Following comments on Sunday by US President Donald Trump that he is “angry” and “pissed off” at Russian President Vladimir Putin and could impose tariffs on countries that buy Russian energy resources, Kremlin Deputy Foreign Minister Sergei Rybakov stated that Moscow thus far cannot accept Washington’s proposals for a negotiated settlement of the conflict in Ukraine. Indicating that the White House’s current terms fail to recognize the country’s basic interests, Rybakov declared in an interview excerpt published on Tuesday, “There’s no place [in the US plans] for our main demand today, which is resolving problems related to the root causes of this conflict.”
The “root causes” to which he refers are Western threats to overthrow the government in Moscow and break apart the country. For decades, Washington and its allies have, in addition to openly supporting regime-change in Moscow, worked to expand NATO up to Russia’s border and install rabidly anti-Russian regimes in neighboring countries. The Kremlin, which launched the invasion of Ukraine in 2022 in an attempt to block Ukraine’s entry into NATO, force Western recognition of Moscow’s control over Crimea and the Donbass and bring about a more friendly government in Kiev, cannot accept terms that do not, however illusory and fleeting, provide security guarantees and roll back Western sanctions. The latter, while failing to bring about the collapse of the Russian economy, have inflicted serious damage for which Moscow has no long-term solution.
Last week’s “Black Sea Initiative”—a ceasefire announced between Russia and Ukraine that would halt attacks on each other’s military and commercial ships in the body of water—is already stalled. The European powers, led by France, stated Thursday that the Kremlin’s terms, which include an end to sanctions on Russian agriculture and its agricultural banking industry, are a non-starter. On Monday, EU foreign policy chief Kaja Kallas accused Russia of “playing games and not really wanting peace.”
The following day, Germany announced that, for the first time since World War II, it is permanently deploying troops to Lithuania, situated on Russia’s western border. The unit will be fully operational by 2027.
The same day, the Kremlin announced that its spring conscription, one of two annual military call-ups that happen each year, will bring 160,000 new recruits into the armed forces, the largest number since 2011.
In an indication of the conflicts emerging on the world stage as the Trump administration erupts in an orgy of militarist violence and threats, Russia’s deputy foreign minister also warned this week against the US president’s promise to bomb Iran if it does not agree to a nuclear deal. This would have “catastrophic consequences,” the Kremlin representative declared.
Despite the ongoing tensions, the Russian ruling class is hoping that a negotiated settlement with the United States over the war in Ukraine will give it some relief. Saddled with massive military-industrial expenditures and burdened by international sanctions, Moscow is confronting mounting fiscal problems.
On Monday, the country’s treasury announced that in January and February of this year, budget expenditures exceeded revenues by 3.841 trillion rubles ($45.5 billion). For the first month of the year, outflows were about one and a half times that which was planned. While the Ministry of Finance insists that the gap is smaller, it too has established that the Kremlin is spending far more than it is taking in.
There are three primary causes. First, Russia is oil-dependent and the price per barrel that it is earning from its sales is too low, in part because trade partners such as China and India have secured special discounts due to the fact that the country cannot sell its resources on the global market. Second, Russia’s budget calculations assumed a weak ruble, with the hope that revenues from foreign-denominated oil sales would be transformed into large amounts of its national currency and thus cover the treasury’s outlays. The recent strengthening of the ruble, which is expected to continue, has blown up these calculations.
And, above all, Moscow has massively increased spending on the military and national security. In 2024, the Putin administration announced a 70 percent increase in these expenditures, which have now climbed to about 6 percent of the country’s GDP, an amount unprecedented in the post-Soviet period.
While these outlays are crippling the budget, they have been key to keeping the economy afloat over the last three years. After suffering a significant decline in 2022, Russia returned to growth in 2023 and 2024, overwhelmingly as a result of state expenditures on the military-industrial complex.
The consequence has been the further accumulation of wealth by Russia’s super-rich. Forbes just announced that Russia added 21 people last year to its list of billionaires, of which there are now 146. Their total wealth, estimated at $625.5 billion, increased by $72 billion over the course of 2024. In short, the Kremlin has ensured that the war in Ukraine has, despite all the damage inflicted by Western sanctions, secured and expanded the ranks of Russia’s oligarchy.
At the other end of society, according to a March 20 article in the Nezavisimaya Gazeta, more than one-third of Russia’s workers are employed in low-paying, low-productivity work. While there is a severe deficit of skilled and educated labor in the country, which economists cite as a major factor holding back further growth, much of the population does not have access to the training and education necessary to move up.
As an analyst from the Russian Academy of Sciences cited in Nezavisimaya Gazeta noted, the “cheapness” of their work from the standpoint of employers acts as a lag on the country’s overall economic modernization, as there is little point in enterprises making major investments to boost productivity if there is a large pool of low-paid people available to employ.
The Russian government places much emphasis on economists’ calculations that real incomes have on average been rising, by 18 percent from 2023 to 2024, according to some estimates. But this fact does not necessarily translate into improvements in everyday life for tens of millions of people. First of all, many do not experience “the average.” And beyond that, for those making a pittance, 20 percent more of that pittance is hardly a major boon to one’s personal finances.
Analysts at the Russian real estate firm TsIAN, for instance, recently estimated that residents of cities with a population over 1 million expend over one-third of their monthly income on housing. Depending on where one lives, this leaves between 37,000 and 76,000 rubles a month in income for other things—that is, between $435 and $899. Notably, this is 2.4 to 3.3 times the country’s “minimum income,” which says not so much about ordinary Russians’ well-being as it does about the absurdity of official calculations regarding what it means to be poor.
Inflation, which ran at about 10 percent in February, is constantly chipping away at workers’ earnings. Currently, a conflict has emerged within the Russian elite over the Central Bank’s decision to keep interest rates high in an effort to bring down inflation, as this makes borrowing more expensive for business, undermining expansion.
A March 27 article in Nezavisimaya Gazeta took note of the fundamental socioeconomic problem the government faces as it attempts to balance between economic growth, which appears to be slowing, and mass anger over constant price rises.
“The inflation dilemma is getting tougher: either the population starts paying for the phenomenal economic growth at a certain point due to inflation, which will bite off more and more of their income, or with a fierce fight against inflation, this phenomenal growth will soon come to naught,” noted Anastasia Bashkatova.