

by John Helmer, Moscow
@bears_with
No government can survive when it fails to control the cost in blood on the battlefield and the cost of potatoes, butter and bread on the home front. The combination at the same time is politically lethal.
US President Lyndon Johnson learned this between 1965 and 1968, when the rate of domestic inflation was quadrupling and the Killed in Action (KIA) numbers in the Vietnam War jumped ninefold. On March 31, 1968, Johnson announced he was withdrawing from the presidential election later that year.*
President Vladimir Putin has managed the KIA half of the lethal equation by fighting a limited expeditionary campaign in the Ukraine, restricting the General Staff’s resources, plans, targets and operations; attacking with standoff, mostly airborne weapons; shifting the casualty burden of ground fighting to socially marginal groups; and keeping the majority of voters out of the line of fire. His success is in high and stable voter support.
For the time being, the president has escaped public blame for the inflationary surge in food prices over 2024. According to one report, beets were up by 71%; potatoes by 65.4%; eggs by 48.5%; garlic by 41%; salt by 27%; vegetable oil by 24%; butter by 22%. According to the AB Centre calculation, the price of potatoes jumped 65.2%; olive oil, 35.5%; butter, 35.2%; garlic, 24.7%; beets, 22.7%.
The state statistics agency Rosstat claims that the overall, official inflation rate for the country was 8.6% for 2024, while retail food price inflation, according to Rosstat was 9.5%. No one believes this, according to consumer polling and expert analyses. Consumer anticipation and expert forecasts are for the surge in food prices to continue this year at rates, depending on the food item, of between 50% and 100%.
Sergei Glazyev, a well-known public economist, presidential candidate in 2004, and a senior official of the Eurasian Economic Commission, is blunt on his attack. “Rising prices are hitting everyone’s pockets and making everyone poorer. Both citizens and businesses. Only banks are swollen with money.
“The Bank of Russia’s policy is driving the economy into a stagflationary trap, in which falling production, devaluation of the ruble and rising inflation are mutually reinforcing: an increase in the key rate [21%] compresses production lending, which leads to lower volumes and higher production costs, the technical level and production efficiency decline, the competitiveness of the economy decreases, which is offset by the devaluation of the ruble. That then causes a new surge of inflation, which the Bank of Russia is trying to pay off with another increase in the key rate. After ten years of ineffectual targeting of inflation, it is clear that the continuation of this insane policy has no prospects.” https://t.me/glazieview/6705
Mikhail Delyagin, deputy chairman of the State Duma Committee on Economic Policy, is just as scathing. He says the official rate of inflation for 2024 was not 8.5%, as the government insists, but closer to 19%; he warns it may reach 29% this year. The Central Bank interest rate of 21% is to blame: “this, in my opinion, is more destructive than the use of tactical nuclear weapons. But there is some good news. If tactical nuclear weapons are suddenly used against us, it will certainly be a severe shock and many people will die, but for the economy as a whole it will not be a greater shock than the policy of Elvira Sakhipzadovna Nabiullina. And [Finance Minister] Anton Germanovich Siluanov, who should also not be forgotten.”
“However, as we know, at the December 20 [2024] meeting, the Central Bank did not raise the key rate to 23 percent once again, as many, including me, expected. This is probably a good signal, because by raising the key rate in conditions of a shortage of money supply, the Bank of Russia thereby accelerates inflation. So far, Elvira Sakhipzadovna has refused to further accelerate inflation, but there is no guarantee that she will not return to this practice at the beginning of next year.”
So serious has been the failure of Central Bank Governor Nabiullina to halt inflation, and so widespread is public suspicion of her competence and intentions, on January 13 the Central Bank issued a public release denying that Nabiullina is planning a freeze on Russian individual savings by blocking withdrawals from bank accounts. “It is quite obvious that in any market economy, of which bank lending is an integral part, such a step is unthinkable,” the Central Bank has announced on Telegram. “Firstly, it will immediately undermine confidence in the banking system and put an end to lending to the economy. Secondly, freezing deposits will not help reduce inflation. People will rush to invest money not in deposits, but in goods and real estate with the corresponding sad consequences for rising prices.”
National polling of public attitudes towards leading officials has never identified Nabiullina positively. In open-ended questioning of those whom voters trust, Nabiullina’s name has not come up. Instead, she appears fifteenth on the countrywide list of officials and politicians who are distrusted – she ranks equal to the Kremlin spokesman, Dmitry Peskov; State Duma Speaker Vyacheslav Volodin, and the Mayor of Moscow, Sergei Sobyanin.
No critic of the domestic inflation and Central Bank policy mentions President Putin. He is understood, however, to be Nabiullina’s protector against her domestic critics. In the past month, however, he has been pressed to qualify this.
At his press conference on December 19, the day before the Central Bank met to decide whether to raise the interest rate to 23%, Putin said: “Only yesterday, while preparing for today’s event, I talked to the Central Bank Governor, and Elvira Nabiullina told me that the inflation rate has already reached about 9.2–9.3 percent year-to-date. That said, salaries have increased by 9 percent, and I am talking about an increase in real terms, minus inflation. In addition, disposable incomes have also increased. So, the overall situation is stable and, let me reiterate, solid.”
The Kremlin record claims there has been no official meeting between Putin and Nabiullina since September 2019.
At his December press conference, Putin acknowledged “there are certain challenges with inflation and with the economy heating up. Therefore, the Government and the Central Bank have been seeking to ensure a soft landing.” Asked by a reporter what the interest rate decision would be, Putin added: “she does not tell me what the rate will be. Perhaps she does not know this yet, because they discuss it at the board meeting, their Komsomol cell, and make the final decision in the course of the discussion. I hope that it will be balanced and will meet today’s requirements.”
“Balance” is Putin’s term for satisfying each of his oligarch, military, and voter constituencies at the same time as they contradict and oppose each other.
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