Will rising inflation rates motivate Vladimir Putin to launch a new military offensive against Ukraine?
The question bears serious attention. After all, Putin appears increasingly concerned about the impact of inflation on the economy and his popularity. The Russian president has just requested amendments to parliamentary legislation to boost the minimum wage by 8.6% in 2022. The Russian labor ministry estimates this will cost an additional $410 million. As shown in the TradingEconomics.com chart below, Russia’s inflation rate has steadily increased over the year, now approaching 9%. In part driven by a poor harvest, the inflation rate for food is approaching 11%. This hurts Russian families and undermines Putin’s central political narrative — namely that he can provide both sustained order and improvements to living standards.
While rising energy prices have benefited the state coffers, a significant portion of the Russian population is dependent on state employment and financial payments. ING assesses this may put unanticipated pressure on state finances in 2022.
That takes us back to the Ukraine military situation.
Some suggest Putin offered an olive branch to the West in a speech to the Russian foreign ministry on Thursday. White House press secretary Jen Psaki welcomed elements of that address on Friday.
I’m not so sure. While Putin pledged support for diplomatic processes, he also spoke of “red lines” that the West was ignoring. Moreover, the latest Russian military deployments suggest an escalation rather than de-escalation. Russia continued to move military equipment to forward staging areas around Voronezh, a five-hour drive from Ukraine’s southeastern border. Unconfirmed video on Friday indicates heavy rocket artillery systems being moved to Voronezh.
Regardless, Russia has retained and recently bolstered a bastion of missile, rocket artillery, mechanized, and armored forces around Ukraine’s borders. On all sides. This mobilization of force joins a significant deployment of covert action units in and around Ukraine. Put simply, Putin could launch a massive offensive against Ukrainian government-held territory with a very short window of warning. It’s also important to note these deployments take place amid the rapidly approaching freezing temperatures of winter and the Christmas holiday. Moving people and forces around is expensive and, if only for show, bad for morale. State media has also ramped up its always hyperbolic rhetoric on Ukraine in recent days.
A winter conflict with Ukraine might serve Putin by distracting Russians from their declining living standards. The stoking of nationalism has always been a powerful elixir for Russian political power. If Putin senses he can act without swift and significant Western riposte (which is eminently possible), he will find added reason to do so.
