President Donald Trump is at loggerheads with Nato over plans to take over Greenland, sparking an existential crisis for the alliance that Russia is celebrating.
On Saturday, Trump announced Tariffs targeting NATO countries Deploying troops to the semi-autonomous Danish territory until “an agreement to fully purchase Greenland is reached.”
This drew cheers from Kirill Dmitriev, Russia’s special envoy for investment and economic cooperation, Vladimir Putin. At the same time, the EU is Weighing options for revenge.
“The collapse of the transatlantic alliance” He posted on X. “Finally – something truly worth discussing in Davos.”
NATO has been a key supporter of Ukraine’s defense against Russia’s invasion, which began nearly four years ago. While Trump has previously stoked trade tensions with Europe, the NATO allies have helped maintain U.S. support for Kyiv even though he has often withheld it.
However, the current tariff war threatens to cause irreparable damage to the alliance, which is the most serious split in its nearly 80-year history.
If Trump’s trade war jeopardizes NATO aid to Ukraine, it could ease pressure on the Russian economy amid growing signs that Putin’s war machine is squelching economic growth. GDP is expected to grow by 1% or less in 2025, with similar growth expected in 2026. This follows surges of more than 4% in 2023 and 2024.
“The Russian people are increasingly feeling the impact of the Kremlin’s continued priority of developing Russia’s defense industrial base,” The Institute for War Research said in a recent analysis.
Weapons manufacturers and other suppliers are booming as the Kremlin provides investments and loans to these industries. But other parts of the economy are suffering.
For example, the ISW noted that labor shortages caused by wars, while defense and civilian companies compete for workers, and rising wages are fueling inflation. Soaring inflation has forced Russia’s central bank to raise interest rates to levels that have only recently begun to decline.
Late last year, several major Russian civilian manufacturers switched to a four-day work week and announced layoffs due to falling demand.
As borrowing costs rise, it is difficult for Russian citizens to buy houses. In addition to high prices, value-added tax rates have been increased to help pay for Ukraine’s war, while Western sanctions and low crude prices have reduced Moscow’s energy export revenues.
The analysis said, “ISW continues to assess that increased Western economic pressure on Russia, as well as helping Ukraine maintain or even increase battlefield pressure, remain critical to changing Putin’s calculations and forcing Putin to face more serious trade-offs between continuing to pursue his most extreme war goals and sacrificing the quality of life of the Russian people.”
The assessment follows evidence of growing pressure across the private sector, including the financial system.
Russian data showed unpaid wages nearly tripled in October from a year ago to more than $27 million, with furloughs and shorter work weeks becoming more common. As a result, more consumers are having trouble repaying their loans.
“A banking crisis is possible” Russian officials told washington post recently requested anonymity. “A non-payment crisis is a possibility. I don’t want to think about the war continuing or escalating.”
This warning is not the first time the downside has been taken into consideration. In June, the Bank of Russia potential debt crisis Because high interest rates affect a borrower’s ability to repay the loan.
That same month, the head of the Russian Union of Industrialists and Entrepreneurs warned that many companies were in a “pre-default situation.”
And in September, savings bank One of the top leaders of the Russian banking industry and CEO German Gref said, The economy is in a state of “technological stagnation” That followed warnings in July and August that growth was close to zero.
Russia’s state think tank, the Center for Macroeconomic Analysis and Short-term Forecasting, said last month that the country could face a banking crisis next October if loan problems worsen and savers withdraw their funds. postal.
“The economic situation in Russia has deteriorated significantly,” Dmitry Belousov, the head of the think tank, wrote in a report seen by Russian Economic Observer. financial times. “The economy is on the verge of stagflation for the first time since early 2023.”