Putin Is Feeling The Squeeze

How long can he stand this?

As Putin’s absurd invasion of Ukraine draws on, the West must find a way to bring the barbaric bloodshed to a close. But, when it comes to Russia and their belligerent, expansionist, and Soviet-loving government, such resolutions are few and far between. Putin and his posse of yes-men are happy to lock themselves in their high tower and command every man and boy to fight on until each and every one of them is dead and gone. However, at the end of last year, we found a way to hurt Putin where it really hurts — his oil industry — and went in for the kill. Now, the Kremlin is losing billions of dollars, draining the Russian war machine and its economy of funds, and it is only set to get worse from here on out. The question is, “How long can Putin survive this fiscal onslaught?”

This fossil-fuel coup de grâce came from the G7. Each member of the G7 (the US, UK, Canada, France, Germany, Italy, and Japan) agreed to place a price cap on Russian oil of $60 per barrel starting on December 5th, 2022. This was a genius move, given that they couldn’t outright ban Russian oil, as it would cause yet another energy crisis due to supply falling short of demand, but it would still hurt Putin. However, before this cap, Russian oil traded for $70 per barrel, so many were sceptical of how effective it would be.

Yet, Russia exports a massive 8.2 million barrels of oil per day! What’s more, the EU (mainly France, Germany, and Italy) are Russia’s biggest oil customers. The Kremlin is highly dependent on this industry, as 45% of its federal revenue comes from oil and 20% of the Russian economy is based on the oil industry. So even though these price cap sanctions are relatively small, they have a massive impact.

In a previous article (read it here), I predicted that the total cost of these sanctions to the Kremlin would be an eye-watering $83 million per day, or $29 billion over the course of a year. But I was a little off. A recent report by the Centre for Research on Energy and Clean Air, an independent research organisation, found that the actual figure is more like $173 million per day, or a staggering $63 billion over the course of a year!

But that is just the cost for the Kremlin. The same report found that the daily cost to Russia’s oil-based economy is vast: $303 million! This colossal drain is bringing the Russian economy to a painful crawl. And it will soon get worse. By February 5th, all 27 member states of the EU will have to entirely phase out Russian seaborne imports of refined petroleum products due to the EU’s self-imposed deadlines. This will make these losses dire.

And it just keeps getting worse for Sad Vlad.

The Ukraine war has changed. Rather than being driven by inner-city skirmishes and tank warfare, it is now being driven by long-range ballistics. Russia initiated this to stem soldier losses while making up for their woeful logistics and lack of experience on the battlefield. But missiles and rockets cost a lot of money! Take their Kalibr missile. This is a multi-use missile (land to land, air to land, air to air fire, etc.) The Russian military widely uses this missile, but each one costs them a massive $980,000! What’s more, the factories that produce these weapons can only pump out so many and are struggling to keep up with demand.

This has caused the Russian missile stockpiles to shrink drastically. So much so that they have started using old Soviet nuclear missiles without their payload, making them kinetic weapons (read more here). These missiles cost a vast $13 million per missile and are far more useful as nuclear or large ballistic weapons. Using them how they are currently being used makes no sense unless their missile stockpile is nearly depleted.

This means Putin is having to dump enormous sums of money into his war machine to keep it supplied and functional, or he will risk losing firepower and being pushed even further back than he already is. The Ukraine war cost the Kremlin $82 billion by November 2022, and that same month, Putin had to sell off $13.6 billion of federal debt insurance to keep the military from going bankrupt.

But that wasn’t enough to keep the wolves from the door, and in December 2022, the Kremlin had to borrow $56 billion, the largest sum it has ever borrowed, to plug its ever-growing budget deficit.

All for what? To stop NATO from expanding to a neighbouring country? No one forced Ukraine to try and join NATO; they chose it themselves with a freely elected leader. Ironically, Putin’s invasion (and blatant violation of the Budapest Memorandum) justified Ukraine’s NATO ties and has led many more neighbouring countries to get closer to or try to join NATO.

Just a reminder here: NATO is expressly a defensive alliance, not an expansionist one. If Ukraine joined NATO, it wouldn’t impact Russia at all unless Russia invaded. So Putin’s stance against it makes very little sense unless he was looking to aggressively expand Russia back into Soviet territory all along.

To sum up, the Ukraine invasion makes zero tactical sense for Russia, and the skyrocketing price of the war combined with crippling sanctions are steadily but surely destroying the Russian economy and the Kremlin. And for what purpose? To relive Putin’s Soviet nostalgia? Or to lean into his unfounded paranoia against NATO? How long can he keep this up while the monetary rug is being pulled from underneath him? How long will the Russian people accept his depravity? The answer is longer than you think. Remember, this is Russia we are talking about; they fight tooth and nail to the bitter end. But these new reports show that the West is hitting Putin hard and significantly weakening the Kremlin. So, for the sake of us all, let’s hope this can help bring the stupid war to an end soon.

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