Why Russia has come to the table

Authors: Peter Caddick-Adams

Publisher:

engelsbergideas.com

Published: 11/28/2025

Language:English

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Elon

Good morning kdeepakbalaji, I'm Elon, and this is Goose Pod, created just for you. Today is Monday, December 8th. We’re diving into a massive question: after all this time, why is Russia suddenly talking peace? It’s not about a change of heart.

Taylor

Exactly. I'm Taylor, and it’s all about the narrative. The story Moscow has been selling is crumbling because the economic reality is just too stark to ignore. We're going to unpack the numbers and the strategy behind this sudden shift.

Elon

Let's start with the core numbers, because they are staggering. The budget deficit is approaching six trillion rubles. To cover this, they're essentially printing money in a disguised way, forcing the Central Bank to finance government bonds. It's a classic circular financing scheme, and it's unsustainable.

Taylor

It's like they're having a party on a credit card and paying off the bill with another credit card. And their supposed best friend, China, isn't helping. Beijing flat-out refused to give them access to its financial markets. They even dropped plans to issue yuan-denominated bonds.

Elon

China does not behave like an ally. They act like a predator. They've saved an estimated twenty billion dollars on Russian oil since 2022 because they know Moscow has no other buyers. After the latest sanctions, Russian Urals crude is selling for twenty dollars below Brent. That’s a fire sale.

Taylor

And that's the real story here. The sanctions are creating these incredible discounts. India is now getting Urals crude at seven dollars below Brent, the lowest in two years. This isn't just about lost revenue; it's about a complete loss of leverage on the world stage. They've lost control of their own story.

Elon

It's a cascade failure. The pressure isn't just on oil. Russian Railways, the country's largest employer, is sitting on four trillion rubles of debt. They're looking at raising freight tariffs, begging for subsidies, or raiding the National Wealth Fund. Every pillar of their economy is shaking.

Taylor

And while they're getting squeezed, China is nearly doubling the prices on goods sold *to* Russia, especially items with military applications. It’s a fascinating, if brutal, narrative of an alliance that's completely one-sided. Moscow is being bled dry from all directions, which brings us to the table.

Elon

This didn't happen overnight. The foundation for this collapse was laid back in February 2022 with the first waves of sanctions. The West went for the jugular, targeting Putin, the Central Bank, and cutting banks from the SWIFT system. They effectively locked Russia out of the global financial system.

Taylor

It was a multi-act play. First, the financial shock and awe. Then came the sectoral attacks. Remember the EU embargo on coal? Russia exported over twenty-two percent of its coal to the EU. That market vanished. They had to reroute everything to Asia, which sounds simple, but it's not.

Elon

Not simple at all. The logistics are a nightmare. You have higher freight charges by sea, and the Trans-Siberian Railway becomes a massive bottleneck. Buyers in Asia know this, so they leverage the disruption to demand lower prices. The price plunged from four hundred dollars a tonne to just seventy.

Taylor

At seventy dollars a tonne, you're not even covering your production and shipping costs. It’s a death spiral for the industry. And this is an industry that employs one hundred and fifty thousand people. It's not just a line on a budget sheet; it's the lifeblood of entire regions.

Elon

Then they went after the diamonds. Russia is the world's largest producer. The G7 ban on direct imports was a body blow. But the real masterstroke was the restriction on third-country processing. You can't just mine in Siberia and cut the stones in India anymore.

Taylor

I love the strategy behind this. They created a new worldwide certification system. Every non-Russian diamond gets a unique number, a passport, that follows it along the production chain. It prevents Russian stones from being laundered through hubs like Dubai or Surat. They've effectively been labeled 'blood diamonds'.

Elon

The financial hit is substantial. Uncut diamond exports have seen a monetary decline of nearly thirty percent. The average price for their raw brilliants has dropped by a quarter. These aren't just sanctions; they are precision-guided economic weapons designed to dismantle their key industries piece by piece.

Taylor

And it all builds up. Each sanction package, from the first to the nineteenth, added another layer of pressure. Banning technology transfers, closing airspace, targeting the shadow fleet of oil tankers. It was a slow, methodical constriction, and now we're seeing the result: the patient is finally gasping for air.

Elon

The fascinating paradox is that while the West made Putin a pariah, he's actually increased his influence in what's called the Global South. He's selling a narrative of being an anti-imperialist leader of the "world majority," and for countries resentful of the West, that message resonates.

Taylor

He's building a new club. It's the "Axis of Upheaval," with China, Iran, and North Korea. They're all united by a common goal: to disrupt the current international order and diminish American power. It’s a classic story of strange bedfellows united against a common foe. It’s less of an alliance and more of a mutiny.

Elon

And this creates a split reality. In Western capitals, he's isolated. But he can host a summit in Kazan and have leaders from dozens of countries show up. He's actively working to prove that he doesn't need the West to have a significant global footprint. It's a direct challenge.

Taylor

But the core conflict is economic. His new friends are not reliable partners. As we saw, China is extracting maximum value, and North Korea and Iran are suppliers of last resort. They can provide military hardware, but they can't provide a sustainable economic future or replace Western capital markets.

Elon

Exactly. That's why the peace proposals are so contentious. A European counter-proposal to a US plan was recently dismissed by the Kremlin as 'completely unconstructive'. They're trying to negotiate from a position of weakness while projecting an image of strength to their new partners. It's an impossible balancing act.

Taylor

And everyone sees the subtext. The peace talks aren't about peace; they're about economic survival. Moscow is signaling it wants a deal, but it can't afford to look desperate, especially not in front of its new audience in the Global South. The whole thing is a high-stakes poker game where everyone knows their hand is weak.

Elon

The long-term impact is that Russia has been forced into the role of China's junior partner. Putin sees China as essential for his own regime's security. That's a fundamental shift in global power dynamics. Russia is no longer an independent pole in a multipolar world; it's a satellite.

Taylor

And the economy is now a wartime economy. It’s robust in the military sectors, but Putin himself has admitted to "really big problems" elsewhere. High interest rates are crushing non-military businesses. It’s a distortion that creates short-term resilience at the cost of long-term health. A sugar high for a dying patient.

Elon

This has led to stagflation. Inflation is consistently double the central bank's target. Household and corporate lending has ground to a halt. We're seeing real GDP growth forecasts for 2025 revised down to less than one percent. The 'Fortress Russia' strategy has failed; the fortress is crumbling from within.

Taylor

And it hits everyone. Lending rates for personal arrangements are nearly twenty-eight percent. Official inflation is over seven percent, but households feel it's closer to fifteen. People are seeing shortages of staples, with queues for essentials that feel like a throwback to the Soviet era. The social contract is breaking.

Elon

That's the ultimate impact. The war has come home. It's no longer an abstract "special military operation." It's the price of potatoes, the inability to get a loan, and the rationing of gasoline because Ukrainian drones have successfully targeted their refineries. The pressure is immense.

Elon

Looking forward, Putin's entire strategy seems predicated on political change in the West. He was banking on Donald Trump's return to power, believing it would fracture the trans-Atlantic alliance and lead to a quick end to the war on his terms. It’s a high-risk gamble on external events.

Taylor

It's a risky final chapter for his story. He's hoping for a deus ex machina to save him. The revival of U.S.-Russian contacts under a new administration has given him a glimmer of hope, a chance to get a seat at the table with the U.S. president and project that image of a legitimate great power leader.

Elon

But Europe is also stepping up, forming a 'coalition of the willing' to ensure they have a role in the peace process. They are even considering a European military contingent to provide security to Ukraine post-war. The future isn't just a U.S.-Russia negotiation; Europe is demanding a seat at the table.

Taylor

Ultimately, the economic outlook is bleak. Even if peace is achieved, Russia faces a 'stagnation trap' with low growth and chronic imbalances from its over-militarized economy. They've traded long-term prosperity for a short-term war effort, and that's a future that's very hard to spin positively.

Elon

So, the key takeaway is that Russia is at the table because its economic foundations are cracking under the immense, calculated pressure of sanctions. The war is no longer sustainable. It’s a matter of economic physics.

Taylor

That's the end of today's discussion. Thank you for listening to Goose Pod. We'll be back with a new story for you tomorrow.

Russia is negotiating peace due to severe economic strain from sanctions. The war has crippled its budget, forced reliance on China, and led to cascading failures across industries like oil and diamonds. This economic pressure, coupled with a distorted wartime economy, has forced Moscow to the table, seeking survival amidst internal and external challenges.

Read original at News Source →

Moscow is burning through its reserves and staring into a deep domestic abyss. Everyone in Putin’s Russia — from the poorest pensioner to the wealthiest oligarch — is feeling the strain. That's why the Kremlin is looking for an exit. Russia’s economy is imploding. Largely due to sanctions caused by the Ukraine War, this year the Economics Ministry posted a record mid-year budget deficit of 3.

7 trillion roubles ($45.8 billion) and the Central Bank expects the full-year deficit to reach $55 billion, or 2 per cent of GDP. This is almost certainly the reason peace proposals with Ukraine have surfaced again. Firstly, its coal industry has been pushed to the brink of collapse. Russia exported 22.

6 per cent of its coal by rail to the EU in 2021, but lost that market due to trade embargoes after the Ukraine invasion, and was forced to redirect shipments to Asia by sea, with higher freight charges. Buyers have leveraged the disruption to negotiate lower rates, and prices have dropped further to $70 per tonne, which no longer covers production and shipping costs.

Russia’s overseas customers have ramped up their own production, particularly in China, India and Indonesia, but tracking the development of alternative energy forms, world coal consumption has slowed, which sent international prices plunging from $400 per tonne in late 2022 to around $100 per tonne by May 2025.

Domestically, the sector employs 150,000 people with several regions still dependent on the raw material for domestic heating, power generation and steel production. In 2024, Russia’s Energy Ministry reported the sector required central government support of $1.4 billion, with an estimated minimum of $3.

7 billion needed by the end of 2025. However, none of this financial outflow addresses more fundamental issues like global market competition or the transition to renewable energy. According to the assessments made by the ministry’s own economists, the real challenge lies in swiftly finding a new economic role for the country’s coal-producing regions and weaning the Motherland off coal.

Then, there is the diamond industry. The Russian Federation is the world’s largest producer of diamonds. Most stones originate in Siberia, are known for their quality, and considered among the best in the world. However, since the 2022 G7 ban on direct imports of Russian-origin material, both natural and synthetic, and restrictions put on third-country cutting and processing of stones over 0.

5 carats mined in the Federation from 2024, the situation has changed. With these sanctions taking effect, and with the market supported by lesser producers such as Botswana and Angola, analysts have estimated a 28.6 per cent monetary decline in uncut Russian diamond exports to $2.62 billion. International prices have shrunk, with a 24 per cent decrease in the average price of raw Russian brilliants, especially to Antwerp, the global hub for the cutting and polishing of stones into gems.

New worldwide certification, giving each non-Russian diamond shipment a number, now accompanies the gems along their production chain, to prevent them from being assimilated with Russian stones (currently labelled as blood diamonds) in a trading hub like Dubai or a polishing centre like the Indian city of Surat.

The financial implications to Putin are substantial, and with an inability to find alternative markets, losses have reached billions of dollars. Traditionally, the Kremlin has leant heavily on oil and gas exports to generate cash; in 2024, earnings from these exports contributed around 30 per cent of total federal budget revenue.

However, from an average price listing of $71.10 per barrel of Urals crude in November 2022, due to sanctions on Rosneft and Lukoil, reliance on its aging and inefficient ‘shadow tanker’ shipping fleet, and a G7-imposed price cap, after three years, traders report the price of Russian oil has slid to $36.

61 per barrel, with other OPEC producers replacing the Urals output. As key export buyers, notably China and India, were threatening to search elsewhere for suppliers, by November 2025 Russian sellers had been obliged to discount their black stuff to an average of $23.52 a barrel. Thus, the Kremlin has turned to selling assets it cannot replace.

In 2025, Putin liquidated $30 billion worth of Chinese yuan and announced he would release another $15 billion in 2026, serving the broader goal of injecting foreign currency into the domestic market to stabilise the rouble and settle his military accounts. Most significantly, on 19 November it was announced that Putin had directed a huge proportion of Russia’s gold reserves to be sold off.

The Kremlin has been slowly releasing gold bullion over the last three years. Sales to date have accounted for 57 percent of the 405.7 tonnes initially held by Russia’s Central Bank at the beginning of 2022, just before the full-scale invasion of Ukraine began. Since then, Putin’s Finance Ministry has liquidated 232.

6 tonnes of that stash to shore up state expenditure. By 1 November 2025, the National Wealth Fund’s gold holdings had plummeted to 173.1 tonnes, although the prices realised (currently the rouble equivalent of $4,130 per ounce), have been the highest ever. Gold has leapt from its pre-invasion high of $1,900 /ounce in February 2022, in an unprecedented war-induced rise, which puts former British Chancellor of the Exchequer Gordon Brown’s ill-advised 1999-2002 sale of 395 tonnes of UK gold, at an average price of $275 /ounce, into tragic perspective.

Admittedly, Putin’s deals have been made in the knowledge that there are other sources of gold stacked in Russian vaults not part of the NWF, currently around 2,300 tonnes in total, the fifth-largest stockpile in the world. Yet the fire sales underline how heavily the Kremlin is leaning on its bullion buffers to keep the boss’ military endeavours going.

Additionally, as one of the world’s most significant gold producers, ranking second only behind China, the Russian Federation mines a further 300-330 tonnes of gold annually, a substantial portion of global supply, but due to post-invasion sanctions, much of this is sold to China at far lower rates, or evasively traded through Dubai and Armenia, again heavily discounted.

Overall, Russian exports are clearly catastrophic, but the federation’s domestic finances are in an equally parlous state. The state statistics service, Rosstat, reported that one-year bank lending rates increased to 19.01 per cent in September 2025 for commercial loans and 27.85 per cent for personal arrangements.

Consumer prices rose 0.5 per cent in October 2025, bringing annual inflation to 7.7 per cent. However, most households believe prices are rising far faster than official figures suggest, with estimates of inflation over the past 12 months at around 14.5 per cent and expectations for the year ahead of 13.

3. With many civilian trucks commandeered to support the army in Ukraine and national distribution systems beginning to fail, some consumer staples, including potatoes, now being imported, are in short supply, with queues reminiscent of the Soviet era forming in cities just to buy essentials. Price caps are being considered for vegetables, poultry and dairy products.

Due to Ukraine’s successful targeting of petroleum infrastructure, gasoline for domestic use is either unobtainable or strictly rationed. These statistics touch everyone in Putin’s Russia, from the poorest pensioner to the wealthiest oligarch. Today’s kings of the Kremlin are finding that keeping the population supplied with vodka and bread is no longer sufficient.

However much Moscow tries to control it, the internet and social media have given all Russians a glimpse of the consumer goods and better living available in the West. No one is happy, and many correctly perceive their current hard living is the direct result of the war in Ukraine and the world’s response to it.

It should come as no surprise, therefore, that with Russia fast running out of funds and staring into a deep domestic abyss, possibly of 1917 proportions, peace proposals to end the Ukrainian adventure have materialised in Washington DC.

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