Russian President Vladimir Putin is under increasing pressure to address Russia’s deepening economic woes as US President Donald Trump intensifies calls for a negotiated end to the war in Ukraine, Reuters has reported.

In an exclusive report citing five sources close to the Kremlin, the agency revealed Putin’s mounting frustration with the country’s faltering economic progress. While Russia’s economy has demonstrated resilience against unprecedented Western sanctions, recent cracks are becoming apparent.

Labour shortages, inflation at 13% and soaring interest rates – now at 21% – are straining non-military sectors. Defence spending has surged to 6.3% of GDP, further driving up costs and draining resources from other industries. Despite modest GDP growth in 2024, economic expansion is forecast to slow to under 1.5% in 2025, sparking alarm within the Kremlin and among business elites.

During a recent closed-door meeting, Putin reportedly criticised the negative impact of high borrowing costs on private investment, according to Reuters. Some influential Kremlin insiders are advocating for a peace deal to ease economic pressures, though Putin maintains that any agreement must preserve Russia’s territorial gains in Ukraine and ensure Ukraine remains outside NATO.

The mounting economic strain is reshaping political dynamics within Russia. Publicly, Putin insists the military campaign can be sustained indefinitely, but sources suggest he recognises the growing risks of economic stagnation and potential social unrest.

Trump’s threats add to the pressure, as his administration seeks to ramp up Biden-era sanctions to further isolate Moscow. Now back in the White House, Trump has threatened severe tariffs and additional sanctions unless Moscow makes significant moves to resolve the three-year conflict. 

“Settle now and stop this ridiculous war,” Trump declared on social media, describing Russia’s economy as “failing” and the war as a misstep that has hurt the Kremlin domestically and internationally.

However, further US sanctions may have limited effect. Bilateral trade has already dwindled due to earlier measures, with US imports from Russia plummeting from $29.6bn in 2021 to $2.8bn in 2024.

According to Reuters’ sources, Putin reportedly believes that key objectives – securing a land corridor to Crimea and weakening Ukraine’s military – have been achieved. Yet sources indicate that he is increasingly worried about the challenges the war poses for the economy, including the strain high interest rates place on non-military businesses.