Russian President Vladimir Putin acknowledged inflation as a major challenge for Russia during his annual “Direct Line” Q&A session on Thursday, describing the economy as “overheating.”

Speaking to Russian citizens, Putin outlined the government’s efforts to address rising prices. “There are some issues here, namely inflation, a certain overheating of the economy, and the government and the central bank are already tasked with bringing the tempo down,” Putin said, according to a Reuters translation.

Russia’s consumer price index reached 8.9% in November compared to the same period last year, up from 8.5% in October. Food prices, particularly for milk and dairy products, were key drivers of the increase. 

Inflationary pressures have been compounded by a weakened ruble, which has elevated the cost of imports, and soaring military expenditures, straining labor and production resources. Russia’s economy under Putin has been interesting since he invaded Ukraine in 2022.

Rising prices and wage growth

“Of course, inflation is such an alarming signal,” Putin remarked, as reported by Interfax. He noted that wages have grown by 9% in real terms, slightly outpacing inflation, while disposable incomes have also risen. 

The comments came as Russia’s central bank was widely expected to raise its benchmark interest rate by 200 basis points to 23% on Friday, marking the highest level in a decade.

Putin partially attributed rising prices to international sanctions, stating that external restrictions have increased logistical costs. However, he also criticized domestic monetary policies, implying that alternative strategies could have been employed to curb inflation. 

“There are also subjective factors, and there are our shortcomings,” he said, emphasizing the need for timely decisions to stabilize prices.

BRICS Pay and currency challenges

Meanwhile, geopolitical tensions over global currency dynamics have intensified since Donald Trump won the US presidential elections in November. At this year’s BRICS summit in Russia, Putin introduced BRICS Pay, a payment system designed to bypass the dollar-centric global financial system. 

However, US President-elect Donald Trump warned of severe consequences for nations seeking to sideline the dollar. Trump threatened 100% tariffs on BRICS countries that attempt to replace the dollar in trade, stating, “They should expect to say goodbye to selling into the wonderful US economy.“

Although the US dollar’s dominance has declined over the years, it remains the world’s reserve currency. Given the challenges of de-dollarization and the potential for US retaliatory measures, including freezing dollar holdings, BRICS efforts to move away from the dollar are expected to be gradual and limited.

Is BRICS collapsing?

BRICS, originally an economic concept, has evolved into a bloc with political undertones. The group, initially comprising Brazil, Russia, India, China, and South Africa, expanded last year to include Egypt, Ethiopia, Iran, and the UAE. 

However, this expansion has not been universally welcomed. India’s central bank governor, Shaktikanta Das, clarified on December 6 that the country is not pursuing de-dollarization or working toward a BRICS common currency. Das’ statement followed Trump’s sharp criticism of BRICS’ ambitions to undermine the dollar’s supremacy.

Argentina’s President Javier Milei, known for his anarcho-capitalist stance, withdrew from BRICS shortly after taking office in December 2023. He cited ideological differences, refusing to “ally with communists.”

Similarly, Saudi Arabia’s engagement with BRICS remains ambiguous. Ahead of the October summit in Kazan, Russia, the Saudi government refrained from affirming its membership status. While Saudi Foreign Minister Prince Faisal bin Farhan attended the summit and expressed a commitment to strengthening ties with BRICS, he stopped short of pledging full membership. 

Saudi Arabia’s unclear stance prompted Russia’s foreign ministry to retract an earlier statement referring to it as a BRICS member.

Criticism of the bloc’s recent expansion has also emerged from within. Jim O’Neill, the economist who coined the term “BRICS,” has questioned its direction. Speaking at an event in London in November, O’Neill dismissed the group’s evolution into a political entity and described its expansion as a move driven more by symbolism than substance.

From Zero to Web3 Pro: Your 90-Day Career Launch Plan