Expert on possible negotiations "Peace would suit Putin just fine"

Vladimir Putin's war economy is in a "precarious situation", explains Russia expert Ulrich Schmid. A conversation about the few options Putin offers as a way out.

About the person

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Ulrich Schmid is Professor of Russian Culture and Society at the University of St. Gallen, specializing in Russian media theories and nationalism in Eastern Europe. The Zurich native has taught or lectured at the universities of St. Gallen, Bern, Basel, Bochum and Oslo.

Company bankruptcies, redundancies and rising prices. What is the state of the Russian economy?

The Russian economy is in dire straits at the moment. Putin likes to boast about the figures, which on paper show astonishing economic growth and low unemployment in Russia. But if you take a closer look, you have to put a big question mark behind these figures.

In what way?

The low unemployment rate can also be described as a shortage of skilled workers, and economic growth is essentially driven by the rampant arms industry.

Food prices in particular are now rising: Could this become a problem for Putin?

Yes, Putin has to be careful that the economic situation for consumers does not deteriorate rapidly. On the one hand, there are the rising food prices. The situation is even worse on the real estate market. The record-high prime rate has also made mortgages enormously more expensive. And you can also see that the Kremlin is definitely keeping an eye on this situation.

How do you see that?

There are special mortgages for volunteers who sign up for military service in Ukraine, and you can actually attract people with them. Against the backdrop of rising prices, this is attractive.

What about inflation?

Inflation is a problem that the central bank has been fighting since the open attack on Ukraine. They would like to end up with 4 to 5 percent, but at the moment it looks as if 8.5 percent inflation is more likely for Russia towards the end of the year. There are now forecasts that say this ambitious inflation target will not be reached until 2026. One thing you can say about inflation is that it acts like a general tax on consumption and wealth.

Putin has switched to a war economy: Can he even afford peace now?

In view of the tense economic situation in Russia, peace would suit Putin just fine, if it came on the Kremlin's terms. Putin has spoken out twice about the conditions in the recent past. Once to Orban when he traveled to Moscow at the start of Hungary's EU Council Presidency. And a few days ago in a telephone conversation with Olaf Scholz.

What do we know about this?

Essentially, what Putin said in the run-up to the Bürgenstock conference still applies. He is calling for the de facto capitulation of Ukraine, an end to sanctions and recognition of Russia's international borders. Putin told Orban that they could only talk about nuances. And to Scholz, he said that territorial realities had to be kept in mind.

How is the Kremlin proceeding in Ukraine after the US election?

At the moment, I read the Kremlin's strategy - and there are also rumors from Russia - as trying to drive the Ukrainian army out of the south of Kursk Oblast by January 20. North Korean soldiers are also deployed there. In the meantime, there are rumors that more troops from North Korea are to arrive in Russia. And if we are now talking about the front line within Ukraine: There, of course, it will be very difficult for Putin to budge from his previous position. After all, he annexed the four oblasts of Donetsk, Luhansk, Zaporizhia and Kherson in October 2022 without having full military control over them.

Are EU soldiers in Ukraine an option for Putin?

I think that if this were to happen under a UN mandate and on Russian terms, then Putin could probably agree to it. Of course, this means that such a deployment would have to take place outside the borders that Russia has claimed for Russia since October 2022.

Trump likes to play the strong man: doesn't Putin run the risk of incurring the US president's wrath if he doesn't proceed with the negotiations as he would like?

Yes, of course, that's the case. But on the other hand, the levers that Trump can use against Moscow are relatively short. Even before 2014, economic relations between the USA and Russia were much weaker than between Russia and the European Union. That is why it has always been relatively easy for America to impose economic sanctions against Russia. Many sanctions have also played into the hands of the USA: The fact that many European countries now no longer buy their raw materials from Russia has naturally boosted the American oil and gas industry.

Will Washington's support definitely drop?

We now know in broad outline who will shape US foreign policy: For these politicians as well as for Vice President J. D. Vance, Ukraine is actually a sideshow. They are all gunning for China. But the two are connected. If Ukraine now suffers a defeat at the hands of Russia, it will also be a strategic defeat for the USA, which has provided Ukraine with considerable support in recent years. And that would of course also make Washington look weak in the eyes of Beijing. A Trump administration will also try to avoid this by all means.

Are there actually alternatives to Putin or has he cleared the field behind him?

He hasn't cleared the field, but has made sure that there are loyal people in the leadership positions who at least accept his aggressive course. If we look at Putin's closest entourage, they are not actually enthusiastic warmongers. Take, for example, the only important person who changed when Putin took office as president at the beginning of this year.

The Minister of Defense.

Exactly, Andrei Beloussov is an economist who has no military background. Beloussov stands for the militarization of the Russian economy on the one hand and the economization of the Russian military on the other. In other words, Putin has efficiency considerations in mind with this appointment.

And what else?

The long-standing Prime Minister Mikhail Mishustin has kept an extremely low profile and has hardly ever spoken out about the war. I think that is also characteristic of this standstill agreement between the ruling elite and the president, who decided on this war almost single-handedly. To a certain extent, they are now trying to continue this balancing act. Putin's calculation is that he believes he has more staying power in this war of attrition.

Moscow says the US would become a belligerent if it lifted restrictions on long-range weapons. Is this just rhetoric?

The announcement from Washington now refers primarily to the deployment of North Korean troops and also to the massive Russian attacks of recent weeks - ever since it became clear that Trump would become president. Russia is currently trying to create facts that will appear immovable once Trump takes office on January 20. At the moment, however, it looks as if both sides are trying to play it cool. Biden was not the one who personally communicated this change in clearance. And in Russia, too, this retort came from a subaltern position.

How high do you think the chances are that the war in Ukraine will soon come to an end or at least to a ceasefire?

It is difficult to say now what will change with a Trump presidency. America has had the Logan Act since 1799, which prohibits private individuals from negotiating with foreign powers. And Trump is a private individual until January 20. That means he can't lean far out of the window at the moment.

What can he do?

There are various scenarios at the moment. I think it is rather unlikely that there will be no alternative but to reduce American aid to Ukraine - precisely because an uncontrolled withdrawal would compromise the desired American position of strength vis-à-vis China. On the other hand, it is also clear that Trump will try to somehow pull himself out of this stalemate. But who should step into the breach? Germany and France are very weak at the moment. There is simply no player who could fill the void that an American withdrawal would open up.