Insiders locate "frustration"

Putin rages over the miserable state of the economy

Vladimir Putin is dissatisfied with the development of the Russian economy.

(Bild: AFP/Natalia KOLESNIKOVA)

According to insiders, Vladimir Putin is increasingly concerned about upheavals in the domestic economy. His frustration was clearly evident at a meeting with business leaders on December 16, several insiders told the Reuters news agency.

Putin had scolded high-ranking business representatives. He was also visibly dissatisfied after learning that private investments were being cut due to high borrowing costs.

High inflation hurts the Russian economy
Shortly afterwards, the President demanded a "balanced interest rate decision" from the Central Bank. One day later - on December 20 - at its last monetary policy meeting of the past year, the central bank surprisingly left its key interest rate at 21 percent. Experts had expected an increase to 23% due to high inflation. The head of the central bank, Elvira Nabiullina, subsequently denied having given in to political pressure.

Several MPs called for her replacement. According to two insiders, this is rather unlikely. "Nobody will change the governor of the central bank in such a situation," said one person familiar with the matter. "Nabiullina's authority is unquestionable, the president trusts her." She has been the supreme guardian of the currency since 2013. Her third term ends in 2027.

War economy in Russia for three years
Russia switched to a war economy after the invasion of Ukraine almost three years ago. Despite numerous Western sanctions, it has grown strongly in the past two years due to enormous arms spending. However, the domestic economy has been burdened in recent months by the shortage of labor and the increase in interest rates to combat inflation.

Situation could be exacerbated by Trump's inauguration
A part of the Russian elite considers a negotiated solution to the war to be desirable, said two people familiar with the Kremlin's way of thinking in view of the difficult economic situation. This could become even more acute: The new US President Donald Trump is threatening further sanctions and tariffs if Putin does not back a negotiated solution.