Russia's Officials Keep Contradicting Putin on War Economy
Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content.
Russia's economy faces a tough 2026, the head of the country's biggest bank has said in the latest official warning about the country's finances, which is at odds with Vladimir Putin's rosier public pronouncements.
German Gref, CEO and chairman of the executive board of Sberbank, said a spike in inflation and the high key interest rate were problems that could not be solved quickly. His comments come only days after Russian Central Bank Governor Elvira Nabiullina and economy minister Maxim Reshetnikov issued their own warnings about wartime growth.
This is despite Putin dismissing concerns about Russia's economy which he insisted remained strong despite sanctions and war.
Even in an authoritarian country like Russia, there is freedom in economic policy debates, Vasily Astrov, an expert on Russia's economy told Newsweek on Tuesday, but each official will make statements that reflect the interests of their groups.
Newsweek has contacted the Russian finance ministry for comment.
Russian President Vladimir Putin, right, and Russian Sberbank CEO German Gref attend a conference on artificial intelligence in Moscow on December 11, 2024.
Russian President Vladimir Putin, right, and Russian Sberbank CEO German Gref attend a conference on artificial intelligence in Moscow on December 11, 2024.Why It Matters
Russia has faced economic turbulence caused by sanctions imposed after Putin's full-scale invasion of Ukraine that are aimed at choking Moscow's military machine.
Strong GDP has been driven by high military spending amid predictions for harder times as inflation and high interest rates take their toll.
But despite Putin's rhetoric, his officials are becoming more vocal about the impact of sanctions, falling oil prices, wartime spending, and labor shortages.
Gref's warning is the latest signal of a wider economic slowdown in Russia that could raise questions on Moscow's ability to sustain the war.
What To Know
At Sberbank's meeting on Monday, Gref said the quality of his bank's loan portfolio is deteriorating, with a growing number of requests for debt restructuring by retail and corporate borrowers.
In comments reported by business newspaper RBC, Gref also said 2026 will not be an easy year either, although much will depend on geopolitics and on how the dynamics of GDP growth will develop.
He said another factor will be the key rate set by the Central Bank, which was lowered from 21 percent to 20 percent in June. The high rate is aimed to curb official inflation of 9.9 percent although analysts say it stifles investment.
Gref's comments follow a somber warning he gave at the St. Petersburg Economic Forum last month, when he referred to a "perfect storm" of problems for the economy. These included real interest rates between the key rate of 20 percent and annual inflation of 10 percent hurting business profits and forcing companies to postpone investment.
At the same event, Central Bank head, Nabiullina, credited for steering the wartime economy, said growth had been predicated on free labor resources but that many of these "have really been exhausted" and that a new model was needed.
Meanwhile, economy minister Reshetnikov said current business sentiment pointed to Russia being on "the brink of transitioning into recession."
This illustratrative image taken on January 11, 2025 shows Russian ruble notes next to a U.S. dollar bill.
This illustratrative image taken on January 11, 2025 shows Russian ruble notes next to a U.S. dollar bill.
Matt Cardy//Getty Images
However, Putin quoted Mark Twain when asked at the forum whether his war in Ukraine was "killing" the Russian economy, by replying "rumors of my death are greatly exaggerated" as he said growth in the country outpaced global rates.
Astrov, from the Vienna Institute for International Economic Studies, told Newsweek there is still a lot of freedom in Russia on economic policy debates unlike in countries, such as Turkey for example, so it was not surprising there were different opinions by officials.
Often these differences can be traced to officials' respective affiliation and because high interest rates suppress economic activity, economy minister Reshetnikov is arguing for lowering them and portrays the situation negatively, he said.
But Central Bank head Nabiullina is downplaying the risks because acknowledging them openly would be tantamount to self-criticism, given that her tight monetary policy has been the most important factor behind the recent slowdown. This is why she is talking about a planned cooling of an overheated economy, Astrov said.
He said that he was almost sure that Nabiullina will ease monetary policy further, very likely at the next meeting in July, justifying it with the recent decline in inflation, rather than risk economic stagnation and recession.
What People Are Saying
German Gref, head of Sberbank, Russia's largest bank on Monday: "2026 promises to be not the easiest [year] either. That is why we need to get in good shape in 2025.
"Much will depend on geopolitics, on how the dynamics of GDP growth will develop…but it is already clear that it will not be simple, because, in fact, the first half of 2026 is already visible."
Maxim Reshetnikov, Russian economy minister, June 19 at the St. Petersburg International Economic Forum: "Based on current business sentiment, it seems to me we are on the brink of transitioning into recession."
Elvira Nabiullina, head of Russia's Central Bank, June 19: "We have been growing for two years at a fairly high rate due to the fact that free labor resources were used... "But many of these resources have really been exhausted."
Russian President Vladimir Putin told the same forum: "Rumors of [the Russian economy's] death are greatly exaggerated."
Vasily Astrov, Vienna Institute for International Economic Studies: "There is still quite a lot of freedom in Russia when it comes to economic policy debates, the state of economy, unlike in Erdogan's Turkey, for example. So, it is not surprising that there are different opinions expressed by various officials."
What Happens Next
In Q1 2025, Russia's economy expanded 1.4 percent year-on-year, its slowest pace in two years and the World Bank forecasts further sluggish growth amid assessments of underlying productivity stagnation.
Meanwhile, a banking crisis in Russia looms because of growing defaults not yet reflected in official statistics, with problem loans possibly reaching 3.7 trillion rubles ($47.3 billion) or one-fifth of the banking system's capital, according to Bloomberg.
Current and former banking officials told the outlet there is a growing risk of a debt crisis in the next year if circumstances don't improve.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Newsweek
an hour ago
- Newsweek
Trump Tariffs Blamed for Sharpest E-Commerce Slowdown in Years: Survey
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. Online retail activity in the United States has experienced its sharpest slowdown in over a decade, as new data indicates widespread declines across many e-commerce categories. Why It Matters The downturn comes as President Donald Trump's administration pursues a more aggressive trade policy, imposing tariffs that have directly affected both consumer buying habits and retailer strategies. The timing of this e-commerce contraction coincides with heightened trade tensions and uncertain policy timelines. A 90-day pause in the new tariffs is set to expire on July 9, with the Trump administration signaling that countries not finalizing bilateral trade deals by this date face a return to higher tariff rates, some as high as 50 percent. What To Know AlixPartners' latest home delivery survey shows that nearly all major product segments have seen year-over-year double-digit declines in online purchases, with only grocery sales proving resilient in the face of new import duties, according to CNBC. Consumers, retail, and transportation companies were surveyed between May 31 and June 3. Newsweek reached out to AlixPartners via email for comment. Newly imposed tariffs have been described not only as a catalyst for immediate consumer behavioral change but also as a source of broader economic uncertainty. The majority of surveyed consumers said they would delay purchases or even shift their buying to domestic suppliers if import prices continue to rise. About 66 percent of respondents said they would seek domestic options if overseas prices increase by 10 percent. Another roughly 34 percent of respondents said they would delay purchases due to price uncertainty. Another 28 percent said they paid for purchases early on to avoid extra import costs. Amazon, eBay, SHEIN, Temu, Walmart, AliExpress, Lazada, Target and Etsy app icons on a screen. Amazon, eBay, SHEIN, Temu, Walmart, AliExpress, Lazada, Target and Etsy app icons on a screen. Getty Images Just 20 percent of respondents expressed an urge or need to "Buy American." "Tariffs are materially influencing consumer behavior, leading to both timing shifts and a potential reshoring of demand," said Chris Considine, a partner at AlixPartners. "Retailers may need to reassess sourcing and pricing strategies to remain competitive." Leah Brooks, professor at the Trachtenberg School of Public Policy and Public Administration at George Washington University, told Newsweek that it's expected that tariffs will cause the most pain where the cost of the item is relatively low relative to the cost of shipping and delivery. "What is that? All kinds of small things that we've become used to ordering online," Brooks said. "Yesterday, I ordered some plastic bag closers (that I love!) and they are appreciably more expensive than last time I ordered them. I ordered fewer of them because of that. "This is bad for the plastic bag closer company, and I suspect it's also bad for Amazon, or any company that makes money on getting the products—likely to be more expensive in short order—to you." The U.S. dollar has recorded its weakest start to a year since 1973, declining 10 percent so far in 2025. Analysts cite the unpredictability of trade policy and increasing fiscal deficits as compounding pressures, with the Federal Reserve hesitating to reduce rates further amid concerns about tariff-related inflation. In AlixPartners' 2025 Turnaround and Transformation Survey, 27 percent of respondents cited tariffs and regulatory changes as the second-highest distress trigger economically, trailing geopolitical instability (43 percent) but ahead of cost and availability of capital (12 percent). What People Are Saying Treasury Secretary Scott Bessent told Bloomberg Television on June 30: "We have countries that are negotiating in good faith, but they should be aware that if we can't get across the could spring back to the April 2 levels." Jim Mesterharm, global co-head of AlixPartners' Turnaround and Restructuring Services Practice, in a statement: "Geopolitical disruption has firmly moved to the top of the boardroom agenda. Agility, once again, must become a core operating principle. CEOs and boards need to move fast to strengthen their organizations' ability to absorb external shocks, pivot at speed as economic conditions evolve, and make the right decisions." What Happens Next As of Monday, only a handful of trade deals have been finalized.
Newsweek
an hour ago
- Newsweek
Republican Senator Tells House Not To Vote on Bill She Just Voted For
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. Republican Arkansas Senator Lisa Murkowski said Tuesday that despite voting in favor of the sweeping tax and spending package, she wants the House to return the "One Big Beautiful Bill" to the Senate for further work. "My hope is that the House is gonna look at this and recognize that we're not there yet," Murkowski told reporters today. Murkowski's vote was pivotal in the Senate's razor-thin 51–50 passage of the bill. The Alaska senator had been the focus of intense lobbying by GOP leaders, including Senate Majority Leader John Thune, to secure her support amid concerns over Medicaid cuts and food assistance reductions. The bill now heads to the House, where its future remains uncertain. Sen. Lisa Murkowski (R-AK) (L) and Sen. John Barrasso (R-WY) (R) take an elevator just off the Senate floor after the Senate stayed in session throughout the night at the U.S. Capitol Building on July... Sen. Lisa Murkowski (R-AK) (L) and Sen. John Barrasso (R-WY) (R) take an elevator just off the Senate floor after the Senate stayed in session throughout the night at the U.S. Capitol Building on July 1, 2025, in Washington, D.C. MoreHow Did Lisa Murkowski Vote? Murkowski's reluctant "yes" vote underlines the fractures within the GOP over the bill's $3.3 trillion price tag and its sweeping policy changes. Her call for the House to send the legislation back signals that even among supporters, there's dissatisfaction with the final product. The passed bill determines the future of era tax cuts, Medicaid funding, and clean energy incentives. The Senate's passage marks a significant win for President Trump, who has pushed for the bill's approval before July 4. However, with House Republicans divided over the Senate's revisions, including deeper Medicaid cuts and a faster rollback of clean energy credits, the bill's path to final passage is far from guaranteed. What to Know Murkowski was one of the final holdouts in the Senate, citing concerns about the bill's impact on Alaska's vulnerable populations. GOP leaders spent hours negotiating with her, offering carve-outs for Alaska on Medicaid and SNAP (food assistance) funding. While some provisions passed parliamentary review, others—like enhanced Medicaid payments—were ruled noncompliant with Senate budget rules. Despite her reservations, Murkowski said voting "no" would have killed the bill entirely. "There is a tax impact coming forward. That's gonna hurt the people in my state," she said, referencing the expiration of Trump's 2017 tax cuts. Her vote allowed the bill to advance, but she made clear she expects further revisions. The Senate stayed in session overnight, voting on dozens of amendments. Murkowski, Thune, and other GOP leaders huddled repeatedly to hash out last-minute changes. The final vote came after 20+ hours of debate. The bill now returns to the House, where Republicans are split. Some hardliners oppose the increased deficit, while moderates are uneasy about Medicaid cuts. If the House rejects the Senate version, a conference committee may be needed to reconcile the differences. Murkowski also pushed to preserve clean energy credits from the Biden-era climate law. While some phaseouts were slowed, most credits will expire by 2026 under the Senate version. The House version is even more aggressive in ending them. List of Senators Who Voted Against the Big, Beautiful Bill Republican Senators Susan Collins (Maine), Rand Paul (Kentucky), and Thom Tillis (North Carolina) joined all 47 Democrats in voting against the legislation, forcing Vice President J.D. Vance to cast the tie-breaking vote. Each senator cited different reasons for their opposition. Collins pointed to deep cuts to Medicaid, warning they would jeopardize health care access for hundreds of thousands of Mainers and threaten rural hospitals. Tillis, who has faced backlash from Trump and announced he won't seek reelection, said the bill would strip Medicaid coverage from over 600,000 North Carolinians. Paul objected to the bill's impact on the national debt, calling for more aggressive fiscal reforms. Despite the defections, the bill now heads to the House, where Republican leaders are racing to finalize it before Trump's self-imposed July 4 deadline. The legislation includes extensions of Trump-era tax cuts, a $5 trillion debt ceiling hike, and major changes to Medicaid, SNAP, and clean energy funding. What People Are Saying Murkowski, when asked why she voted for the bill today, said, "Kill it and it's gone. There is a tax impact coming forward. That's gonna hurt the people in my state." In a separate interview with NBC News Capitol Hill correspondent Ryan Nobles, Murkowski said: "Do I like this bill? No. But I tried to take care of Alaska's interests." Secretary of Transportation Sean Duffy on X following the vote: Thank you to @VP and the Senate for passing the One Big Beautiful Bill. Now it's time for the House to fly it home to @POTUS' desk so he can sign it into law!" Senate Democratic Leader Chuck Schumer on the bill: "Republicans are in shambles because they know the bill is so unpopular." He pointed to a report from the nonpartisan Congressional Budget Office (CBO), which estimated that 11.8 million more Americans would be uninsured by 2034 if the bill becomes law. The CBO also projected the bill would add nearly $3.3 trillion to the national deficit over the next decade, despite its deep cuts to welfare programs. What Happens Next The Senate-passed version of the bill is expected to be taken up in the House Rules Committee, possibly as soon as Tuesday. If House Republicans demand changes, the bill could head to a conference committee. Lawmakers are racing against the clock to finalize the package by Trump's self-imposed July Fourth deadline.
Bloomberg
2 hours ago
- Bloomberg
Macron Briefed Zelenskiy on His Call With Putin, People Say
French President Emmanuel Macron has reached out to Volodomyr Zelenskiy to brief him about his phone call with Russian President Vladimir Putin on Tuesday, according to people familiar with the matter. Macron and his Russian counterpart agreed to coordinate their approach on Iran in their first phone call since 2022.
