Putin Knows More Than We Realize

Andrei Klepach, the chief economist at Russia's state development bank (VEB), has delivered a grim prognosis on the country's economic future. In a report titled "The Russian Economy and Geopolitical Challenges," Klepach warned of an impending social crisis if Russia continues down the path of its current macroeconomic policy. He cautioned that the economy would likely grind to a halt, leading to widespread societal discontent.

Klepach's predictions emerged during a May meeting of top Russian economists and scientists, where he openly admitted that Russia is losing the technological and economic battle to Ukraine. Despite the unflattering revelations, he was allowed to continue his work at VEB for three months. However, his findings were eventually leaked to Russian media, leading to his sudden removal from his position.

The economist, who held esteemed positions in Russia's Ministry of Economic Development and among the boards of major state companies, including Rosatom, United Shipbuilding Corporation, and United Aircraft Corporation, was known for his unflinching honesty. He served in the ministry for a decade, earning the Order of Honor and holding influential positions on various boards. Despite his track record of delivering inconvenient truths, Klepach remained a revered figure within the Russian government.

Klepach's report contained four key projections, the last of which sent shockwaves through the Kremlin. He argued that Russia's economic model is ill-equipped to withstand a prolonged conflict with the West, as it continues to pour resources into the military while simultaneously tightening budgets and raising interest rates. The economist estimated that Russian economic growth would only reach 0.3 percent in 2026, far below the Central Bank's forecast of 0 to 1 percent growth and a 2.5 percent drop in investment.

Moreover, Klepach argued that Russia's dependence on China is growing due to the war in Ukraine, questioning whether the nation could remain a sovereign power under such conditions. He also warned that the war in Ukraine is hindering Russia's broader technological and economic progress, even compared to Ukraine itself. His fourth and most alarming prediction was that a social crisis could emerge suddenly, much like the February 1917 Revolution that toppled the Romanov dynasty.

With parliamentary elections just a month away, Russian President Vladimir Putin is desperate to maintain the illusion of national unity. Putin's government has been struggling to explain the mounting costs of the war, such as fuel shortages and skyrocketing prices, as natural consequences of the conflict with Ukraine. Klepach's report poses a significant threat to Putin's legitimacy, as it exposes the true state of Russia's economic and technological landscape, a truth that the Kremlin had hoped to keep hidden until after the elections.