Vladimir Putin is living on borrowed time – at least if Donald Trump keeps his word and follows through on the threat he made last week to crash Russia’s economy if there is no ceasefire within 50 days.
Over the last three years, 18 announcements of European Union sanctions have failed to make much of an economic dent in the Kremlin’s war machine. That is because, despite its rhetoric around support for Ukraine, Europe still keeps the money flooding into Moscow. Russia is still its third-largest supplier of liquefied natural gas (LNG), and it increased its imports from Russia by 25 per cent in 2024.
If Trump went ahead and imposed his threatened secondary sanctions on countries importing Russian oil, gas and uranium – a customer list headed by China, India, and the EU itself – then Putin would quickly find himself running out of money.
Yet somehow, the Russian leader does not seem to be quaking in his boots. If anything, he seems to be upping the ante. Despite Trump’s threats to impose sanctions that could cripple the Russian economy, Volodymyr Zelensky said on Monday morning that more than 420 drones and at least 20 missiles, including ballistic missiles, had been fired at cities and communities across Ukraine in waves of intense overnight attacks.
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Vladimir Putin continues to defy Trump and the West, but for how long? ( Sputnik )
While the UK defence secretary John Healey has used a meeting of the European Ukraine Defence Contact Group (UDCG) to back Trump’s proposal and pledge that the UK will “play our full part in its success to bolster Ukraine’s immediate fight”, Putin clearly does not take Trump’s threat remotely seriously. Indeed, Russia’s president hasn’t deigned to comment on Trump’s latest threats at all – and nor has Russia’s state-controlled media given Trump’s threat any serious airtime.
The capital markets also barely twitched after the US president threatened to unleash a global trade war directed at Russia. Trump’s sweeping new sanctions would, in theory, deprive the world of the 5 million barrels of oil a day that Russia exports – yet the price of crude did not move an inch.
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There are three sound reasons why Putin believes that Trump’s words are hollow and feels he can confidently call his bluff. One is that Trump has barely implemented any of the punitive tariffs that he has threatened against most of the world over the last six months. An executive order Trump signed in March imposing 25 per cent tariffs on countries importing Venezuelan oil, for instance, has yet to be implemented.
Then there’s the question of the economic damage to the US itself if Trump actually followed through. Levelling 100 per cent tariffs against China, India, Turkey, Belgium, Spain and other major importers of Russian oil would quickly bring the world economy to a juddering halt. It would also wreck Washington’s relationship with Delhi and force India and China into a closer partnership. Cutting off Europe from Russian oil and gas would trigger immediate economic chaos.
Finally, actually imposing an effective embargo on Russian oil would take more than 10 per cent of world supply off the markets and precipitate a serious 1973-style price shock that would send energy costs through the roof and pitch the US and Europe into recession. You can see why Putin is hedging that it is inconceivable that Trump would pay that kind of price simply for ending what the American president often describes as “a war that should never have happened”.
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Trump and Putin during the G20 summit in Buenos Aires, Argentina, in 2018 ( Reuters )
Putin may be safe from Trump’s secondary sanctions. However, that does not mean that his economy is in good shape. “The remarkable resurgence the Russian economy has experienced since Putin’s invasion of Ukraine is losing momentum,” observes Alexander Kolyandr, a senior fellow at the Centre for European Policy Analysis. “The party is over.”
For the first two years of the war, state spending on the military fuelled a runaway 4.3 per cent GDP growth rate. That’s set to fall to a much more modest 1.4 per cent in 2025. For the first time in years, Russia has begun running a fiscal deficit of some 1.5 per cent of GDP. And most seriously of all, global oil prices have fallen a precipitous 35 per cent this year. As a result, Russia’s Central Bank is set to print 15 trillion roubles (￡142bn) in cash come October – the largest issuance since the hyperinflation of the 1990s, according to internal documents leaked by Ukrainian hackers. By winter, Russia may face a looming inflation shock.
Pro-Ukrainian online warriors have gleefully shared videos of Russian holidaymakers sleeping on the floors of airports shut down because of drone threats, and angry passengers complaining that they have missed their onward flight to Venice. Yet interrupted luxury holidays don’t really stack up against the near-nightly horrors that ordinary Ukrainians face as Russia steps up the intensity and frequency of its drone attacks.
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Trump unveils his global tariffs list in April ( Getty )
And while Russia’s economy may face structural challenges, Russians are still managing to buy more luxury German cars than the Germans are. Car Industry Analysis reports that BMW sold 3,504 of its latest X7 SUVs in Russia in 2024 – compared to 3,323 in Germany. That’s despite sanctions, which force importers to go via former Soviet neighbours, bumping the price to Russian consumers from $87,000 (￡64,000) to $170,000 (￡126,000).
Putin, evidently, remains set on pursuing his obsession with subjugating Ukraine, apparently at any cost. This spring, Trump brusquely railroaded Zelensky into dropping most of Kyiv’s red lines in pursuit of a ceasefire deal that would effectively have left Putin in undisputed control of the 22 per cent of Ukrainian territory he has already occupied. But Putin rejected that peace deal and still continued to demand regime change in Kyiv, plus a promise that Ukraine would never join Nato and restrictions on the size of the country’s army.
The polls suggest that the number of ordinary Russians who agree with their leader’s dogged obsession is dwindling. According to a study by Levada, Russia’s last independent pollster, in June, 64 per cent of respondents favoured peace talks, which is six percentage points up since March. At the same time, the number of people who wanted the war to continue fell to 28 per cent, down from 34 per cent in March.
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Firefighters work in a destroyed apartment building after a Russian attack in Kyiv on Monday ( AP )
While there has been little to no sign of popular discontent with the regime, there is evidence that infighting among Russia’s elites over cash flow and state resources is intensifying. Earlier this month, recently sacked minister of transport Roman Starovoit shot himself, becoming the latest high-ranking Russian to die in suspicious circumstances. A number of prominent individuals, including government officials, military officers and prominent businessmen, have now died in suspicious circumstances since the full-scale invasion of Ukraine.
For the time being, as long as the oil and gas money continues coming in, Putin faces no serious opposition to his rule. But it’s also clear that there is no way that Russia can achieve the military and political subjugation of Ukraine of which Putin dreams. The war has been a colossal strategic mistake for Russia, objectively weakening its geopolitical position and costing hundreds of thousands of lives.
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Trump’s 50-day ticking clock may be a transparent bluff. But it is clear that Washington is losing patience with Putin’s stalling, and is ready to tighten the economic screws in small ways – even if the economic nuclear bomb that is secondary sanctions remains a boastful fantasy.
This means that Putin’s room for manoeuvre is shrinking, and the time he has left to bring the war to an end is running out. Crucially, Trump is willing to permit the Kremlin to keep its territorial winnings, which will in turn allow Putin to claim a kind of victory even as the majority of Ukraine remains independent and free. And it will mean that Trump, for all his flaws, might make good on his promise to end the war, if not in 24 hours, then at least within the first year of his presidency. Putin, meanwhile, must decide how much more blood is to be shed before he cuts his losses.