Russia’s economy in CRISIS! Inflation hits RECORD levels, budget DEFICIT grows huge!

Added: 2026-05-30

[00:00:00]Putin has come up with a new way to lure Russians into the war against Ukraine.

[00:00:04]The Kremlin dictator has allowed participants of the so-called special military operation and their families not to repay overdue loans. However, this benefit does not apply to everyone, but only to those who have signed or plan to sign a contract with the Russian Ministry of Defense from May 1st of this year for a period of at least 12 months.

[00:00:23]In addition, the amount to be written off must not exceed 10 million rubles.

[00:00:29]So, what does this decision mean in practice? Who is footing the bill for this war banquet? And how will the loans of Russian mercenaries and killers be covered? I'll ask Ole Sarcis, an economist and expert in geoeconomics.

[00:00:42]Mr. Ole, welcome.

[00:00:44]>> Thank you, >> Mr. Ole. So, now the Kremlin is recruiting new cannon foder by writing off loans. Does this mean that these massive astronomical one-time payments have finally stopped working effectively as bait? or have the regional budgets in Russia simply and completely run out of available funds for these enlistment bonuses?

[00:01:04]>> Yes, fortunately, they are indeed running out. Both the central government of the Russian Federation and the various local budgets are no longer able to effectively cope with the immense financial pressure and the sheer volume of these payments. Consequently, they increasingly resort to finding alternative and unconventional new mechanisms that will allow them to continue to recruit, as you so very aptly put it, more cannon futur. And this practice in the Russian Federation has been in effect since 2024.

[00:01:31]Furthermore, if we take a much more detailed and closer look at the specific dates provided, we can see that by the year 2025, they had already successfully implemented and fully resolved approximately 250 of these complex legal cases and they simultaneously managed to recruit a significant number of new soldiers into the official armed forces of the Russian Federation. That is why this uh mobilization mechanism unfortunately really works and through it they want to enlist and mobilize the greatest possible number of combatants into the Russian Federation's army so that they can be sent to fight against Ukraine.

[00:02:07]>> Mr. Ole, how exactly will this trick impact and influence the Russian banking sector? We understand that writing off billions in consumer loans would create a massive and significant deficit in the balance sheet in any standard functioning economy. So in Russia, who will cover this hole?

[00:02:24]>> In reality, it will ultimately be the state that is responsible for covering the costs, but the financial hole they are facing is quite large. The budget deficit has already reached a total of more than $70 billion as of today.

[00:02:36]Furthermore, when we look at the general outlook, the budget for the year 2026 was planned for a total deficit of about 55 to60 billion. In other words, this means they have already significantly exceeded all of the fiscal expectations and targets they were supposed to meet throughout the current year. If we consider a scenario involving say uh 100,000 potential such cases, they will cost the Russian state budget approximately 1 trillion rubles, meaning they will effectively write off 10 million per individual case. And this represents an incredibly heavy burden on an already deficit strained budget. It's important to understand here that they are already facing problems and if we look at it from the perspective of the individual consumers that is the everyday people who will agree to these specific terms the commercial banks will eventually write off these amounts for them. But we must understand that this initiative is on a broad nationwide federal government scale and the costs will fall directly on the federal budget. That is to say um in the end the central bank will provide full financial compensation to the banks for this. This is a very heavy burden on the economic infrastructure um on the financial system and it will inevitably lead to increased inflation and further complicate economic processes.

[00:03:50]>> Mr. Ole, what do you think? Will they turn on the printing press?

[00:03:55]>> That's the only way out because we see that the export of the Russian Federation is only decreasing. They were counting on the specific fact that due to the rapidly rising prices caused by the ongoing war in the Middle East, especially oil prices, they would be able to earn significantly more profit.

[00:04:11]But we see that the Ukrainian defense forces are currently working quite effectively on strategic targets that enable the shipment of oil, fuel, and various lubricants including liqufied natural gas. And the revenues flowing into the budget are not as high as they had originally expected. Therefore, the only way to immediately, let's say, compensate for this deficit is that they will indeed start up the printing press.

[00:04:34]But this will certainly affect the economic and financial indicators, including the rate of inflation. In other words, this will place even more additional strain on the national budget.

[00:04:44]>> And what level of inflation do you predict from this? What could it be?

[00:04:49]It is my personal belief that by the very end of this year it could reach a level of approximately 15% within the Russian Federation. But all of this will ultimately be contingent upon the specific way in which the processes of international sanction related pressure on the enemy advance and to what exact extent their internal economic and foreign economic activities are further restricted. This is very important and another quite important factor is their interaction with the people's republic of China. We are now seeing that the People's Republic of China is increasingly trying to distance itself from the Russian Federation because cooperation with Russia is already looking quite toxic for them, so to speak, and they are deeply concerned that secondary sanctions may potentially be imposed by the United States of America or by various European Union countries.

[00:05:35]>> Mr. Ole, we remember many different stories. Russian social media talked about this when promised death benefits or salaries were simply never paid to Russians, including due to complex bureaucracy.

[00:05:48]Could this debt write off turn out to be yet another deceptive trick played on Russians who go along with it?

[00:05:55]>> It's entirely possible. Well, first of all, it's worth adding that this compensation for these uh loans can only happen if the bank or financial institution has already filed a lawsuit.

[00:06:07]In other words, there has to be a lawsuit and uh these specific loopholes are written in so that later um when a person has already officially signed the binding contract and gone to fight in the war and then when they eventually apply to have this entire debt amount written off Naki, they will be flatly refused because there are certain hidden loopholes that were designed for this exact purpose. Undoubtedly, the Russian Federation will do this with its uh with its citizens. They have carried this out many times before. So it is certainly not out of the question.

[00:06:38]>> And what do you honestly think about this when they finally exhaust this pool of the most desperate debtors? What economic levers and tools will the Kremlin still have left? Well, of course, apart from announcing mobilization, which naturally will be free of charge for Russians?

[00:06:54]>> Well, let's start with mobilization. To properly announce such a decision, you first need to supply and support the entire army. If they increase the numbers and face a significant deficit in their budget, then accordingly they simply won't have enough funds to provide for it. They might try to motivate people, let's say, by offering to write off certain debts. They can uh provide housing support. They can they can legally wave or cancel uh some I don't know alimony payments or something else. In other words, release an individual from certain legal obligations because he is going to the so-called special military operation. Uh in that specific case, maybe it could work, but on a much larger scale, it still won't be effective. And I think that the Russian Federation will be forced to confront the reality that they won't be able to provide the necessary funding for even the death benefits because there is already a significant budget deficit. Even without paying those benefits, they can't fulfill even the most fundamental social requirements in some regions. And they won't be able to carry out these types of financial compensations. Let's call them that.

[00:07:57]>> Mr. Ole, we literally have 40 seconds of air time left. I want to ask for your forecast as a geoeconomics expert. How much longer can the Russian economy function in this mode?

[00:08:10]It's quite challenging to make precise forecasts, but we can carefully analyze the situation. If they do not receive additional budget revenues from steadily increasing oil and gas prices, they can probably last like this for a year or two. But then again, it will all depend on the shifting global market situation uh and the specific international demand for Russian products. Plus, there are the complex sanctions regimes to consider because even though, as we have discussed, they have significant windfall profits from exporting and selling crude oil and liqufied gas. At the same time, they are strictly limited by physical shipments. Since both major ports and oil refineries are currently burning, that is exactly the reason why I believe they could sustain their efforts for at least another year or two at this current rate of progress despite any additional uh let's say economic benefits for the overall Russian national economy.

[00:09:05]>> Mr. Ole, thank you very much for joining our broadcast and for this interesting conversation. Joining us is Ole Sarcis, economist and geoeconomics expert. Thank you.