David O’Sullivan, the EU sanctions commissioner, warns that the Russian economy is on the brink of collapse. He told the German editorial network that Russia’s economic conditions are “devastating” with all indicators pointing to red. The country is sliding into recession, battling severe problems in public finances, inflation, and soaring interest rates.
Banking institutions have long been exposed to problematic loans that the industry has taken to fund the war effort. Now those companies may be unable to repay. “Russia is approaching a financial crisis similar to 1998” O’Sullivan says.
He acknowledges that a determined dictator could prolong the war at any cost, but the situation will eventually become untenable. Referring to a “Hemingway moment” he explains that Ernest Hemingway once described bankruptcy as occurring first very slowly and then abruptly. O’Sullivan believes the same pattern will unfold in Russia: the economy will deteriorate gradually before a rapid collapse. He can’t yet pinpoint exactly when that turning point will arrive.