Russian economy headed for 'doom' as massive debts grow by 71%

Russia's economy is headed for bankruptcy after racking up debts of $446 billion, experts say. But they warn sanctions imposed on Russia over its invasion of Ukraine may have actually strengthened dictator Vladimir Putin's grip on power in the short term. Russian businesses have become more dependent on the Government while Mr Putin's regime strengthened ties with countries such as India, China and Saudi Arabia.

The warning comes in a report by think tank the Henry Jackson Society, ahead of US President Donald Trump's deadline for Russia to reach a peace agreement with Ukraine. Washington has threatened "severe tariffs" and other economic penalties if the killing does not stop by Friday.

The report's authors, Dr Helena Ivanov and Dr Theo Zenou, said: "Rogue regimes are adapting, markets are profiting, and civilians are paying the price. We need a tougher, smarter sanctions regime - one that actually weakens autocrats rather than strengthening their grip."

Russia was subjected to "an unprecedented wave of sanctions" following its full-scale invasion of Ukraine in 2022, but the economy has displayed "a surprising degree of resilience" allowing the Government to sustain and finance its ongoing war effort.

The report's authors argue that the Russia's economy is eventually headed for collapse because the government has been forced to take on massive debts, but sanctions have failed to end the invasion.

And they pointed out that sanctions imposed on Russia in 2014 meant firms were "bailed out" by the Kremlin.

Russian corporate debt has shot up 71% by 2022 and reached $446 billion, researchers say. Highliting this research, the report said Russia's economic growth "is driven by massive wartime spending acting as artificial stimulus. The result has been a huge increase in Russian debt, much of it hidden off the books by the Kremlin. In the medium term, this spells doom for the solvency of the Russian economy."

The report called for a "smarter" sanctions regime and diplomatic and economic pressure to deter other countries from doing business with sanctioned regimes.

Mr Putin has held talks in Moscow with Mr Trump's special envoy Steve Witkoff according to the Kremlin, but there was no sign of the three-year war ending and Russian forces hit a recreational centre in Ukraine's southern Zaporizhzhia region, killing two people and injuring 12, including two children.

Russia also struck the Ukrainian power grid and heating gas facilities, Ukrainian President Volodymyr Zelensky Zelensky said, as Ukraine makes preparations for winter.

Mr Trump has expressed increasing frustration with Mr Putin over Russia's escalating strikes on civilian areas of Ukraine, intended to erode morale and public appetite for the war.

On Tuesday, Mr Trump said "we'll see what happens" regarding his threat to slap tariffs on nations that buy Russian oil, which could increase import taxes dramatically on China and India.

Western analysts and Ukrainian officials say Mr Putin is stalling for time and avoiding serious negotiations while Russian forces push to capture more Ukraine land.

A Russian offensive that started in the spring and is expected to continue through the autumn is advancing faster than last year's push but is making only slow and costly gains and has been unable to take any major cities.

The Washington-based Centre for European Policy Analysis warned in an assessment this week that there are "clear signs that the Kremlin is preparing for a broader confrontation with Nato", including a military build-up along Russia's western flank with alliance countries in recent years.

Mr Putin has strengthened Russia's military ties with China, North Korea and Iran.