Despite Kremlin beliefs that Russia holds the upper hand in the Ukraine war due to its larger resources and time advantage, its economy is now facing serious strains.

Axar.az, citing Bloomberg, reports that initially resilient in the face of Western sanctions, Russia’s economy has recently stagnated, with non-defense sectors struggling since mid-2023.

Credit and inflation issues have worsened, and a potential financial crisis looms due to state-directed loans to defense contractors. Russia's corporate debt has surged, and although banks have been masking the issue, the risk of a credit collapse is rising. While some analysts, like Craig Kennedy, argue that Russia's heavy reliance on state-backed defense funding could lead to a severe financial crisis, others, like Janis Kluge, believe the long-term debt can be managed.

In light of these economic challenges, Putin's position is weaker than he portrays. Bloomberg analyst suggests that the US and Europe must avoid actions that would inadvertently strengthen Putin, such as easing economic pressure or reducing aid to Ukraine, to ensure a fair peace settlement.

Negotiations have become more likely as both sides show openness to dialogue.