Putin Warns Russian Oligarchs of Potential Economic Collapse

Russian leader Vladimir Putin warned on March 18 that the government and the Central Bank must work “subtly” to prevent the potential “collapse” of the Russian economy.

Speaking at a congress of the Russian Union of Industrialists and Entrepreneurs, which includes members of Russia’s Forbes list, Putin acknowledged the inevitability of an economic slowdown after the economy had been reoriented toward wartime production.

While Russia’s GDP grew by 4.1% in 2023, with a record growth rate of more than 8% over the past two years, the Russian Ministry of Economic Development predicts a significant slowdown in 2024.

Growth is expected to decelerate by nearly half, to 2-2.5%, while inflation is projected to remain twice as high as the target—7-8% instead of the planned 4%.

Putin emphasized the need for caution in managing the economy to avoid “overcooling,” warning of the risks of an economic “freeze” akin to a cryogenic chamber.

“We need to make sure that there is no collapse, no excessive freezing. It is a delicate matter, but I hope it will work out,” Interfax quoted him as saying.

Despite public claims of economic stability, sources close to the Kremlin have said Putin remains increasingly concerned about a looming economic crisis.

Military spending has surged, with more than $200 billion spent over three years on weapons and contract soldiers, creating a money supply “bubble.” To combat inflation, the Central Bank raised its key interest rate to a 21-year high, but the budget deficit has ballooned to $100 billion, and the National Welfare Fund is nearing exhaustion.

Putin is reportedly concerned that the high interest rates are placing significant strain on civilian industries, leading to potential bankruptcies. Data from the Center for Macroeconomic Analysis and Short-Term Forecasting suggests that one in five manufacturing companies now dedicates two-thirds of its pre-tax profits to servicing debt, with coal and metallurgical industries particularly affected.

These sectors have already faced severe losses, and coal companies have received emergency state support to prevent further closures.

Earlier, Russia announced plans to produce at least 60,000 metric tons of lithium carbonate by 2030, according to a statement from the Natural Resources Ministry.