A major conflict in Kremlin; economists and generals are pulling Putin in different directions

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Government officials have warned Russian dictator Vladimir Putin that Russia can no longer afford the costs of the war with Ukraine. According to Bloomberg, this is a serious sign of internal discord within the Kremlin.

Russian economists from the Ministry of Finance and the Central Bank say that continuing the war will lead to a dangerous increase in the state budget deficit. The publication's sources say that reviving the economy from its precarious state will be extremely difficult.

"However, disagreements have emerged among politicians: Defense Ministry officials and some Kremlin officials, determined to pursue Putin's military goals, insist on maintaining military spending. They believe cutting it would seriously damage the economy, as many businesses depend on military-related contracts," the article states. Sources also reported that Putin has ordered cuts to all spending except military spending. The Ministry of Defense, however, is not only resisting the cuts but is also demanding additional funding. Military spending, on the contrary, is slated to increase to cover a $36 billion budget deficit.

Journalists write that at the time the budget was drafted, "there were hopes that the war would end after the Alaska summit." But that didn't happen, and now "Putin faces a difficult choice, responding to domestic warnings about the consequences of war." His disappointment even manifested itself publicly, when he demanded an explanation for why a slowdown in growth rates had not been avoided.

Meanwhile, rising oil prices due to the war in Iran aren't helping the situation. Russian economists believe that for this to happen, oil prices must remain above $100 per barrel for at least a year. Russia's budget deficit has already grown to 2.5% of GDP, which is approximately 50% higher than the annual plan.

To save the economy, which is also weakened by sanctions, the Russian government raised taxes this year. But to further combat the budget deficit, they need to cut spending or begin searching for new sources of revenue. For example, they are considering introducing an excess profit tax for some raw materials producers and banks. Job cuts are also reported in the Moscow government.

As reported, the Russian economy has slowed sharply in recent years. Meanwhile, Ukrainian drone attacks on oil refineries, other Russian enterprises, and ports have further crippled a significant portion of the economy, creating the risk of fuel shortages during the peak season. According to Reuters, Russian business representatives are also trying to convince Putin that it's time to end the war. As a reminder, according to columnist Gideon Rachman, the failure of Russia's campaign in Ukraine could pose a threat to Putin's hold on power. He noted that Russian politicians and experts have begun to offer critical assessments of the wars. They acknowledge that Russia is unable to achieve Putin's goals in Ukraine. Historically, military failures have often led to political upheaval in Russia.

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