By John Q. Hosedrinker 
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Der Spiegel: „Russia is actually broke“ – so, let’s unpack this, shall we? The core idea, as suggested by the German magazine, is that Russia’s economic house of cards is teetering, possibly on the brink of collapse. The sheer cost of the ongoing war in Ukraine is a huge factor, with irreversible damage already done. The constant churn of soldiers, tanks, and equipment into the conflict isn’t just a military drain; it’s an economic one, too.
The problem is, we’ve heard similar pronouncements before. “Russia is finished,” the headlines screamed, and yet, the war grinds on. The rhetoric of imminent collapse has become almost routine, and it’s easy to become desensitized to it. There’s a certain skepticism that understandably creeps in. Russia keeps finding ways to mobilize resources, whether it’s manpower, equipment, or money. The country’s ability to keep fighting, even with the economic strain, often leaves a sense of disbelief.
A key distinction that needs to be explored when we talk about Russia’s economic woes is whether they are truly broke, meaning they have no more money left to spend, or simply burdened by debt. While the former would be a more immediate crisis, the latter allows for some breathing room. As long as Russia can find creditors willing to lend them money, whether they’re broke or not is not really an issue for them, they’ll just keep borrowing and pay them back whenever.
It’s important to acknowledge that many countries, including some of the most powerful, are swimming in debt. This means that, in theory, a nation can often weather financial storms by taking on even more debt. This reality makes it difficult to use economic pressure alone to force a country to change its behavior. It is quite a lot more complex.
Der Spiegel suggests a complex situation. Russia’s economic trajectory has, at a bare minimum, been severely disrupted by the war. The initial strategy of stockpiling funds for the sanctions that they knew were coming. This may have already damaged the longer term prospects of the economy. And when their initial plans went sideways, they had to spend their savings on the war effort, not on making it through the sanctions.
Even before the current conflict, there were clear warning signs. The Russian economy was already struggling. It’s a wartime economy, even a “death-based” one, given the payouts for the families of dead soldiers. The country is now facing increasing difficulties in producing goods and maintaining its current position. Attacks from Ukraine only add to their economic burdens, particularly when targeting energy infrastructure and logistics. The ability to repair and rebuild in the face of these attacks, combined with the loss of equipment, may prove to be beyond Russia’s capabilities.
The crux of the matter may be what the “Der Spiegel” article truly says. The magazine may suggest that the economic issues are masked by a facade. The wealth of a select few, including Putin, remains immense. This has helped to keep some semblance of stability, even while much of the world has distanced itself from Russia, the war is draining resources. It’s a question of whether the oligarchy can keep their wealth.
The world knows the key players. Sanctions haven’t had the desired effect, as those who haven’t sanctioned are propping up the Russian economy. China’s willingness to continue doing business with Russia is also a key point. The high interest rates and the borrowing that Russia is forced to resort to indicates the growing precariousness of the situation.
Finally, there’s a sense that the situation has been misreported and, with this, exaggerated. The prediction of imminent collapse has been around for a while, and the reality is more nuanced. This isn’t to say that Russia’s economy is flourishing, but the complete collapse may not be as close as some sources suggest.