Russia’s inflation has gone from bad to worse as it continues to wage war against Ukraine, causing even everyday goods to feel out of reach for the average person.
A recent butter heist, in which two masked men barged into a dairy shop and stole 20 kg of butter, demonstrated just how dire the problem was. The price of a slab of butter has increased by 25.7% since December, prompting a slew of thefts across Russia and highlighting the state of the wartime economy.
Following the initial wave of sanctions on Russia following its invasion, reports showed supermarkets attaching anti-theft tags to cans of meat to prevent shoplifting. Now, retailers are having to take similar measures for butter and other grocery staples.
Butter robberies continue in Russia.
— Anton Gerashchenko (@Gerashchenko_en) November 5, 2024
A store called “Milky Place” in Yekaterinburg was targeted – the assailants took all the butter, a few chocolate milkshakes and some cash from the register. https://t.co/rVoy71gqoN pic.twitter.com/a4aZrngW8G
Last month, the Russian central bank increased interest rates to 21%—nearly seven times that of the Euro region. It hopes that by hiking rates for the “overheating economy,” inflation could fall to 4.5-5% by next year, down sharply from 9.1% in August.
“Your average butter churning factory would be more than happy to meet the demand and work in three shifts too. But there aren’t enough people for them to hire,” Alexandra Prokopenko, a fellow at the Carnegie Russia Eurasia Center in Berlin, told the Financial Times.
“You can’t fight inflation and a war at the same time.”
But Russian President Vladimir Putin disagrees. He believes the country can supply guns and butter—in a literal sense—without making any painful tradeoffs.
Guns vs. Butter
Inflation hardly operates in a silo; the country’s job market is tight, nudging employers to increase salaries to maintain their competitiveness. Its population figures aren’t keeping up either, aggravating the labor shortage.
While inflation has been climbing, Putin has also been ramping up defense spending.
For 2025, the Kremlin has earmarked 13.5 trillion roubles ($145 billion) or 6.3% of Russia’s GDP on defense, hinting at a long-drawn war ahead and outstripping education and healthcare spending. That’s why industries linked to the war, such as transport and navigation services, have boomed in recent years.
The country’s GDP has been growing partly due to these industries and an increase in private-sector investments.
But Russia’s most vital asset is its oil exports. The government’s balance sheet is solid because of them, even though sanctions have dented the Russian economy and the ruble has nosedived against the dollar and euro.
Experts fear the Russian economy is doing worse than it appears, as a confluence of financial, technological, and demographic factors threatens its long-term growth.
“Simply put, Putin’s administration has prioritized military production over all else in the economy, at substantial cost. While the defense industry expands, Russian consumers are increasingly burdened with debt, potentially setting the stage for a looming crisis,” a group of Russia-Ukraine war experts wrote in a Fortune op-ed in August.
What could change under Trump’s presidency?
Russia has no plans to end its war with Ukraine. But U.S. President-elect Donald Trump once said he could end it in 24 hours because he wants Russians and Ukrainians to “stop dying.”
If that happened and a ceasefire were to kick in, it could mean a relaxation of sanctions for Russia and less isolation from other parts of the world. Ukraine could potentially lose substantial backing from the U.S., which has given the war-torn country $108 billion in aid.
America’s support for Ukraine is what held Russia back from celebrating Trump’s return to office. The Kremlin spokesperson said the U.S. was “an unfriendly country that is both directly and indirectly involved in a war against our state.”
But it won’t be as straightforward as it seems, as there is no firm plan to end the war.
How Trump’s presidency might help (or hurt) Russia will unravel in 2025, and the Kremlin will keep a close eye on standby, ready to retaliate if the need arises.
