The $40 Question That Could Finish Russia’s War Economy
Putin’s Biggest Mistake Yet—and Why It’s About to Get Worse
Between 2013 and 2021, Russia sat comfortably among the world’s top three oil and gas exporters. It had the one asset most economies would kill for—energy dominance. And yet, during that entire eight-year stretch, Russia’s GDP per capita didn’t grow—it shrank. From a peak of nearly $16,000 in 2013, it slid backwards to around $12,000 by 2021.
Year after year, decline after decline, while the Kremlin kept talking about “strategic stability.”
Now line that up against the United States. The U.S. went into this period still bruised from the 2008 financial crisis, started off with a GDP per capita already north of $53,000, imported far more oil than it exported—and still managed to add 30% growth during the same period.
That Putin has no clue about economics isn’t a controversial take.
It’s math.
And the reason is simple: Putin still thinks like a Soviet power manager. In his world, economics isn’t about innovation or productivity—it’s about controlling hard assets, locking down buyers, and using commodities as leverage. It’s zero-sum thinking in a world that moved on three decades ago. While the rest of the world invested in tech, services, and supply diversification, Putin bet the house on oil, gas, and coercion. And he’s still losing.
Then came the final act of self-destruction. In 2022, convinced he could choke Europe into submission, Putin turned off the gas tap. He overestimated Europe’s dependence and underestimated its ability to adapt. Within a year, Europe cut him off, diversified imports, and Germany—once 55% hooked on Russian gas—went to near zero without collapsing.
He destroyed Russia’s most profitable energy market—permanently. Those pipelines to Europe? Worthless. And the shiny new deals with China? They don’t even come close to covering the loss.
Worst of all, he killed economic trust. Even if sanctions disappeared tomorrow, no Western country—apart from Hungary and Slovakia, run by his loyal proxies—would come near Russian energy with a ten-foot pole. This wasn’t some masterstroke of geopolitical chess. It was a historically bad economic bet made by a man who understands raw power but is hopelessly out of his depth in how modern economies function.
If not for the highly competent Russian central bank, the economy would have collapsed months ago. But even that last line of defense is now under extreme pressure—and Putin’s economic illiteracy was once again on full display during the first day of the Ukraine-Russia peace talks in Istanbul.
I really thought Putin would have told his team to slow things down at the Istanbul meeting. Play for time. Work the cracks between the U.S. and Ukraine. Say just enough to put distance between Europe and Washington. Maybe even bait Trump’s camp into a narrative split.
Instead, the Russian delegation did the exact opposite. They walked in, unleashed their maximalist demands without a filter, and broadcast them to the entire world. No subtlety. No strategic pacing. Just the full list of non-starters, delivered live.
They formalized previously informal territorial claims, openly demanding Ukraine cede the entirety of Luhansk, Donetsk, Zaporizhia, and Kherson—including areas Russian forces don’t even control.
Then they escalated further, threatening to seize Kharkiv and Sumy oblasts and introducing new demands never formally raised before.
Vladimir Medinsky stood before the world and declared Russia is ready to fight for “a year, two, three—however long it takes,” invoking the Great Northern War and suggesting Russia is prepared to fight “forever.”
Instead of quietly trying to peel Europe away from U.S. national security hardliners, they broadcast their maximalist demands live, daring the West to tighten the economic screws even further. To make matters worse, Kremlin rhetoric made it clear this wasn’t the end of their ambitions but the start of a broader campaign to formalize even more land grabs under the banner of “buffer zones.”
In a moment that demanded tactical restraint and economic self-preservation, Putin’s team chose the loudest possible confrontation—guaranteeing more sanctions, more isolation, and more long-term damage to the very economy they’re pretending to defend.
And not only that—in his genius, Putin is now furiously ramping up troop presence in occupied territories. Maybe he’s telling his generals one last push, as he always does.
But reality is already catching up.
The Institute for the Study of War (ISW) assessed that Russia is facing a cascade of compounding material, industrial, manpower, and economic problems that directly threaten its ability to sustain this war. Instead of addressing any of them, Putin is banking everything on breaking Western resolve. His decision to intensify offensive operations is only making those problems worse, underlining once again that his priority isn’t solving Russia’s domestic collapse—it’s gambling everything on battlefield leverage and diplomatic theater.
And that gamble is now backfiring across every front.
The European Union is already preparing a fresh wave of sanctions aimed directly at the core of Russia’s remaining economic lifelines. European Commission President Ursula von der Leyen confirmed that a new package is in the works targeting not just energy and financial sectors but also Russia’s growing network of sanctions-evading intermediaries.
The EU is actively weighing measures against the Nord Stream pipelines—a move that could permanently shut down any attempt to revive them, effectively killing off Gazprom’s last hope of returning to its former power. Plans are also underway to lower the oil price cap on Russian crude, tightening the financial chokehold further and cutting deeper into what little remains of Russia’s foreign revenue streams.
For years, experts have advised Europe and the United States to cut the Russian oil price cap to $40 per barrel. But the West hesitated—why exactly, no one seems to know. Now, with WTI crude hovering around $62 for weeks, the opportunity to drop the cap is sitting right there. It wouldn’t even be a heavy lift.
On December 2, 2022, when the EU and G7 first agreed to cap Russian seaborne oil at $60 per barrel, WTI crude closed at around $79.98. That created a $20 differential, and if they drop the cap to $40 now, they can preserve the same pressure margin without disrupting global markets.
The West can’t do much about China’s purchases—but getting India on board to stop paying more than $40 is perfectly achievable. And if Europe plays this right, even without full U.S. support, they’re staring at a clear and painful reduction in Russia’s daily oil revenues.
I think the odds are quite high that Europe will try to move the price cap down to $40. But they can’t just make the announcement and assume the market will take care of the rest. They need to enforce it—aggressively.
That means ramping up naval patrols across European waters and systematically dismantling Russia’s shadow fleet of tankers—one by one. That enforcement is non-negotiable.
And if they pair that with serious diplomatic pressure on India, ensuring that the millions of barrels India buys deliver no more than $40 per barrel to the Russian war machine, then we have the clearest—and most realistic—path yet to bring that war machine to a grinding halt.
In a moment that demanded tactical restraint and economic self-preservation, Putin’s team in Istanbul chose the loudest possible confrontation—guaranteeing more sanctions, more isolation, and more long-term damage to the very economy they’re pretending to defend.
And like every strongman before him, Putin is about to learn the same brutal lesson—numbers don’t take orders.
A masterly analysis … thank you!
Agreed. This kind of analysis is simply absent from most, if not all, media.