The war economy in Russia may lead to the negotiating table

Russia has shown little appetite for peace negotiations with Ukraine, although Moscow made an offer to what war experts described as a “ceasefire”, and a number of attempts by US President Donald Trump to persuade Russian leader Vladimir Putin to speak to Kiev.

In fact, it is widely believed that Moscow is planning a new summer attack in Ukraine to enhance regional gains in the southern and eastern parts of the country, which its forces are partially occupied. If it succeeds, the attack can give Russia more influence in any future talks.

While Russia appears to be reluctant to follow peace now, the increase in economic and military pressures at home-starting from the supply of military agencies and employing soldiers, to sanctions on exports generated from revenues such as oil-can be the factors that ultimately drive Moscow to the negotiating table.

“Russia will seek to intensify offensive operations to build pressure during negotiations, but pressure cannot be continued indefinitely,” said Jack Watering, a major land -war colleague at the RUSI Services Institute (Rusi) in London.

Watling said that the Russian stocks of military equipment left from the Soviet era, including tanks, artillery and infantry fighting vehicles, will run out between now and the fall of the fall, which means that Russia’s ability to replace losses depend entirely on what it can produce from scratch.

“At the same time, while Russia can fight two other seasons of the campaign through its current approach to employment, the additional attacks to 2026 are likely to require more forced mobilization, which is a political and economic challenge.”

CNBC called Kremlin to respond to the comments and awaits the response.

Meanwhile, dark clouds gather on the horizon when it comes to the economy that focuses on the war in Russia, which worked under the weight of international sanctions as well Putin described as “alarmingly”.

The Russian Central Bank (CBR) has stood up to maintain high interest rates (21 %) in an attempt to reduce the inflation rate, Which reached 10.2 % in April. CBR said in May that the inflation process is under implementation, but a “long period of narrow monetary policy” is still required to inflacly return to its 4 % goal in 2026. Meanwhile, a noticeable slowdown in the Russian economy surprised some economists.

“The sharp slowdown in the growth of Russian GDP from 4.5 % year on an annual basis in the fourth quarter, to 1.4 % in the first quarter consistent with a sharp decline in production and indicates that the economy may tend to a much more difficult decline than we expected,” Liam Beach emerging in Capital Economy commented.

He pointed out that “such a sharp decrease in GDP growth surprised us, although we expected its slowdown this year,” adding that “technical recession is possible over the first half of the year and GDP growth over 2025 as a whole can come much less than our current 2.5 % expectations.”

The growth that is still in the Russian economy is concentrated in manufacturing, specifically the relevant defense and industries sector, and is provided with government spending, according to Alexander Coleander, an older colleague at the European Policy Analysis Center.

“After three years of militarization in the country, the Russian economy cools,” he said. In online analysis for CEPANoting that the slowdown in inflation, less borrowed by companies and consumers, declining imports, industrial production, and consumer spending, everything indicates a constant slowdown.

This is not disputed by Russian officials, with the Ministry of Economic Development that economic growth will slow from 4.3 % in 2024 to 2.5 % this year.

“The economy does not spoil, it is running out of steam. However, the decline can easily become diving. Bad decisions by politics makers, decline in oil prices, or neglect with inflation, and Russia can find itself in trouble.”

On Thursday, Benchmark Brent Future is eligible With the expiration of July, at a value West Texas Medium (WTI) was raw in $ 61.65. The last instant price of the barrel of Orlez crude oil, the standard in Russia, was at $ 59.97, according to LSEG data.

At the beginning of 2025, Brent was traded at $ 74.64 a barrel, while the raw WTI and Urals were trading at $ 75.13 and $ 70.04, respectively.

The Russian Ministry of Finance said in April It expects a decrease of 24 % of the revenues of oil and gas this yearCompared to previous estimates, and oil prices were reduced from $ 69.7 to $ 56 a barrel. The Ministry also raised the estimation of the budget deficit of 2025 to 1.7 % of GDPFrom previous expectations of 0.5 %.

A Russian analyst said that the decrease in the oil price “will be severely determined by Russian revenues while its reserves are exhausted.”

He said, “The application of more aggressive against the Russian shadow fleet and the continued campaign of a deep strike in Ukraine can reduce the liquid capital, which has so far allowed Russia to increase defense production steadily and provide huge rewards to volunteers who join the army.”

If the Western allies are able to maintain the efforts made to calm and strengthen the Russian economy, and to deprive Ukraine’s forces, Russia from reaching the borders of Donetsk (in eastern Ukraine) from now and Christmas, “” Moscow will face difficult options about the costs prepared for the continuation of the war. “

“Under these circumstances, the Russians may move from Potemkin negotiations to actually negotiating,” said Watling.