Vladimir Putin faces a growing fuel crisis as Ukrainian drone strikes impact Russian inflation and industrial output.
Vladimir Putin is navigating a significant fuel crisis as Ukrainian drone strikes on oil refineries accelerate Russian inflation and slow industrial production. Monthly inflation reached 10.6% in June, a sharp increase from 2% in May, driven largely by rising gasoline prices. These supply shocks are expected to increase annual inflation by 1 to 1.5 percentage points, with some analysts predicting a rise to 6.5% to 7% by year-end depending on the intensity of the Ukrainian campaign. The crisis has also impacted industrial output, with refinery production falling by an estimated 25% in June to a 20-year low. While the military receives priority subsidies, the non-military economy faces a heavy debt burden and high interest rates. In response to pressure from regional leaders and the central bank, Vladimir Putin stated that cutting the key rate is a natural process based on macroeconomic stability. The administration continues to balance the needs of the war machine with the necessity of managing civilian economic stagnation.