Russia braces for economic and military challenges post-elections

In the lead-up to the presidential elections, the Kremlin strives to maintain the currency exchange rate below 100 rubles per dollar. However, post-March 17, the situation might revert to its actual state, according to Vladimir Milov during his interview with Ukrainian Channel 24. He elaborated that the Kremlin is exerting efforts to suppress prices.

In Russia, the dwindling gasoline production in domestic refineries has led to a 35 percent uptick in wholesale prices since the start of the year. Yet, retail prices have not mirrored this increase, being artificially suppressed by Putin's regime until the elections conclude.

Vladimir Milov anticipates a significant price surge for a broad spectrum of goods in Russia after March 17. Consequently, the central bank will likely be compelled to hike interest rates, which is expected to adversely affect the Russian economy and its recovery process.

Despite the numerous sanctions imposed on Russia following its invasion of Ukraine, the country continues to reap substantial profits, especially from oil sales, garnering at least 1 billion euros in 2023 alone. Lithuanian intelligence speculates that Putin's regime could sustain the current level of warfare for an additional two years. However, domestic tension is predicted to escalate, culminating in a formidable challenge for the Kremlin.

According to Milov, Russia's fiscal reserves are rapidly depleted. Within two months, the budget deficit equaled the forecast for the entirety of 2024.

Russia faces a dilemma as its capacity to increase weapon, equipment, and ammunition production dwindles. This shortfall is palpable at the front, where dated and unrefurbished tanks are frequently deployed. Moreover, the national social welfare fund's remaining balance is approximately 5 trillion rubles, less than half of the annual military budget.

"We are edging closer to a moment where only the emergency reserve will be left. In one or two years, Russia's ability to sustain such intense military operations will be critically hampered. Although uncertainty exists, we can discern the approach of a certain limit. For now, Putin can persist with military endeavors, but not much longer. This trend is already manifest," Milov remarked.

The Pentagon has reported that the war in Ukraine has cost Russia 211 billion dollars. Furthermore, the Kremlin has suffered a 10 billion dollar loss from either cancellations or postponements in arms sales transactions. In contrast, Bloomberg highlighted that the Kremlin's oil and gas sales revenue surged by 80 percent in February year-on-year, reaching the 10 billion dollar mark, partially attributable to China's strategic decisions.