Putin said Russia wouldn’t have to choose between guns or butter. The price of butter is soaring.

• Putin has been pledging that his country can focus on both “guns and butter” as it fights in Ukraine.

• Yet it’s precisely butter that’s been a headache for Russia, with a 25.7% price increase this year.

• The surging cost is raising fears of renewed inflation in Russia amid sanctions and war production.

A year into his war on Ukraine, Russian leader Vladimir Putin told his country that its new focus on weapons production wouldn’t tank its economy.

“There is a well-known phrase: guns instead of butter,” Putin said last February.

“The country’s defense is, of course, the most important priority, but, in solving strategic tasks in this area, we must not repeat the mistakes of the past, we must not destroy our own economy,” he said, citing burgeoning wheat production at the time.

In May, Putin once again ordered his government to continue aiming for that goal, telling officials to focus on both “guns and butter” — rejecting the adage that countries have to choose between military and civilian spending.

Yet as the war grinds on, the last few months have been especially rough on Russian consumers. Inflation rates in August and September climbed to their highest since early 2023, when Putin first made his speech propping up the civilian economy.

By the end of October, the price of butter in Russia was up 25.7% compared to December 2023, per government statistics.

Not all grocery or dairy prices are running up at such a rate. The next-largest increase involved lamb, which rose 21.48%, while milk rose 12.75% in the same period.

‘Armageddon with butter’

Still, the overall trend has raised fears of a return in Russia to 2022’s surging inflation rates or the possibility of a recession.

“What is especially frightening is the fact that the acceleration is associated with a unanimous increase in prices across the entire basket. Of the 107 items included in the weekly basket, 84 went up in price,” wrote economists on the MMI Telegram channel, a Russian group that provides analysis on inflation.

As government statistics showed butter rising by up to 1.9% weekly in late October, the same channel warned of an “armageddon with butter” and said Russia could see a repeat of its 40% egg price surge from November 2023.

The soaring prices made national headlines earlier this month when Russian media reported a series of butter-related supermarket thefts.

The independent outlet Meduza reported that one robbery in Moscow involved 25 packs of butter stolen by two men.

Even state media has addressed the issue, with the government-run Rossiyskaya Gazeta writing that some stores were putting butter in protective boxes.

Federal officials have since met with dairy producers in a bid to curb the cost hikes, though the local union’s statement in late October promised only that it would monitor prices weekly.

Why butter prices are on the rise

A week before that meeting, the same union said the country wasn’t experiencing a butter shortage, but added that about 25% of local butter consumption comes from foreign suppliers.

Much of those imports previously came from countries in Latin America, which dropped their butter shipments from 25,000 tons to 2,800 tons yearly amid Western sanctions on Moscow.

Another major dairy supplier complying with wartime sanctions, New Zealand, sold $88.8 million worth of butter to Russia yearly before the invasion began.

To fill the butter void, Moscow has since been turning to friendlier nations such as Turkey and the United Arab Emirates, which previously only supplied about 90 tons yearly to Russia.

The price turmoil continues to play out as Russia leans its economy further into weapons manufacturing to maintain the invasion of Ukraine, which has now increasingly turned into a grinding war of attrition in manpower and equipment.

Russia is expected to spend $140 billion on its defense industry in 2024, up to $145 billion in 2025, or 6.3% of its GDP.

That could spell even more bad news for Russian consumers, with economists expecting further tax hikes beyond the announced reforms for 2025 to keep up with military spending.

Read the original article on Business Insider