Vladimir Putin’s ’guns and butter’ war economy in Russia struggles as butter prices jump 25.7% since December 2023

President Vladimir Putin says that Russia’s war economy is well balanced to supply both guns and butter, but the price of butter itself is now soaring as surging inflation distorts parts of the economy.

The price of a block of butter has risen by 25.7% since December, according to the state statistics service.

Reuters reporters found shopping bills showed the price of a pack of “Brest-Litovsk” high-grade butter in Moscow has risen by 34% since the start of the year to 239.96 roubles ($2.47).

Also Read | Butter Jumps to Record on Tight Supplies Ahead of Holiday Baking Season

“The Armageddon with butter is escalating; we wouldn’t be surprised if butter repeats last year’s situation with eggs,” economists on Russia’s popular MMI Telegram channel warned, referring to an earlier spike in egg prices which alarmed consumers.

The steep price rise has prompted a spate of butter thefts at some supermarkets, according to Russian media, and some retailers have started putting individual blocks of butter inside plastic containers to deter shoplifting.

The authorities, who have gone to great lengths to try to ensure the war in Ukraine does not affect people’s daily lives, are watching closely.

Also Read | Delhi heatwave: Woman gives buttermilk packets to labourers toiling under heat

Dmitry Patrushev, a deputy prime minister in charge of agriculture, said on Oct. 23 that the government would monitor butter prices. He met major dairy producers and retailers and said imports were being stepped up.

Milk prices have soared too as have wages, interest rates, fuel and transport – all price inputs for butter. Butter imports from Belarus are not sufficient so Russia is expecting a big shipment from Turkey, and even from Iran and India, Russian media reported.

Defence spending rises

Putin has made much of the resilience of Russia’s wartime economy, and mentioned the relationship between ‘cannons’ and ‘butter’ after he appointed an economist, Andrei Belousov, to head the defence ministry earlier this year.

The $2 trillion economy has so far outperformed expectations: shortly after Putin sent troops into Ukraine in 2022, Western economists predicted its imminent collapse.

Also Read | US sanctions 19 firms, 2 Indians for ‘enabling’ Russia in war against Ukraine

Instead, despite the most onerous Western sanctions ever imposed on a major country, it grew faster than the United States and almost all major European countries.

Prices, though, are now rising – as are interest rates, which the central bank hiked 200 basis points to 21% on Oct. 25, their highest since Putin’s first term in 2003. The central bank is forecasting inflation of 8.0-8.5% this year.

As it fights a major land war against Western-backed Ukraine, Russia is spending more on defence than at any time since the Cold War – and that is pushing up prices even if the International Monetary Fund forecasts growth of 3.6% this year.

Also Read | Russia fines Google whopping ‘$2.5 decillion’ over YouTube bans: Report

Jim O’Neill, the former Goldman Sachs chief economist who coined the ‘BRICs’ term in 2001, has questioned how sustainable the situation is if things continue.

“It’s all because of enormous Russian defence spending,” O’Neill told Reuters of the overall macro picture. “So I think the medium term outlook to long term outlook is quite bleak. ($1 = 97.2455 roubles).

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Aniket Pujari

Aniket Pujari is a visionary entrepreneur and dedicated content creator who has made significant contributions to the digital media landscape. As the founder of Minute To Know News, he has established himself as a leading figure in the world of finance, cryptocurrencies, and Internet-related topics.

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