ELISSA NADWORNY, HOST:
In Russia, the country's wartime economy is increasingly showing signs of strain. Inflation has spiked. The value of the country's currency, the ruble, has tumbled. And next year's economic growth forecasts have been slashed. Alexandra Prokopenko worked at the Russian Central Bank and is now a fellow at the Carnegie Russia Eurasia Center. Welcome to the program.
ALEXANDRA PROKOPENKO: Hi. Thanks for having me here.
NADWORNY: Ever since Russia invaded Ukraine, the U.S. and Europe have been trying to choke Russia's economy with sanctions. So why is Russia's economy struggling now?
ALEXANDRA PROKOPENKO: Because, finally, sanctions are hitting Russian economy. The latest sanctions imposed in 2024, which hit Russian transactions and Russian foreign trade, become a bottleneck for Russian businesses, for Russian financial system, for Russian partners. And since Russia is quite dependent on imports, well, the transactional costs imposed by sanctions on economy increased so significantly that, finally, sanctions are starting to bite.
NADWORNY: In remarks this week, President Vladimir Putin acknowledged inflation as a concern for the Russian people. Give us a sense who among kind of the average Russian is hardest hit by this economy.
ALEXANDRA PROKOPENKO: Well, Putin wasn't honest with his audience because the biggest losers of the current economical situation is the public sector - workers of educational system, doctors, internal security. Not all but most part of the budget now goes to the war, which means that these sectors like health care, education and even internal security are highly under-financed. And because of labor shortage in Russia, they are also understaffed. So - and inflation eating up the income of these people, so they are the biggest losers. And Putin saying that the economy is doing well - well, he's not saying this wholeheartedly.
NADWORNY: Is Putin feeling any domestic pressures?
ALEXANDRA PROKOPENKO: I am not sure since the level of repression in Russia was high even before the war, and after the full-scale invasion, it has increased significantly. So people don't have taste to go on the streets and put some pressure on authorities.
NADWORNY: Yeah. And does this add pressure to Putin internationally in terms of his ambitions in Ukraine?
ALEXANDRA PROKOPENKO: I think no, not actually. It become more challenging to him to continue his Ukrainian endeavor and to continue this war. But unfortunately, we see that economy is not - it's not a reason for Putin to stop it. And economic struggles - well, economy can bite, sanctions can bite, but it's not the thing which is going to make him to stop the war, even if he and his surrounding suffers from sanctions.
NADWORNY: Might some of these pressures on Putin - the challenge with the economy - change once President-elect Donald Trump is back in the White House?
ALEXANDRA PROKOPENKO: I doubt that since there is a little cooperation in terms of economic cooperation between Russia and the U.S. And I think it's very Putin's way to frame the possible deal that, hey, I am a tough guy, and, Mr. Trump, you're a tough guy, so let's settle up everything together. But here are other players, and they should be on the table, and I mean Europe, and I mean, of course, Ukraine.
NADWORNY: That's Alexandra Prokopenko of the Carnegie Endowment for International Peace. Thank you.
ALEXANDRA PROKOPENKO: Thank you. Transcript provided by NPR, Copyright NPR.
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