Russia economy meltdown as panicking Putin clashes with top banker

The ongoing war in Ukraine is taking a heavy toll on Russia’s economy, and a recent public clash has highlighted the growing tension between the Kremlin and financial institutions.

At the Eastern Economic Forum, German Gref, the CEO of Sberbank (Russia’s largest bank), openly warned that the country’s GDP growth had nearly stalled in July and August, following a sharp decline earlier in the year. He described the second quarter as “technical stagnation.”

This statement angered Vladimir Putin, who pushed back by claiming the slowdown was only a “soft landing” caused by stabilizing prices. The Russian president insisted that lending activity had not stopped, just slowed down.

Economists, however, see the situation differently. According to Oleh Pendzin, head of Ukraine’s Economic Discussion Club, Gref’s cautious remarks reflect his fear of potential political backlash from Russia’s security services. Publicly addressing these problems is one of the few ways experts can warn leadership without being accused of disloyalty.

The strain on the economy is becoming clear. The Bank of Russia recently cut its key interest rate from 18% to 17% after previously raising it as high as 21% to fight inflation. Inflation temporarily eased in July and August but remains high at 8.2%, and the central bank admitted that expectations of rising prices are still strong.

The pressure of war spending, coupled with slower growth and a widening budget deficit, exposes the real cost of Russia’s war with Ukraine. While the Kremlin insists the economy is stabilizing, many experts believe Russia is edging closer to prolonged stagnation.