But Viktor Orbán’s regime in Hungary is even more sympathetic to Putin. And in Hungary, one of the EU’s poorest states, food inflation alone was 22.1% y/y in June. As the conflict continues in eastern Ukraine, many observers believe the West is running out of time. New York Times pundit Thomas Friedman argued that Mr. Putin is probably telling the generals to get him at Christmas, when winter sets in and gas shortages in Europe really start to bite. But Russia is already in trouble. The Kremlin is turning to Turkey and other potential new trading partners in a bid to defeat Western sanctions that are crippling its economy, despite all Kremlin claims to the contrary. A recent, detailed report on the state of Russia’s finances after the invasion of Ukraine by Yale University economists concluded that “sanctions are catastrophically crippling the Russian economy.” They noted that the Kremlin has pushed misleading figures on oil and gas revenues (and recently stopped releasing figures) as it is forced to sell power to India and China at deeply discounted prices. “Russian domestic production has completely ground to a halt without the ability to replace lost businesses, products and talent. the elimination of Russia’s domestic innovation and manufacturing base led to soaring prices and consumer stress,” the Yale team concluded.
Putin’s friends
As Putin met his Turkish counterpart, Recep Tayyip Erdogan, in Sochi on Friday, concerns grew that the Kremlin could strengthen economic ties with an unpredictable and capricious NATO member that has not joined in imposing sanctions on Moscow. A Russian proposal intercepted ahead of the meeting, reported in US media, said Russia wanted Turkey to agree to new channels that would help it disguise the national identity of its exports – and avoid restrictions on banking, energy and its industrial sectors. The very real possibility that this could lead to Turkish companies being trapped by Western sanctions means that Ankara is unlikely to agree. Putin hoped his “boundless friendship” with fellow dictator Xi Jinping would allow him to use alternative payment systems through Chinese banks. But that plan has not failed, with Beijing questioning the prospect of tough secondary sanctions from the US and the EU if it helps Russia in this way. It is widely believed that because he runs a police state, Mr Putin is less concerned about the economic fallout from war than the leaders of Western governments, who are chosen by free and fair elections. Some experts believe, however, that Mr. Putin is more vulnerable to the effects of Western sanctions than is often assumed. “The situation will be darker next year,” Sergei Guriev, former chief economist at the European Bank for Reconstruction and Development, told the Washington Post. “Nobody knows how things will work when the European oil embargo kicks in. We’re in uncharted territory.” One of the top Kremlin officials, US government adviser Fiona Hill, believes Mr Putin has limited time to declare success in Ukraine, telling Foreign Policy he “might as well be running against time”. In this regard, he suggests that dire warnings of cracks in Western resolve serve the Kremlin’s purpose. “He wants to make sure the West is “on the back foot, always wondering if we can pull it off, if we can persevere. This is part of an information war.” There is one specific date Putin has in mind: Russia’s presidential election in March 2024.
