DOMINIC LAWSON: Don’t be fooled by Putin’s posturing with Xi and Modi. Russia is facing a financial meltdown and has too few troops to fight his catastrophic war

A smile, of sorts, could be discerned on the peculiarly taut features of Vladimir Putin as he welcomed President Xi Jinping of China and Prime Minister Narendra Modi of India to a conference in the Russian city of Kazan last week.

This was the so-called Brics summit and, as the Russian leader currently holds the rotating presidency, it was always going to be held there.

Yet the idea being put about that this was a triumph for the killer in the Kremlin is belied by what actually happened in Kazan. Putin’s position got no statements of support from the leaders of the world’s two most populous nations.

In particular, the revelation that Russia had got North Korea to supply 1,500 troops for its war in Ukraine went down badly.

Xi Jinping declared there should be ‘no expansion of the battlefields, no escalation of hostilities’, while Modi warned that the gathering should not be seen as a united front against the West: ‘We support diplomacy, not war.’

The war on Ukraine is said to be going well for Putin right now – at least in terms of attritional gains of territory. But the Russians have had no breakthroughs.

And as our wise former Ambassador to Moscow, Sir Roderic Lyne, put it to me: ‘Over the past two months, the Russians have taken about 300 square miles – equivalent to less than one-fifth of Essex – at a cost of an estimated 60,000 casualties, dead and injured, so around 200 per square mile in a country of over 230,000 square miles. No wonder they need the North Koreans.’

In other words, Putin simply can’t find enough Russians to continue to fight his catastrophically stupid (and criminal) war against a people he claims to be ‘brothers’.

A further demonstration of that predicament is the Kremlin’s decision, implemented this month, to give not just prisoners, but all those facing trial, freedom in return for going to the front.

As one Russian lawyer describes it: ‘Police can now catch a man over the corpse of someone he has just killed. They tighten the handcuffs and then the killer says, ‘Oh wait, I want to go on a special military operation’ – and they close the criminal case.’

This will lead to a further collapse of the Russian criminal justice system — and it’s worth recalling that it was to deal with a similar disintegration under Boris Yeltsin that Putin had (successfully) staked his reputation when he took office in 1999. Now, even the official figures show that organised crime has soared, and shooting on the streets has once again become almost commonplace in Moscow.

But the main reason for Putin’s popularity had been based on his stabilisation of the economy. Admittedly, this was most to do with the coincidental increase in global oil prices soon after he succeeded Yeltsin: as hydrocarbons are overwhelmingly the largest source of Russian revenues, it is that which keeps the public’s pensions paid.

Yet since Putin launched his full-scale invasion of Ukraine, its income from this crucial resource has halved. The West’s sanctions may have proved porous, but China and India have been ruthless in price negotiations over the oil they buy from Russia – and Beijing has shown no interest, despite Putin’s pleas, in a Sino-Russian gas pipeline deal to replace the one which has now been closed between Moscow and Western Europe.

Meanwhile, Putin has turned the domestic economy into something resembling the ‘structural militarisation’ which, in the end, led the Soviet Union into penury and partition.

The intensity of the drive towards weapons production has starved other sectors of investment – and, indeed, employees. This affects the commodity of most concern to every Russian: food.

As a briefing paper by Global Intelligence Services points out: ‘Between January and July this year, the output of tractors and seeders fell by more than 22 per cent. In mid-August, suppliers of key food items informed retailers of pending price hikes of up to 40 per cent.’

Officially, the overall inflation rate is given as around 9 per cent. But can that be believed? An indicator of the true situation was the announcement last Friday by the Russian Central Bank that it was raising its basic interest rate by 2 points to a staggering 21 per cent.

This is a hammer blow to the country’s housing market, especially as, in July, the government abandoned its home-owner subsidy scheme which had held mortgage rates at 8 per cent.

But it is far from just the property market which is now to be banjaxed by ultra-high interest rates – themselves in part a consequence of Russia’s inability to borrow on the international markets (the Chinese won’t even lend to them in renminbi, Beijing’s official currency).

Last week, Sergei Chemezov, the CEO of Russia’s largest state industrial holding company, Rostec, declared of the latest hike in interest rates: ‘If we continue to work like this, then most of our enterprises will go bankrupt.’

Of the rise to over 20 per cent in borrowing costs, Chemezov observed: ‘There is no 20 per cent profitability anywhere. Maybe in the drugs trade, but even the sale of weapons does not bring such a profit.’

As it happens, Russia’s once-thriving arms export trade has also capsized, for the simple reason that it now needs all of them, and more, for its own use.

As the Swedish economist Anders Aslund noted: ‘Much to its shame, the Kremlin has been forced to import artillery shells from its even more backward neighbour, North Korea.’

Does this all mean that even the stoical Russian people will begin to turn against Putin? The penalties for doing so are so brutal, that might seem unlikely. But if the continuing disintegration of the country’s infrastructure leads to widespread loss of domestic heating in winter, that could be a trigger.

Last winter, there was public discontent when almost 600 ‘major incidents’ affected critical infrastructure, with 3 million Russians losing their heating.

Given that the Kremlin had claimed that Europeans would die of hypothermia without Russian gas, this led residents to ask: ‘Why is it not Europe, but us, who are freezing to death?’

Obviously, Putin has been concentrating on destroying Ukraine’s energy networks: but if his own people are then suffering from soaring costs, food shortages and even blackouts, they will hardly deem that a consolation.

In this context, it is perverse of some Western politicians to conclude that the sanctions campaign against Moscow, and their military aid to Ukraine, has been a failure. And it is even more perverse to fall for the idea, propagated by the Kremlin, that there is an inevitable tide towards Russian ‘victory’ (whatever that means).

Look again at those pictures of Putin with the leaders of India and China at that summit in Kazan.

Is that really a genuine smile on the Russian President’s face? Or is it a grimace masquerading as a grin?