Russia’s military economy may lead Moscow to the negotiating table

Russia has shown little appetite for peace talks with Ukraine, despite the fact that Moscow has made that hostilities were called “focus of fire”, and a number of US President Donald Trump’s attempts to persuade Russian leader Vladimir Putin to talk to Kiev.

In fact, supposedly, Moscow plans a new summer offensive in Ukraine to consolidate the territorial benefits in the southern and eastern parts of the country that its forces are partly occupied. In case of success, the offensive can give Russia more leverage in any future negotiations.

While Russia seems reluctant to strive for peace, enhancing economic and military pressure at home-starting from the supply of military equipment and a set of soldiers, for sanctions on export income, as oil, they can become factors that will eventually lead Moscow to the negotiating table.

“Russia will seek to strengthen the offensive activity on pressure extensions during the negotiations, but the pressure cannot be supported endlessly,” Jack Watling, a senior scientist on the Land War at the Royal Institute of Service (Russia) said in London.

Russian military equipment reserves that remained from the Soviet era, including tanks, artillery and infantry combat vehicles, will run out between now and in the middle of the fall, said Watling, which means that Russia’s ability to replace losses will completely depend on what it can produce from scratch.

“At the same time, while Russia can fight two more seasons of agitation with its current approach to the set, further offensive operations in 2026 will probably require further forced mobilization, which is both politically and economically difficult,” Vatling said.

CNBC has contacted the Kremlin to answer the comments and waits for a response.

At the same time, dark clouds gather on the horizon when it comes to the economy focused on Russia, which worked under the weight of international sanctions as well as the pressure Putin called “disturbing”.

Central Bank of Russia (CBR) has withstood the rate of interest rates (by 21%), seeking to reduce inflation rate, which amounted to 10.2% in April. In May, CBR stated that the disinflation was underway, but the “long -term monetary policy” is still required that inflation returned to its goal in 4% in 2026. Meanwhile, some economists surprised the noticeable slowdown in the Russian economy.

“A sharp slowdown on the growth of the Russian gross domestic product from 4.5% compared to last year in the fourth quarter up to 1.4% in the first quarter corresponds to a sharp drop in production and suggests that the economy can head for a much more complex landing than we expected,” Liam Peach, a senior economist, has been developing in the last week.

“Such a sharp drop in GDP growth was surprised, though we expected a slowdown this year,” he said, adding that “the technical recession is possible in the first half of the year, and GDP growth in 2025 can lead to a much lower forecast of 2.5%.”

According to Alexander Kohndra, a senior employee of the European Policy Center, the growth that remains in the Russian economy is concentrated in production, in particular, in the defense sector and related fields, and is fueled by state expenses.

“After three years of militarization of the country, the Russian economy has cooled down,” he said On the Internet Analysis CEPANoting that inflation slowing, less borrowing companies and consumers, decreased imports, industrial volume and consumer costs indicate slowing.

This is not disputed by Russian officials, and the Ministry of Economic Development predicts that economic growth will slow down from 4.3% in 2024 to 2.5% this year.

“The economy is not demobilizing; it just ended in a couple. It can easily become immersion. Bad policy decisions, further drop in oil prices or negligence with inflation, and Russia may be in trouble,” Coolian said.

On Thursday Benchmark Brent Futures With a shelf life in July amounted to $ 64.94 a barrel, and the US Frontmonth Intermediate Western Texas (WTI) Raw was at $ 61.65. According to LSEG, the last price for a barrel of crude oil impressed, the Russian landmark, amounted to $ 59.97.

In early 2025, Brent traded $ 74.64 a barrel, while WTI and Urals Crude traded $ 75.13 and $ 70.04 respectively.

Russian Finance Ministry stated in April that This year it is expected that 24% less oil and gas revenueCompared to previous estimates, it reduced the price of oil from $ 69.7 to $ 56 a barrel. The ministry also increased the budget deficit 2025 to 1.7% of GDPfrom the previous forecast of 0.5%.

The low price of oil “strongly limits Russia’s income as long as its reserves are being delayed,” said Russian analyst Watling.

“More aggressive forced use against the Russian shadow fleet and the continuation of the deep strike of Ukraine can reduce liquid capital, which still allowed Russia to constantly increase the production and offer large bonuses for volunteers who join the military,” he said.

If Western allies can support and strengthen the efforts to destroy the Russian economy, and Ukraine’s forces “denied Russia to reach the borders of Donetsk (in eastern Ukraine) between today and Christmas,” then “Moscow will face the tough choice that it is ready to attract to the war.”

“In such circumstances, the Russians can move from the negotiations to the negotiations,” Wotling said.