Exclusive: Putin growing concerned by Russia’s economy, as Trump pushes for Ukraine deal

President Vladimir Putin has grown increasingly concerned about distortions in Russia’s wartime economy, just as Donald Trump pushes for an end to the Ukraine conflict, five sources with knowledge of the situation told Reuters.

Russia’s economy, driven by exports of oil, gas and minerals, grew robustly over the past two years despite multiple rounds of Western sanctions imposed after its invasion of Ukraine in 2022.

But domestic activity has become strained in recent months by labour shortages and high interest rates introduced to tackle inflation, which has accelerated under record military spending.

That has contributed to the view within a section of the Russian elite that a negotiated settlement to the war is desirable, according to two of the sources familiar with thinking in the Kremlin.

Trump, who returned to office on Monday, has vowed to swiftly resolve the Ukraine conflict, Europe’s biggest since World War Two.

This week he has said more sanctions, as well as tariffs, on Russia are likely unless Putin negotiates, adding that Russia was heading for “big trouble” in the economy. A senior Kremlin aide said on Tuesday that Russia had so far received no specific proposals for talks.

“Russia, of course, is economically interested in negotiating a diplomatic end to the conflict,” Oleg Vyugin, former deputy chairman of the Central Bank of Russia said in an interview, citing the risk of growing economic distortions as Russia turbo-charges military and defence spending.

Vyugin was not one of the five sources, who all spoke on condition of anonymity due to the sensitivity of the situation in Russia. The extent of Putin’s concerns about the economy, described by the sources, and the influence of that on views within the Kremlin about the war, are documented here for the first time.

Reuters has previously reported that Putin is ready to discuss ceasefire options with Trump but that Russia’s territorial gains in Ukraine must be accepted and that Ukraine must drop its bid to join the U.S-led NATO military alliance.

Kremlin spokesman Dmitry Peskov, when asked about the Reuters reporting, acknowledged “problematic factors” in the economy, but said it was developing at a high rate and was able to meet “all military requirements incrementally” as well as all welfare and social needs.

“There are problems, but unfortunately, problems are now the companions of almost all countries of the world,” he said. “The situation is assessed as stable, and there is a margin of safety.”

Trump “is focused on ending this brutal war,” by engaging a wide range of stakeholders, White House National Security Council spokesperson Brian Hughes said in response to Reuters’ questions. In recent weeks, Trump’s advisers have walked back his boast that the three-year-old war could be resolved in a day.

Just days before Trump’s inauguration, outgoing U.S. president Joe Biden’s administration imposed the broadest package of sanctions to so far target Russia’s oil and gas revenues, a move that Biden’s national security adviser,

Would give Trump leverage in any talks by applying economic pressure on Russia.

Putin has said that Russia can fight on as long as it takes and that Moscow will never bow before another power over key national interests.

Russia’s $2.2 trillion economy had until recently shown remarkable endurance during the war, and Putin has praised top economic officials and business for circumventing the most stringent Western sanctions ever imposed on a major economy.

After contracting in 2022, Russia’s GDP grew faster than the European Union and the United States in 2023 and 2024. This year, however, the central bank and the International Monetary Fund forecast sub-1.5% growth, although the government projects a slightly rosier outlook.

Inflation has edged toward double digits despite the central bank hiking the benchmark interest rate to 21% in October.

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