As we approach the third anniversary of Russia’s attack on Ukraine, as the world braces for Trump’s inauguration, as the military and diplomatic balance threatens to shift against Ukraine there has been a noticeable shift amongst Western commentators on the economic front.
Being Russian and actually having recently been to Russia - my best analysis is that Russia and perception of Russia in the West is currently undergoing a mini version of what the West is undergoing itself and its perception of Ukraine conflict. Let me unpack. I firmly believe that Western actions in Ukraine, and its perception of Ukraine, are determined by internal Western matters, i.e. an interplay between Western economy, Western lobbying groups, and Western problems. Ukraine and perception of Ukraine is important only insofar they affect the above.
Now, current set up in Russia is such that a large portion of the economy and lobby groups attached to it are getting killed by high interest rates. It is a very real problem, obviously, but as the author points out, it's manageable. However, this situation is unbearable for those lobby groups, and they create an artificial reality/narrative, exactly the same way their counterparts on the West do with regards to Ukraine. And since this narrative plugs in seamlesly into what those Western counterparts NEED to hear in order to continue pushing their interests in Ukraine, it gets lifted wholesale out of Russian discourse and presented as something real in the Western discourse. It is not real, it is simulacrum squared, reality's cousin twice removed,
It is a tale
Told by an idiot, full of sound and fury,
Signifying nothing.
Naturally, the same happens on the Russian side, when bits and pieces of Western narratives, created for internal purposes, fit current interests of this or that power group with control over some sort of media.
Sorry for the long winded post, I didn't intend for it to read as a piece out of a French philopher text.
Our foreign policy vis a vis Russia is characterized by a lack of understanding as to the size, wealth, and national character of Russia. (In that order.) This failure has been firmly entrenched here for over one hundred years. In our common American government perception Russia is a nasty little central European country like Hungary or Bulgaria. Decade after decade we miss he point. We got into Afghanistan because we failed to realize that when Russia met defeat there it was not due to any inherent weakness on Russia's part. Size does matter. We simply and mistakenly thought, "We can do better."
"What we need to know is how Russia’s political economy is actually put together." Why face reality when the western created narrative help kick the can down the road. Otherwise, the bilateral trade with China has reached almost 250 billion dollars per year (worth of, because likely majority was not done in USD...)
Great piece Adam. I wish some of these authors predicting doom and gloom would take a step back and reflect on whether their article might as well have been written in 2022 if you were to solely look at their predictions. A financial crisis spawned by the credit bubble bursting is an especially hilarious fantasy, considering that Nabiulina and the CBR spent half of the 2010's cleaning up system from unhealthy financial structures. They can't do much about an inflation fueled by wage growth in the face of a deficit of lobby supply, at least short of killing the economy outright with hikes, but betting against them being able to manage credit-based systemic risk is certainly a take, given the CBR's recent history.
As you rightly point out the growth during war is largely growth that could have taken place earlier if not for the simultaneous insistence on austerity and sanctionsproofing the economy in the 2010's. A much more interesting counterfactual is actually that of the impressive pre-war growth rate of 2021; sure, high commodity prices are the primary culprit, but how much growth did Russia lose out on by refusing to let loose the financial bazooka for a decade? If everybody was getting much richer, much faster, could the war have been averted? It might sound dumb or naive, but suppose both Russia and Europe let go of the economic malaise that is ordoliberalism in early 2016, rather than waiting until the Covid shock, would the path to war have been different? We'll never know, but I think so. The incentives for not letting relations hit rock-bottom pre-war would simply be different.
This is so sensible, and a welcome corrective to the usual "Russia Fail!" (not unlike the endless stream of "China Fail!") narratives continuously flogged in the Western corporate media organs.
Too many observers fail to inquire the extent to which Russia actually relies upon external resources in order to prosecute its military operations in Ukraine -- if that number is low (and I suspect that it is, given the quantity of raw resources and native manufacturing available within the country itself), then the sanctions aren't going to have anywhere near the effect advertised. Perhaps the most idiotic trope constantly repeated is that Russian fossil fuel export profits "pay for" the war -- this can ONLY be true the extent to which Russia relies upon imports for military purposes, but this necessary connection is always missing in typical Western narrative construction. Most of it isn't analysis -- it's wishcasting ...
Thanks for the excellent comment on Russia´s war economy,and the distinction between analysis and propaganda intended to undermine confidence.Another clear case is the "China peak" theory.
Is there a comparison to be made between Russia today and Germany of the mid to late 30’s. From a lay persons perspective, both took advantage of low domestic demand after a period of austerity and used large amounts of credit to fuel rapid growth in military industries - all of which seems unsustainable in the long run. Should we expect history to rhyme in the future?
Finally, after the speculations, ifs ands and buts, the real question:
'...if we actually want to get a realistic assessment of Russia’s long-run power potential, images like a “House of Cards” are an indulgence. What we need to know is how Russia’s political economy is actually put together.
"as the military and diplomatic balance threatens to shift against Ukraine " Threatens to shift? Good grief. As the Russians roll over Ukraine along a 1500 km front, completely destroy electricity supplies, completely dominate air space; as thousands of Ukrainians desert . . .And how is the Ukranian economy doing?
Russia’s oil proceeds to the state budget increased by almost a third last year to the highest since at least 2018, spurred by higher crude prices as the nation adapted to international sanctions.
It seems that "roll over" means something quite different to certain peddlers of propaganda and nonsense. Since September 2024, Russia has gained 1192 square miles of Ukrainian territory. For comparison, the German army conquered around 1200 square miles of French land in the 1918 offensive 'Kaiserschlacht', with most of that stemming from two separate operations of just over one week each. Those gains, considered a remarkable operational-tactical success in conditions of entrenched stalemate, ended up achieving none of Germany's strategic aims. It took the Russian army half a year to gain equivalent territory, and just as in WWI, the strategic benefits of occupying that land are imperceptible.
Ukraine is in a very difficult military position, with numerous pressing issues related to manpower, command and co-ordination. But despite their enemy's weaknesses, and while enjoying a significant advantage in terms of numbers and firepower, the Russian army has been incapable of any operational scale maneuvers. Rather than rapidly advancing into the depths of Ukraine's weakened defenses, Russia is reduced to extremely costly infantry assaults, using small unit infiltration tactics and the weight of numbers to labouriously move forward. And yet this grinding crawl is described as "rolling over" the Ukrainian lines by cheerleaders of Putin's imperialist aggression. I know such types are usually allergic to basic factual information, but here's some actual data for those interested. https://www.russiamatters.org/sites/default/files/media/inline/wrc-monthly%20%281%29.jpg
I have no idea what the state of Russia's economy is today. For that matter, can anyone predict when the next 2008 will happen in the U.S. or the next 1929? I do know that there was a collapse of the USSR, which I don't think was really expected. So could Russia be a house of cards? Absolutely. But is it a useful discussion? IMHO, all of this speculation seems pointless. I would suggest that the underlying question is whether 'we' (The West) see Ukraine's defense as a chance to avoid WWIII in the sense that many say a stronger response to Germany's pre-WWII move on Czechoslovakia might have averted WWII. If so, then you fight like hell because losing isn't an option you want to live with. It's certainly not an option Ukraine can live with. If the West collectively decides it doesn't believe that, then Russia wins. And only time will tell whether that matters to anyone outside of Ukraine.
The USSR collapse is sui generis it's occurance and unlikely to reoccur. It's was a collapse as much from restrained and placid leadership that put in has made his career out of being nothing like. A coup or assad sequence revolt and violent suppression causing a rebellion are much more probable.
Maybe so. I don't presume to know when a conflict is the next Vietnam or Afghanistan and when it is a replay of the 1930s. But I also don't assume that it won't ever be...
Another variable to consider is the gradual draw down of the massive stock of Soviet-era equipment. YouTuber Perun makes the case that Russia will run into a few different limits in 2025 as these supplies run dry. He argues that Russia cannot produce equipment at a rate that matches its attrition in Ukraine. Nonetheless, even limited efforts to maintain the war effort will add to the strain on labour and investment in 2025.
First you have to choose between Russian estimates of equipment losses and the joke figures on the Oryx website.
for over a year we were being told that Russia was running out of missiles. Now we are told that Russia produces more missiles a year than the whole west.
Generally detailed discussions of the war in Ukraine show Russia using modern equipment, not Soviet equipment, and of course Russia is not really spending to fight Ukraine, it is investing heavily to anticipate any eventual war with Nato (West talks about this war a lot, Russia prepares for it, not much changes).
Interesting discussion, and probably wise not to reach the obvious conclusion.
Several things come to mind.
1. There is a strange relationship between the current surplus of "Russian economy is going to collapse" stories and the dearth of the "Russian front line is about to collapse" story which was so common in the days before the "Putin is ill and about to die" and the "Putin is hated and about to be overthrown" stories. I guess economics is about the only story that doesn't seem obviously daft.
2. 8% of GDP on military in a big war. I suspect that includes 2% for essentially basic policing as the two sectors are generally included in the one category for Russia. It reminds me of that 40% of Russian state spending goes on the military meme of last year. Which ignored the fact that regional spending was as big as state spending. Indeed add all the military spending like veterans affairs and US military spending is also close to 40% of "Federal spending".
3. From day 1 this has been a small war in Ukraine - about 150k Russian troops initially, but a big preparation for any Nato intervention. Russia's spending is not about defeating Ukraine (which has been quite inevitable since end 2022 or earlier) but about preparing for WW3. The west constantly talks about raising spending to 3% of GDP, no surprise that Russia did it a while ago.
Also obviously what Russia gets is not only vastly superior in quality, and quantity, but many many times cheaper. In the many ways Nato has already been defeated, the quality of Western equipment has been shameful, and Nato's unpreparedness for a conventional war in Poland or Ukraine (its raison d'etre) has been worse.
[Note: it is hard to find out proper estimates of deaths and wounded. Some like to say Russia has had horrendous losses. But then nonsense stories out of Kiev have abounded for 3 years now, and Russia versions have a consistency that smells like truth from the side that has consistently been winning. My best guess 100k Russian and 1 million Ukrainian dead. Wounded 300k vs 1m. Russia pre-empts defeats by retreating, Ukraine prolongs them. Russians have 6 months training minimum (3 months for reservists) and normal aged troops, Ukraine has 5 weeks with Nato or 5 days training, and a median age which was 43 but is probably higher now that there are no volunteers. Surviving requires a basic medical training which Ukrainians just don't have. Russian Glide bombs and flame throwers don't leave many injured. 5:1 casualty ratio and 10:1 kill ratio should surprise no one who thinks for themselves.]
[Note to note. Until western media publishes that 1 million Ukrainian dead number there is no Overton Window that allows western leaders to negotiate a reasonable peace with Russia - this of course is deliberate.
UN reckons 15k or so civilian deaths, making the Russian war in Ukraine easily the most Civilian Friendly war EVER.]
4. The huge rises in wages strikes me as being a very very good thing. Reminds me that wages are 60% of GDP in China, 40% in US.
Should we consider deathanomics as the Russians do inflation, with an official and real rate? Right now the Russian government values the death of a 30-35 year old man to gain a few meters of territory in Donetsk at a significantly higher rate than what they can produce for the economy. And that rate goes up, with enough of the 30-35 year old men agreeing to keep the Russian offensive going. But is this really what they are worth to Russia? Will this living exchange rate look as good in the year 2035?
Over half the entire Russian mortgage book consists of state subsidised mortgages. Because of interest rates, subsidies that were budgeted at c. RUB 100bn, are now estimated to cost > RUB 1 trillion p.a.. To this you can add subsidised corporate and commercial lending, with the combined cost now seeing subsidised lending to consumers and agriculture of all places being scaled back. Meanwhile to help finance these subsidies Russia is borrowing (via bonds) from the same banks its paying subsidies to; this is the definition of pulling yourself up by your bootstraps. It also needs noting that the prevalence of subsidised loans continues to both muffle and distort the effect of interest rates.
I'd be interested in comment on the housing market and the end (or drastic restriction) of subsidised mortgages. Having been through such an episode in Australia, you only need a short period of 20% interest rates to produce a lot of distress.
Tooze is frankly oblivious to what's happening in Russian banking. To answer your question - using Russian central bank data - half the Russian mortgage book consists of subsidised loans with the remainder seeing a month on month increase in overdue loans thru-out H2 24 (but from a v.low base). Alongside this the number of new mortgages was down 62% YoY Dec 24 and house pries are unsurprisingly falling also. However, the immediate kicker is that the mortgage subsidies are already costing 10-15xs budget, to which you can guestimate what the subsidised corporate loan book is now costing. Meanwhile, the prevalence of subsidies has obviously muffled the impact of high interest rates.
'The upshot is that Kennedy's report is correct in the essentials, but its alarmist tone is overdone in my book if you dig into the details. Kennedy’s big takeaway is that to solve all these problems, Putin needs to stop the war and get some sanctions relief and so Ukraine actually has more leverage in the mooted talks than first appears.'
And a bit longer essay last week:
Putin 25 years in office - has he been a boon or a bane for Russia?
Being Russian and actually having recently been to Russia - my best analysis is that Russia and perception of Russia in the West is currently undergoing a mini version of what the West is undergoing itself and its perception of Ukraine conflict. Let me unpack. I firmly believe that Western actions in Ukraine, and its perception of Ukraine, are determined by internal Western matters, i.e. an interplay between Western economy, Western lobbying groups, and Western problems. Ukraine and perception of Ukraine is important only insofar they affect the above.
Now, current set up in Russia is such that a large portion of the economy and lobby groups attached to it are getting killed by high interest rates. It is a very real problem, obviously, but as the author points out, it's manageable. However, this situation is unbearable for those lobby groups, and they create an artificial reality/narrative, exactly the same way their counterparts on the West do with regards to Ukraine. And since this narrative plugs in seamlesly into what those Western counterparts NEED to hear in order to continue pushing their interests in Ukraine, it gets lifted wholesale out of Russian discourse and presented as something real in the Western discourse. It is not real, it is simulacrum squared, reality's cousin twice removed,
It is a tale
Told by an idiot, full of sound and fury,
Signifying nothing.
Naturally, the same happens on the Russian side, when bits and pieces of Western narratives, created for internal purposes, fit current interests of this or that power group with control over some sort of media.
Sorry for the long winded post, I didn't intend for it to read as a piece out of a French philopher text.
Our foreign policy vis a vis Russia is characterized by a lack of understanding as to the size, wealth, and national character of Russia. (In that order.) This failure has been firmly entrenched here for over one hundred years. In our common American government perception Russia is a nasty little central European country like Hungary or Bulgaria. Decade after decade we miss he point. We got into Afghanistan because we failed to realize that when Russia met defeat there it was not due to any inherent weakness on Russia's part. Size does matter. We simply and mistakenly thought, "We can do better."
our only failure is we didn’t crash this nation sooner....
"What we need to know is how Russia’s political economy is actually put together." Why face reality when the western created narrative help kick the can down the road. Otherwise, the bilateral trade with China has reached almost 250 billion dollars per year (worth of, because likely majority was not done in USD...)
Great piece Adam. I wish some of these authors predicting doom and gloom would take a step back and reflect on whether their article might as well have been written in 2022 if you were to solely look at their predictions. A financial crisis spawned by the credit bubble bursting is an especially hilarious fantasy, considering that Nabiulina and the CBR spent half of the 2010's cleaning up system from unhealthy financial structures. They can't do much about an inflation fueled by wage growth in the face of a deficit of lobby supply, at least short of killing the economy outright with hikes, but betting against them being able to manage credit-based systemic risk is certainly a take, given the CBR's recent history.
As you rightly point out the growth during war is largely growth that could have taken place earlier if not for the simultaneous insistence on austerity and sanctionsproofing the economy in the 2010's. A much more interesting counterfactual is actually that of the impressive pre-war growth rate of 2021; sure, high commodity prices are the primary culprit, but how much growth did Russia lose out on by refusing to let loose the financial bazooka for a decade? If everybody was getting much richer, much faster, could the war have been averted? It might sound dumb or naive, but suppose both Russia and Europe let go of the economic malaise that is ordoliberalism in early 2016, rather than waiting until the Covid shock, would the path to war have been different? We'll never know, but I think so. The incentives for not letting relations hit rock-bottom pre-war would simply be different.
This is so sensible, and a welcome corrective to the usual "Russia Fail!" (not unlike the endless stream of "China Fail!") narratives continuously flogged in the Western corporate media organs.
Too many observers fail to inquire the extent to which Russia actually relies upon external resources in order to prosecute its military operations in Ukraine -- if that number is low (and I suspect that it is, given the quantity of raw resources and native manufacturing available within the country itself), then the sanctions aren't going to have anywhere near the effect advertised. Perhaps the most idiotic trope constantly repeated is that Russian fossil fuel export profits "pay for" the war -- this can ONLY be true the extent to which Russia relies upon imports for military purposes, but this necessary connection is always missing in typical Western narrative construction. Most of it isn't analysis -- it's wishcasting ...
Thanks for the excellent comment on Russia´s war economy,and the distinction between analysis and propaganda intended to undermine confidence.Another clear case is the "China peak" theory.
Eugenio Bregolat
Is there a comparison to be made between Russia today and Germany of the mid to late 30’s. From a lay persons perspective, both took advantage of low domestic demand after a period of austerity and used large amounts of credit to fuel rapid growth in military industries - all of which seems unsustainable in the long run. Should we expect history to rhyme in the future?
No.
Finally, after the speculations, ifs ands and buts, the real question:
'...if we actually want to get a realistic assessment of Russia’s long-run power potential, images like a “House of Cards” are an indulgence. What we need to know is how Russia’s political economy is actually put together.
"as the military and diplomatic balance threatens to shift against Ukraine " Threatens to shift? Good grief. As the Russians roll over Ukraine along a 1500 km front, completely destroy electricity supplies, completely dominate air space; as thousands of Ukrainians desert . . .And how is the Ukranian economy doing?
A touch melodramatic.
Russia’s oil proceeds to the state budget increased by almost a third last year to the highest since at least 2018, spurred by higher crude prices as the nation adapted to international sanctions.
It seems that "roll over" means something quite different to certain peddlers of propaganda and nonsense. Since September 2024, Russia has gained 1192 square miles of Ukrainian territory. For comparison, the German army conquered around 1200 square miles of French land in the 1918 offensive 'Kaiserschlacht', with most of that stemming from two separate operations of just over one week each. Those gains, considered a remarkable operational-tactical success in conditions of entrenched stalemate, ended up achieving none of Germany's strategic aims. It took the Russian army half a year to gain equivalent territory, and just as in WWI, the strategic benefits of occupying that land are imperceptible.
Ukraine is in a very difficult military position, with numerous pressing issues related to manpower, command and co-ordination. But despite their enemy's weaknesses, and while enjoying a significant advantage in terms of numbers and firepower, the Russian army has been incapable of any operational scale maneuvers. Rather than rapidly advancing into the depths of Ukraine's weakened defenses, Russia is reduced to extremely costly infantry assaults, using small unit infiltration tactics and the weight of numbers to labouriously move forward. And yet this grinding crawl is described as "rolling over" the Ukrainian lines by cheerleaders of Putin's imperialist aggression. I know such types are usually allergic to basic factual information, but here's some actual data for those interested. https://www.russiamatters.org/sites/default/files/media/inline/wrc-monthly%20%281%29.jpg
I have no idea what the state of Russia's economy is today. For that matter, can anyone predict when the next 2008 will happen in the U.S. or the next 1929? I do know that there was a collapse of the USSR, which I don't think was really expected. So could Russia be a house of cards? Absolutely. But is it a useful discussion? IMHO, all of this speculation seems pointless. I would suggest that the underlying question is whether 'we' (The West) see Ukraine's defense as a chance to avoid WWIII in the sense that many say a stronger response to Germany's pre-WWII move on Czechoslovakia might have averted WWII. If so, then you fight like hell because losing isn't an option you want to live with. It's certainly not an option Ukraine can live with. If the West collectively decides it doesn't believe that, then Russia wins. And only time will tell whether that matters to anyone outside of Ukraine.
The USSR collapse is sui generis it's occurance and unlikely to reoccur. It's was a collapse as much from restrained and placid leadership that put in has made his career out of being nothing like. A coup or assad sequence revolt and violent suppression causing a rebellion are much more probable.
As long as "the West" imagines every conflict is a replay of 1930s Europe it will continue to blunder around from one idiocy to the next.
Maybe so. I don't presume to know when a conflict is the next Vietnam or Afghanistan and when it is a replay of the 1930s. But I also don't assume that it won't ever be...
Another variable to consider is the gradual draw down of the massive stock of Soviet-era equipment. YouTuber Perun makes the case that Russia will run into a few different limits in 2025 as these supplies run dry. He argues that Russia cannot produce equipment at a rate that matches its attrition in Ukraine. Nonetheless, even limited efforts to maintain the war effort will add to the strain on labour and investment in 2025.
https://youtu.be/TzR8BacYS6U?si=MW3Ktk13TmLUbP1Q
First you have to choose between Russian estimates of equipment losses and the joke figures on the Oryx website.
for over a year we were being told that Russia was running out of missiles. Now we are told that Russia produces more missiles a year than the whole west.
Generally detailed discussions of the war in Ukraine show Russia using modern equipment, not Soviet equipment, and of course Russia is not really spending to fight Ukraine, it is investing heavily to anticipate any eventual war with Nato (West talks about this war a lot, Russia prepares for it, not much changes).
Interesting discussion, and probably wise not to reach the obvious conclusion.
Several things come to mind.
1. There is a strange relationship between the current surplus of "Russian economy is going to collapse" stories and the dearth of the "Russian front line is about to collapse" story which was so common in the days before the "Putin is ill and about to die" and the "Putin is hated and about to be overthrown" stories. I guess economics is about the only story that doesn't seem obviously daft.
2. 8% of GDP on military in a big war. I suspect that includes 2% for essentially basic policing as the two sectors are generally included in the one category for Russia. It reminds me of that 40% of Russian state spending goes on the military meme of last year. Which ignored the fact that regional spending was as big as state spending. Indeed add all the military spending like veterans affairs and US military spending is also close to 40% of "Federal spending".
3. From day 1 this has been a small war in Ukraine - about 150k Russian troops initially, but a big preparation for any Nato intervention. Russia's spending is not about defeating Ukraine (which has been quite inevitable since end 2022 or earlier) but about preparing for WW3. The west constantly talks about raising spending to 3% of GDP, no surprise that Russia did it a while ago.
Also obviously what Russia gets is not only vastly superior in quality, and quantity, but many many times cheaper. In the many ways Nato has already been defeated, the quality of Western equipment has been shameful, and Nato's unpreparedness for a conventional war in Poland or Ukraine (its raison d'etre) has been worse.
[Note: it is hard to find out proper estimates of deaths and wounded. Some like to say Russia has had horrendous losses. But then nonsense stories out of Kiev have abounded for 3 years now, and Russia versions have a consistency that smells like truth from the side that has consistently been winning. My best guess 100k Russian and 1 million Ukrainian dead. Wounded 300k vs 1m. Russia pre-empts defeats by retreating, Ukraine prolongs them. Russians have 6 months training minimum (3 months for reservists) and normal aged troops, Ukraine has 5 weeks with Nato or 5 days training, and a median age which was 43 but is probably higher now that there are no volunteers. Surviving requires a basic medical training which Ukrainians just don't have. Russian Glide bombs and flame throwers don't leave many injured. 5:1 casualty ratio and 10:1 kill ratio should surprise no one who thinks for themselves.]
[Note to note. Until western media publishes that 1 million Ukrainian dead number there is no Overton Window that allows western leaders to negotiate a reasonable peace with Russia - this of course is deliberate.
UN reckons 15k or so civilian deaths, making the Russian war in Ukraine easily the most Civilian Friendly war EVER.]
4. The huge rises in wages strikes me as being a very very good thing. Reminds me that wages are 60% of GDP in China, 40% in US.
Should we consider deathanomics as the Russians do inflation, with an official and real rate? Right now the Russian government values the death of a 30-35 year old man to gain a few meters of territory in Donetsk at a significantly higher rate than what they can produce for the economy. And that rate goes up, with enough of the 30-35 year old men agreeing to keep the Russian offensive going. But is this really what they are worth to Russia? Will this living exchange rate look as good in the year 2035?
Over half the entire Russian mortgage book consists of state subsidised mortgages. Because of interest rates, subsidies that were budgeted at c. RUB 100bn, are now estimated to cost > RUB 1 trillion p.a.. To this you can add subsidised corporate and commercial lending, with the combined cost now seeing subsidised lending to consumers and agriculture of all places being scaled back. Meanwhile to help finance these subsidies Russia is borrowing (via bonds) from the same banks its paying subsidies to; this is the definition of pulling yourself up by your bootstraps. It also needs noting that the prevalence of subsidised loans continues to both muffle and distort the effect of interest rates.
I'd be interested in comment on the housing market and the end (or drastic restriction) of subsidised mortgages. Having been through such an episode in Australia, you only need a short period of 20% interest rates to produce a lot of distress.
Tooze is frankly oblivious to what's happening in Russian banking. To answer your question - using Russian central bank data - half the Russian mortgage book consists of subsidised loans with the remainder seeing a month on month increase in overdue loans thru-out H2 24 (but from a v.low base). Alongside this the number of new mortgages was down 62% YoY Dec 24 and house pries are unsurprisingly falling also. However, the immediate kicker is that the mortgage subsidies are already costing 10-15xs budget, to which you can guestimate what the subsidised corporate loan book is now costing. Meanwhile, the prevalence of subsidies has obviously muffled the impact of high interest rates.
Ben Aris today also writes on the report and the RU economy:
Russia’s looming credit crisis
https://bneeditor.substack.com/p/russias-looming-credit-crisis
'The upshot is that Kennedy's report is correct in the essentials, but its alarmist tone is overdone in my book if you dig into the details. Kennedy’s big takeaway is that to solve all these problems, Putin needs to stop the war and get some sanctions relief and so Ukraine actually has more leverage in the mooted talks than first appears.'
And a bit longer essay last week:
Putin 25 years in office - has he been a boon or a bane for Russia?
https://bneeditor.substack.com/p/putin-25-years-in-office-has-he-been