The Ukraine War Has Turned Russia Into a ‘Ticking Time Bomb’
Key Points and Summary – Russia’s Federal Security Service (FSB) has accused exiled oligarch Mikhail Khodorkovsky of plotting a coup, a move experts dismiss as the Kremlin creating another “Phantom Enemy” out of paranoia.
-The real threat to Vladimir Putin’s regime is economic: a “ticking bomb” of bad debt, as Russian arms manufacturers owe banks $190 billion—37% of the state budget.
-This, combined with runaway military spending, new U.S. sanctions, and Ukrainian drone strikes on oil refineries, is causing “panic” in Moscow.
-Analysts conclude the regime is buckling, can no longer afford to “buy victory,” and is showing “anxiety” as it faces a debt crisis that “isn’t going to fix itself.”
The Real Threat to Russia in the Ukraine War
WARSAW, POLAND – Almost precisely 22 years after Russian President Vladimir Putin had Mikhail Khodorkovsky arrested, convicted in a sham trial, sent to the GULAG, and then later released and forced to leave Russia, the exiled and one-time oligarch is suddenly today a threat to the security of Russia.
This month, Russia’s Federal Security Service (FSB) accused Khodorkovsky, who now lives in London, and the 22 members of Russia’s Anti-War Committee of plotting a coup against Putin.
According to the FSB, which was once run by Putin, the committee is using its opposition to Russia’s war in Ukraine as a cover for “the violent seizure of power and overthrow of the constitutional order in the Russian Federation.”
Khodorkovsky denies the allegations and says they are more lies from the cabal that surrounds the former KGB Lt. Col., who has been Russia’s president for a quarter of a century.
There is no conspiracy to take down Putin’s regime.
Even if there were, it would not last for very long in a nation that has become a sea of informers backing competing security services.
The truth of the situation, say an increasing number of analysts watching the trends in Russia, is that the greatest threat to Putin’s regime is nothing less than the regime itself.
As far back as August, former US Secretary of State Condoleezza Rice told news outlets that Russia’s economy was in “dire straits” and that Putin does not have all the cards in the Ukraine war.
Another Phantom Enemy
“Ever since Putin turned against the West – roughly after 2006 – he has always been looking for what we have come to call the ‘Phantom Enemy’,” said Dr. Stephen Blank, a long-time Russia scholar and a Senior Fellow at the Foreign Policy Research Institute (FPRI). “He always has to have some entity out there that he sells to the Russian public as an existential threat to his regime.”
“This is why he has invoked the supposed threat that NATO was ready to invade Russia at any moment, which is an obvious canard because NATO is a defensive alliance of pacifist countries that never want to actually go to war. Then it was the Ukrainian Nazis – who do not even exist – are going to invade Russia,” he continued.
“If he is now harping on Khodorkovsky and his group of exiles then it means he feels the need to conjure up another new conspiracy against him in order to prop up the support for his regime within the population. It is an old gimmick that goes back to the Stalin years in the Soviet Union. The dictator in Moscow always tells the people there is a gang of conspirators – both foreign and domestic – who are out to topple the leaders sitting in the Kremlin,” he explained.
John Herbst, the senior director of the Atlantic Council’s Eurasia Center and former US ambassador to Ukraine, echoes this assessment. “It tells us that the Kremlin is being paranoid. Putin is looking for enemies to try to bolster his regime,” he said.
The Threat Is Real This Time
For once, however, there is a real threat to Putin’s rule, although it is not from some enemy military alliance or an internal conspiracy.
An article in today’s London Daily Telegraph explains what the Russian president really needs to be worried about.
“Putin Fears Another Coup as Russia Finally Begins to Buckle,” reads the title. The London daily goes into some detail as to the various ills that beset the nation.
It is a combination of runaway military spending, dire economic trends, record-high interest, and the bite of so many sanctions since the 2022 invasion of Ukraine, now finally being felt.
Another not inconsequential factor is Ukraine’s relentless drone attacks on Russian oil refineries, which have had concrete effects on cutting into the nation’s petrol supplies.
Now the US president, Donald Trump, is adding to the pressure due to his frustration with Putin’s refusal to agree to a ceasefire and a lasting peace agreement with Kyiv. On Wednesday of last week, Trump announced new sanctions on two of Russia’s biggest oil companies.
“For the first time in three and a half years, Russia’s really getting hurt,” says Timothy Ash, an associate fellow at Chatham House’s Russia and Eurasia program. “I think there’s some panic.”
And a large part of what could make the house of cards collapse for Putin are the vast sums that banks have lent to Russian defense companies.
“They were funding the war with borrowed money all along, it just wasn’t showing on the state’s balance sheet,” Craig Kennedy, of Harvard’s Davis Center for Russian and Eurasian studies, told the Telegraph.
Kennedy is a former vice chairman at Bank of America Merrill Lynch and led the financing of Russia’s largest-ever corporate transaction during that time.
His warning is that these lending practices have ballooned into a ticking bomb waiting to go off.
“This is just a dark pool of debt, and nobody quite knows how much is going to default once it matures,” he said.
Something on the order of 23 per cent of Russian banks’ outstanding corporate loans —about US $190bn— are now to arms companies, he has analyzed. This is about 37 per cent of the annual state budget.
“Not only was this money lent without proper credit checks, but it has gone to a sector that has a bad credit history,” is the overall assessment.
This could mean record defaults on massive loans in the future.
In July, Bloomberg reported that at least three of Russia’s largest banks were already quietly preparing requests to the central bank for bailouts as their bad loans continued to pile up.
Khodorkovsky himself told The Telegraph the FSB’s accusations against him are signs the Kremlin has “anxiety over the issue of power transition” because if he suddenly dies there is no person who is a clear successor, not is there a process to determine one and so appoint him.
“What do we have in Russia?” Khodorkovsky told the paper. “A prime minister whom no one elected but whom Putin appointed. Courts appointed by Putin. A parliament whose seats were filled through falsified elections, and whose legitimacy no one believes in.”
Whatever happens, the situation for Putin politically and his armed forces militarily is almost guaranteed to deteriorate further.
“In terms of being able to buy victory on the battlefield, Moscow already understands it’s beyond their capability,” says Kennedy. “The longer they wait, the greater the risk of a crisis, because the debt situation isn’t going to fix itself.”
About the Author: Reuben F. Johnson
Reuben F. Johnson has thirty-six years of experience analyzing and reporting on foreign weapons systems, defense technologies, and international arms export policy. Johnson is the Director of the Asia Research Centre at the Casimir Pulaski Foundation. He is also a survivor of the Russian invasion of Ukraine in February 2022. He worked for years in the American defense industry as a foreign technology analyst and later as a consultant for the U.S. Department of Defense, the Departments of the Navy and Air Force, and the governments of the United Kingdom and Australia. In 2022-2023, he won two awards in a row for his defense reporting. He holds a bachelor’s degree from DePauw University and a master’s degree from Miami University in Ohio, specializing in Soviet and Russian studies. He lives in Warsaw.
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