Putin has overreached himself

The Russian economy is on the verge of collapse after 40 months of war, according to the Spanish newspaper El PAÍS. The picture that Trump keeps in his head is of Russia as the second most powerful nation on earth, when the truth is, its GDP is not much more than Spain’s ($2 trillion compared to $1.8 trillion), despite having three times the population. It is an economic minnow. California alone has a GDP of over $4 trillion. Running a full-scale war is a costly business, and in a prolonged conflict, the economy with the greatest resources and staying power will usually prevail. With over 20% of government spending going on the military last year (about 7% of GDP) it’s no surprise the Russian economy is in serious trouble. Putin has finally overreached himself, as all dictators do eventually.

The numbers don’t lie. Inflation is running at 9% and their interest rates are an eye-watering 18%. Wages aren’t keeping up, so consumers aren’t spending, and the result is a serious slowdown. Many young workers fled the country when the Ukraine war started, and since then, more than a million able-bodied men have been killed or wounded, while others are still being conscripted into the armed forces. The rouble has been highly volatile since the war started. Last November, the Russian currency hit its lowest point since March 2022, when it fell by a third.

Exports of oil and gas, the backbone of Russia's economy, are expected to fall by a quarter this year, and in 2026, a glut is expected to see prices even lower than they are now. And international sanctions continue to press on other industrial output.

To get the picture, listen to this clip of an exchange between two Russian Z-bloggers:

"We could face serious economic challenges in the fall.The industrial sector is in a very deplorable state. Several of the major enterprises may declare bankruptcy." Russian Z-bloggers complain about the sharp deterioration of the economic situation in Russia, rising housing&utility prices

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— Anton Gerashchenko (@antongerashchenko.bsky.social) 20 August 2025 at 09:13

Z-bloggers are Russian social media influencers who post pro-war content, usually on the Telegram platform, to persuade millions of ordinary Russians that the Special Military Operation (SMO) is all going to plan.  They are now starting to worry.

It’s getting harder to keep up the illusion that victory is just around the corner. These bloggers and commentators on the government-controlled media all expected to see Putin strutting around Kyiv in March 2022. Russia launched itself into a much harder opponent than it had ever faced before and is in serious danger of being broken.

Putin must be aware of the situation he’s in, and by all logic, he should be open to a negotiated settlement, but he seems outwardly at least to be quite relaxed about it all. I’ve seen it suggested that he needs to keep the conflict going to avoid the economy collapsing, since so much of it is now tied to military effort.  The sorry truth is that Putin badly underestimated Zelensky and Ukraine, and now he is having to use bluff, pretending to be happy for fighting to continue for as long as it takes to crush resistance. 

Russia in reality, is in a perilous position. Check the estimated Russian losses according to Ukraine's armed forces:

These are the indicative estimates of Russia’s combat losses as of Aug. 20, according to the Armed Forces of Ukraine.

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— The Kyiv Independent (@kyivindependent.com) 20 August 2025 at 06:37

These are absolutely colossal figures of personnel and equipment spent in exchange for very little.

At the same time, Ukraine and Europe are building a military-industrial complex to match and overtake Russia.

Ambrose Evans Pritchard (the dedicated Brexiteer) has a slightly overblown article in The Telegraph about the war and how the USA under Trump is making itself irrelevant. Europe has belatedly started to crank up its production of war materials and investment in defence, which will reduce dependence on America's military might and essentially transfer power and influence to European leaders where it belongs.

“With each month that passes, America is losing its strategic leverage,” Professor Alan Riley from the Atlantic Council, a US think tank, is quoted as saying. “Trump cannot dictate terms to the Europeans or to Kyiv.”

Given the position, I am convinced that Trump and the Europeans only need to push a little for Russia to start making concessions.

At the moment, Putin is already back-pedalling on the two key points apparently 'agreed' over the past week. The Russians do not accept NATO style security guarantees should be given to Ukraine and insist that they must be involved in discussions on the subject, giving them a veto on how Ukraine can reassure itself about future threats from Russia. And it seems they only agreed to talk about a Trump/Putin/Zelensky meeting, not actually arrange one.

Ukraine's reluctance to forego US guarantees is understandable. In 1994, Russia, the USA and the UK signed the so-called Budapest memorandum, an international treaty lodged with the UN. Note article 1:

And article 2:

This was formally signed by Boris Yeltsin but Putin simply ignores it. The parties agreed that Ukraine's sovereignty and independence would be respected and that Russia, the US and the UK would not use, or threaten to use, force against the "territorial integrity or political independence" of Ukraine.

Ten short years later, Russia annexed Crimea and began destabilising eastern Ukraine and in 2022 launched a full-scale invasion.

We cannot trust Russia to keep to any agreement. They must be soundly beaten, and Ukraine must join NATO. Now is the time.  If Russia can't be defeated now, they never will be.