Russia’s rebellion: bigger war, lower macro stability?

The armed uprising by Yevgeny Prigozhin’s Wagner mercenary group against the Russian military over the weekend has dealt a heavy blow to President Putin and exposed cracks in the regime. There are a lot of unknowns about how things will play out at this point. There is a potential for a resolution to the Ukraine war but, on balance, we think that Russia is now more likely to devote additional resources to the war in an effort to appease militarist factions. While a full-blown war economy looks unlikely, a larger war effort could still threaten the unstable equilibrium that has, to this point, been able to preserve macroeconomic stability in Russia.