Decoding Geopolitics Podcast with Dominik Presl #114 Janis Kluge: Russia Can't Afford This War Anymore. And The Real Crisis Is Just Beginning
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Mar 21, 2026 Janis Kluge, a Senior Associate at the German Institute for International and Security Affairs and expert on the Russian economy, discusses Russia’s post-invasion boom turning into stagnation. He highlights rising bad debt and banking risks. He frames problems across growth, cycles and distribution. He argues budget allocation to war versus civilians is the core political-economic threat.
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Russia Is In A Cooling Economic Cycle
- Russia is cooling off after a post-invasion fiscal/monetary boom rather than collapsing now.
- Inflation has fallen close to the 4% target and growth slowed to ~1% in 2025 with rising underemployment and sectoral losses.
Three Layered Problems Shape Russia's Economic Outlook
- Russia faces three layered problems: long-term growth limits, cyclical risks, and political distribution via the budget.
- Long-term growth is constrained by sanctions and demography, while non-performing loans and bank balance risks are rising.
Budget Distribution Is The Biggest Political Risk
- The budget distribution choice — how much output is diverted to the war versus civilians — is the central political risk for regime stability.
- Rising military costs squeeze social spending and interest payments, leaving few realistic cuts.