Russia is welcoming an existential crisis within NATO, triggered by a dispute between the alliance and former President Donald Trump over his intent to acquire Greenland.
Trump declared on Saturday that he had ordered troops into the semi-autonomous Danish territory, pending a finalized agreement for the “Complete and Total purchase of Greenland.”
This move was applauded by Kirill Dmitriev, Russian President Vladimir Putin’s investment and economic cooperation envoy. The European Union, meanwhile, is .
“Collapse of the transatlantic union,” . “Finally—something actually worth discussing in Davos.”
NATO has served as a principal backer of Ukraine in its defense against Russia’s invasion, now approaching its fourth year. Although Trump previously ignited trade disputes with Europe, NATO members have been instrumental in preserving U.S. backing for Kyiv, despite his frequent reluctance to provide it.
The ongoing tariff conflict, however, risks causing permanent damage to the alliance, marking the most severe rift in its almost eight-decade existence.
A scenario where Trump’s trade war undermines NATO’s aid to Ukraine could ease the strain on Russia’s economy. This comes as mounting indicators suggest Putin’s war effort is suppressing economic growth. GDP projections for 2025 indicate an increase of 1% or lower, with 2026 forecast to follow a similarly sluggish pace. This follows growth spurts exceeding 4% in both 2023 and 2024.
“The Russian people are increasingly feeling the effects of the Kremlin’s continued prioritization of the Russian defense industrial base,” the .
While arms manufacturers and related suppliers are thriving due to Kremlin-directed investments and loans, the broader economy is faltering.
For instance, analysts at ISW noted that wage increases are driving inflation, as the war creates labor shortages and defense contractors vie with civilian companies for workers. Skyrocketing inflation compelled Russia’s central bank to raise interest rates to elevated levels, which have only begun to decline recently.
Furthermore, in the latter half of the previous year, multiple major Russian non-military manufacturers adopted four-day workweeks and announced job cuts in response to declining demand.
With borrowing costs rising, Russian citizens are finding it harder to purchase homes. In addition to high prices, the value-added tax has been increased to help fund the war in Ukraine, while Western sanctions and depressed crude oil prices have reduced Moscow’s earnings from energy exports.
“ISW continues to assess that increased Western economic pressure on Russia, along with helping Ukraine maintain and even increase pressure on the battlefield, remains critical to changing Putin’s calculus and forcing Putin to face more serious tradeoffs between continuing to pursue his maximalist war aims and sacrificing the quality of life of the Russian people,” the analysis stated.
This evaluation comes amid signs of growing pressure throughout the private sector, .
Official Russian figures indicate that unpaid wages in October nearly tripled compared to the previous year, exceeding $27 million, as furloughs and reduced work schedules become more widespread. Consequently, a growing number of consumers are encountering difficulties repaying their loans.
“A banking crisis is possible,” a recently stated anonymously. “A nonpayments crisis is possible. I don’t want to think about a continuation of the war or an escalation.”
Considering these challenges, this alert was not unprecedented. In June, Russian banks signaled alarms over a as high interest rates impaired borrowers’ capacity to manage their debt.
That same month, the leader of the Russian Union of Industrialists and Entrepreneurs cautioned that numerous firms were in “a pre-default situation.”
Then in September, CEO German Gref, a prominent Russian banking executive, said the after his warnings in July and August that economic growth was nearing a standstill.
According to the Post, the state-supported Russian think tank, the Center for Macroeconomic Analysis and Short-Term Forecasting, reported last month that the nation could confront a banking crisis by October of next year if loan problems intensify and depositors withdraw their funds.
“The situation in the Russian economy has deteriorated markedly,” Dmitry Belousov, the think tank’s head, wrote in a note reviewed by the . “The economy has entered the brink of stagflation for the first time since early 2023.”