Putin's Reserves on the Edge

It is getting difficult to hide

Not sometime in 2025.

Not sometime in 2026.

Gone are the days when projections spanned more than a year.

Now, we have a clear timeline: fall 2025. That’s when Anders Åslund, a Swedish economist and leading expert on the economic transformation of post-Soviet states, predicts Putin will run out of liquid reserves.

According to Åslund, Russia is reliant on a single source of financing: the National Wealth Fund (NWF). He notes that the NWF's liquid reserves “have fallen from $117 billion in 2021 to $31 billion at the end of November. This amount can only cover three-quarters of the projected budget deficit in 2025.

By then, budget cuts will be unavoidable. Meanwhile, the demands of a war economy could also lead to price controls and rationing—reminiscent of old Soviet-era policies. As the risk of financial collapse grows, Russia’s strained economy will impose serious limitations on Putin’s ability to sustain his war”.

Moscow Times, the Financial Times, The Economist, and nearly every independent media outlet have drawn the same conclusion: Putin does not have the money to fund the war through 2025. I arrived at this conclusion back in November.

Since that time, at every opportunity, I never fail to emphasize that between the two countries, only one has the option to win—and it’s not Russia.

Instead of focusing on what has gone wrong, let’s take a different approach and examine the limited options Putin has to stop this downward spiral.

Can Putin Let Elvira Nabiullina Do Her Job?

It’s inconceivable that the Russian Central Bank chief independently decided to leave interest rates unchanged at the December 20 meeting. Inflation is rampant, and it poses the greatest threat to the Russian economy—far more than corporate bankruptcies. Bankruptcies hurt in isolated pockets, affecting a town here or a region there. The collective impact will take time to spread. But inflation? It touches every Russian, every business, every economic activity.

Nabiullina likely wanted to raise interest rates, but the oligarchs opposed her. Putin, fearing an oligarch mutiny, intervened on their behalf and pressured the Central Bank to hold rates steady. As a result, inflation is now running unchecked. With the liquid portion of the National Wealth Fund sitting at just $31 billion, Nabiullina doesn’t even have the cushion to intervene in the currency market to stabilize the ruble.

The Central Bank is effectively powerless to control inflation unless Putin steps aside and gives Nabiullina a free hand. But will he? Likely not. He’s too afraid of alienating the oligarchs. The easiest option is therefore off the table.

Can Putin Stop the War?

Ask Putin himself, and he might wish he could.

The problem is, losing the war could spell the end of his regime. Sure, they could try to spin it as they did with Kherson, convincing Russians that their 2022 withdrawal was strategic rather than a defeat. But what if the spin doesn’t work? What if, as a failed leader, someone in the Kremlin sees him as weak and moves to oust him?

Being a dictator is hard enough; being one who lost a war and a million troops is even harder. Stopping the war is not a realistic option for Putin.

Can Putin Turn to Kim Jong Un?

It’s surprising Putin hasn’t fully explored this avenue yet. By now, he could have brought in at least 100,000 North Korean troops to fill his manpower gaps and let them bear the brunt of battlefield losses. So far, only 12,000 North Korean troops have been deployed.

If this hasn’t materialized, it likely means the deal isn’t attractive enough for Kim Jong Un. Perhaps North Korea fears the international repercussions, or maybe they’re demanding payment Putin can’t provide. Regardless, the lack of significant North Korean reinforcements has forced Putin to withdraw workers from the Russian labor pool, worsening inflation.

If Kim Jong Un were to send at least 20,000 troops per month, it might ease Russia’s manpower stress and buy Putin some time. But if Kim wants money, Putin doesn’t have it.

Can Putin Win?

No. Not a chance.

He could fire every missile in his arsenal and still lose like it’s nobody else’s business. Ukraine’s combat power is growing, while Russia’s is steadily declining. Putin’s ability to sustain the war is eroding, and his forces are increasingly outmatched. There is zero chance he can win this war or bring it to a favorable conclusion.

In summary, Putin’s options are dwindling, and none offer a clear path forward. His predicament is a product of his own making, and every potential solution carries risks he is unwilling—or unable—to take.

What Can Putin Actually Do?

Nothing. I believe he’s out of options. Putin is desperately clinging to the hope that Trump might somehow hand him a lifeline—perhaps by brokering a deal to freeze the frontlines and let him escape this predicament. But this isn’t 2022, and it’s not even 2024.

Ukraine is in an entirely different position today. Their economy is on solid footing. The combined G7 loans and EU aid, totaling nearly $100 billion, are now flowing into Ukraine.

To put this into perspective, Russia began the war with just $117 billion in liquid reserves in its National Wealth Fund. Ukraine now has access to $100 billion, and their financial needs are far smaller than Russia’s. With this economic stability, why would Ukraine agree to a ceasefire or frozen frontlines if Trump were to ask?

They’re far more likely to say, “Let’s keep talking and keep fighting.”

And that would be catastrophic for Putin. It would worsen his predicament, accelerating Russia’s decline.

If Ukraine refuses to accept a ceasefire and continues fighting at its current pace for another six months, I don’t see how Russia can hold itself together. The strain will likely prove too much to bear.