What's happened
As Russia's defense spending escalates amid the ongoing war in Ukraine, rising interest rates and economic sanctions threaten the stability of its defense sector. Analysts warn of potential bankruptcy for defense firms and a looming recession if the war continues or if spending is curtailed.
Why it matters
What the papers say
According to Business Insider UK, Rostec's CEO Sergei Chemezov highlighted the dire situation for defense firms, stating that high interest rates are 'eating up' profits. Meanwhile, Alexander Mertens from the Atlantic Council warned of a potential 'severe recession' if the war persists, noting that the economy is heavily reliant on defense spending. The Moscow Times reported on the FSB's crackdown on dissent, which could further destabilize the economy by stifling innovation and investment. These perspectives illustrate a complex interplay between military needs and economic sustainability in Russia's current landscape.
How we got here
Since the invasion of Ukraine, Russia has significantly increased its defense budget, reaching an estimated $140 billion for 2024. However, high interest rates and sanctions are straining the economy, leading to warnings from experts about the sustainability of this spending.
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Ukraine is a country in Eastern Europe. It is the second-largest European country after Russia, which borders it to the east and northeast.
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Russia, or the Russian Federation, is a transcontinental country located in Eastern Europe and Northern Asia. Covering an area of 17,125,200 square kilometres, it is the largest country in the world by area, spanning more than one-eighth of the Earth's in