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Russia could run out of liquid reserves as soon as this fall, one European economist has said.
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The nation’s liquid reserves have dwindled to $31 billion, down from $117 billion in 2021.
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Limited funds could hinder Russia’s further war efforts.
Russia is facing a critical challenge to its war effort in 2025: The nation is quickly running out of cash, with financial reserves potentially running out before the end of the year, one European economist estimates.
Anders Åslund, a Swedish economist who’s a former fellow at the Atlantic Council, has said liquid reserves in Russia’s National Wealth Fund could be depleted by the fall of this year.
That spells trouble for the nation’s military efforts in 2025, he said, given how heavily Russia has relied on its wealth fund over the past several years.
Liquid reserves in the wealth fund have been drawn down from $117 billion in 2021 to $31 billion as of the end of November, Åslund noted.
Yet, according to its 2025 budget, Russia is on track to spend a record $130.5 billion on defense this year.
“The most critical shortage, however, is budget financing, as Russia’s last liquid reserves are likely to run out in the fall of 2025,” Åslund wrote in an op-ed for Project Syndicate that was published Tuesday. “Budget cuts will then become necessary. In the meantime, the war economy might also require price controls and rationing — the old Soviet sins. As the risk of a financial crash rises, Russia’s imperiled economy is about to pose serious constraints on Putin’s war.”
The rapid decline in Russia’s wealth fund has been partly driven by Western sanctions, which have prevented Russia from borrowing from other countries. The nation’s total foreign debt has collapsed over the past decade, with foreign borrowing down from $729 billion in 2023 to about $293 billion in September 2024, Åslund noted.
Russia’s limited ability to finance the war also spells bad news for the health of its economy, which is plagued by a myriad of other issues.
Åslund pointed to soaring inflation, the declining value of Russia’s currency, and a severe shortage of workers in the nation, all factors that economists have warned could crimp Russia’s long-run growth prospects.
“Russian President Vladimir Putin frequently boasts about the strength of his country’s economy, claiming that Western sanctions only made it stronger (while in the same breath demanding that they be lifted). In fact, ‘stagflation’ — inflation combined with minimal growth — is coming to Russia,” Åslund said.
Other experts have also issued grim forecasts for Russia’s economy, with some noting that economic weakness could interfere with Russia’s ability to continue its war. Renaud Foucart, another European economist, said last year that Moscow didn’t look like it could afford to either win or lose the war.
The Atlantic Council recently said Russia’s economic problems could force an end to its conflict with Ukraine in 2025.
Read the original article on Business Insider
