also said his troops would not stop pushing forward in Ukraine and sought to undermine Mr Zelensky.
The Western military alliance will hold a crucial summit in The Hague next week to discuss increasing defence spending to five per cent of GDP, under pressure from US President Donald Trump.
Mr Putin has cast his offensive in Ukraine as part of a wider conflict between Russia and US-led NATO, which has been Ukraine’s staunchest backer since Russia launched its offensive in February 2022.
“We do not consider any rearmament by NATO to be a threat to the Russian Federation, because we are self-sufficient in terms of ensuring our own security,” he said.
Russia is “constantly modernising our armed forces and defensive capabilities,” Mr Putin said, adding that it made “no sense” for NATO to spend more money on arms.
Though he conceded higher spending by NATO would create some “specific” challenges for Russia, he brushed them off.
“We will counter all threats that arise. There is no doubt about that,” Mr Putin added.
Kyiv is seeking security guarantees from NATO as part of any deal to end the fighting, more than three years after Russia ordered its full-scale military offensive.
TRUMP’S SAVAGE RESPONSE TO PUTIN OFFER
Meanwhile, US President Donald Trump has dismissed an offer by Mr Putin to mediate in the Israel-Iran conflict, saying the Russian leader should end his own war in Ukraine first.
“He actually offered to help mediate, I said ‘do me a favour, mediate your own. Let’s mediate Russia first, okay?’” Mr Trump told reporters at the White House on Wednesday.
“I said ‘Vladimir, let’s mediate Russia first, you can worry about this later.’”
Mr Putin has been in contact with world leaders about the Iran-Israel war since Israel started its recent attacks on Iran’s nuclear infrastructure.
Mr Putin has spoken with both Iranian President Masoud Pezeshkian and Israeli Prime Minister Benjamin Netanyahu, according to the Kremlin.
In a statement on the Kremlin’s website, the Russian leader “expressed his condolences to the leadership and people of Iran over the numerous human casualties” and “emphasised that Russia condemns Israel’s actions, which were carried out in violation of the UN Charter and international law.”
Mr Putin also condemned Israel’s actions on a phone call with Mr Trump.
AUSTRALIA SLAPS NEW SANCTIONS ON RUSSIA
The Australian Government has sanctioned dozens of Russia’s shadow fleet vessels used to help conduct its war on Ukraine.
Foreign Minister Penny Wong joined key G7 partners in the move to “help starve the Russian war economy of oil revenue”.
“Russia uses these vessels to circumvent international sanctions and sustain its illegal and immoral war against Ukraine,” she said.
“Operating under deceptive practices, including flag-hopping, disabling tracking systems, and operating with inadequate insurance, the shadow fleet enables the illicit trade of Russian oil and other sanctioned goods.
“These sanctions reinforce Australia’s consistent commitment to ensuring Russia, and those enabling its illegal invasion of Ukraine, face consequences.”
Shadow fleet vessels are ships, primarily oil tankers, that engage in illicit or deceptive practices to evade sanctions, regulations, or insurance requirements.
The sanctions will apply to 60 Russian vessels that will also be targeted by sanctions from Canada, the United Kingdom and the European Union.
RUSSIA REACTS TO TRUMP CLAIM
Russia has agreed with US President Donald Trump’s assertion that there would be no war in Ukraine if Russia wasn’t kicked out of the G8 in 2014, saying the G7 looked “rather useless” now.
Mr Trump told the G7 summit in Canada on Monday that the G8 had made a mistake by kicking Russia out in 2014 after it annexed Crimea from Ukraine.
“This was a big mistake,” he said, before adding that he believed Russia would not have invaded Ukraine at the start of 2022 had President Vladimir Putin not been ejected from the leaders’ club.
He said Putin “basically doesn’t even speak to the people that threw him out, and I agree with him”.
Kremlin spokesman Dmitry Peskov told reporters: “We agree with President Trump: it was a big mistake then to exclude Russia from the G8 format.”
He said the G7 had “lost practical significance” for Russia, given the state of world affairs.
“Given the declining share of the G7 countries in the global economy, given all the trends that are observed in the G7 countries and, of course, against the background of, for example, such formats as the G20, the G7 looks dull and rather useless,” Peskov said.
‘HORRIFIC’: RUSSIAN STRIKES KILL 10 IN UKRAINE
Russia fired scores of missiles and drones at Kyiv on Tuesday, killing at least 10 people and wounding dozens in what Ukrainian President Volodymyr Zelensky called “one of the most horrific attacks” on the capital.
The strike was one of the deadliest on Kyiv since Russia launched its full-scale invasion in February 2022, and came as direct peace talks between the two sides appeared to stall.
Zelensky said “an entire section of an apartment block” was destroyed and rescuers were searching under the rubble for possible survivors.
Dozens of residents took shelter in a metro station in central Kyiv, sleeping on mats, exchanging information on the drone and missile threat or reassuring pets, AFP journalists saw.
Some 27 locations in Kyiv were hit, Interior Minister Igor Klymenko said.
One person was also killed and 10 wounded in a strike on the southern port city of Odessa, while attacks on the Sumy and Kherson regions later in the day killed two others, authorities said.
A total of 440 drones and 32 missiles were used in the strikes nationwide, Zelensky said.
“Kyiv has faced one of the most horrific attacks,” the Ukrainian leader wrote on Facebook.
“Right now in Kyiv, efforts are underway to rescue people from under the rubble of an ordinary residential building – it’s still unclear how many remain trapped.”
He urged the international community not to “turn a blind eye”. Russian President Vladimir “Putin does this solely because he can afford to continue the war. He wants the war to go on,” he said.
– with AFP
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Originally published as Russia-Ukraine war: Moscow on brink of a recession as sanctions bite