cross-posted from: https://mander.xyz/post/44340351
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[Putin said that the task] had been accomplished: inflation would end the year below 6%.
Yet the Central Bank undercut that narrative almost immediately. Contrary to expectations, it lowered the key rate from 16.5% to just 16%.
If inflation truly is below 6%, that implies a real interest rate of roughly 10% — among the highest in the world. Brazil, often cited as an outlier, sits at 9.2%, while Mexico at 5.3%. Turkey and Argentina, despite having interest rates of around 38% and 29% respectively, do not even make the list because inflation there is near or above those levels.
[Russia Central Bank Governor Elvira] Nabiullina’s remarks after this month's rate meeting seemed to support this. Inflation has declined, she said, but not sustainably. The 6% figure only appeared in weekly data, which is not a reliable basis for identifying trends. And although inflation fell in November, it rose in October.
And beginning in January, it is expected to accelerate again, driven by a higher value-added tax (VAT), now applied to a wider swath of businesses, and by another round of increases in utility tariffs.
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Nabiullina, who once cloaked bad news in careful technocratic language, sounded increasingly like a Soviet official reciting a familiar formula: yes, there are shortcomings, but the strengths outweigh them. When all else fails, there is always the reassurance that the economy is “returning to a trajectory of balanced growth.”
In other words, the economy is shrinking — but it is shrinking according to plan.
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The government’s long-term budget forecast was striking in two respects. First, its sheer horizon: projections extend to 2042. Second, its candor: the budget is expected to remain in deficit throughout that entire period.
Even here, Soviet habits are evident. Oil is optimistically forecast at $69 a barrel by 2031. Officials stress that oil revenues will gradually give way to tax income. Putin promised that the higher VAT is not permanent, though he did not say when it would end. One might reasonably suspect it will end in 2042.
The date itself feels telling. It invites a grim literary echo of Venedikt Yerofeyev and Vladimir Voinovich’s dystopian “Moscow 2042.” It is hard to believe the choice was accidental.
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Then, too, Soviet decline was accompanied by triumphant propaganda. The language has changed, but not the function. Soon, Russians will be told daily how Ukrainian and European “militarism” obstructs Russia’s desire for peace. The euphemism of “forcing peace” requires no invention; it was tested long ago.
If this déjà vu is more than psychological, it is possible to sketch a timeline for how long the Russian economy will last. Oil prices collapsed in 1985. Though the Soviet Union survived until 1991, its economy became effectively nonviable by 1989.
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But the Soviet example suggests that public patience can end suddenly and collectively. Military spending now stands at 7.3% of GDP, according to a presentation by Defense Minister Andrei Belousov, a figure comparable to late-Soviet levels.
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Even if fighting were to end, Russia will be paying for this war for years, not least through high interest costs on government bonds. This year alone, the state issued nearly 8 trillion rubles’ ($102.5 billion) worth.
Meanwhile, the government is already propping up struggling sectors ranging from carmakers and aircraft manufacturers to railways, coal, metals and oil.
Even defense enterprises are faltering. Workers at the Kingisepp Machine-Building Plant, a strategic supplier to the Navy, recently complained of unpaid wages. The company’s director responded angrily, accusing them of petty self-interest at a time of national struggle.
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Whether this story concludes suddenly and almost bloodlessly, as the Soviet collapse did, or drags on in a long and painful decline is impossible to know. History does not repeat itself exactly.
But when economic narratives begin to sound this familiar, it is hard not to start counting the years.