Russian Economy's Singular Focus Complicates Things

The reason why Vladimir Putin is slow-walking peace talks with Ukraine might make sense—or, more specifically, dollars and cents. The Wall Street Journal reports that the Russian president has reoriented the economy to produce the weapons of war and pay the soldiers who are waging it, which changes the calculus around ending things. Billions of dollars have facilitated 24-hour production lines and an increase in wages that have helped raised the standard of living for many. As a senior fellow at the Center for European Policy Analysis puts it, "It is absolutely imperative for Russia to continue to rely on the military industry, because it [has] become the driver of economic growth. For a while, it will be next to impossible for Russia to reduce military spending." One key point:

• The Journal reports some neighboring countries, including Kazakhstan, fear any end of the war in Ukraine could mean that war economy gets directed to them. Key lines: "These fears stem partly from the belief that the Kremlin would rather keep the tens of thousands soldiers fighting on some other front line rather than bring battle-hardened and often traumatized men back home. After the end of World War II, Soviet leader Joseph Stalin viewed returning veterans as a threat and sent many to the gulags to rid himself of the domestic pressures they could cause."

While the Financial Times sees signs the bloom is coming off the rose—GDP growth in 2025 is expected to halve from the 4% it's been at the last two years—it also has this telling stat from Russian pollster Levada: "For the first time in more than a decade, the share of Russians with a positive view of their finances surpassed those with a negative outlook in mid-2024." (Read the full Journal article, which toys with the idea of a return to Russia's arms-exporting glory days, here.)