Russia

Russia is a petro-state. Its economy. Its ability to feed its people and, most important of all, its ability to wage war, is tied to the price of a barrel of oil. Twenty percent of government revenues come from the oil and gas industries.

Back at the start of the Ukraine War the price of oil peaked at $120 a barrel. Vladimir Putin was able to wage war, pay pensions and maintain social services while keeping inflation under control and fending off sanctions.

This week oil prices dipped to $62 a barrel. And to persuade the likes of China, Hungary and Slovakia to face the wrath of sanctiongs-imposing countries,  Moscow discounts the oil price by $20 a barrel.

But there is more. One of Russia’s biggest oil customers was India. Recently, Narendra Modi caved in to American pressure and dramatically cut Russian oil imports.

And there is still more. The Americans, French, British, Swedes and others are starting to board and impound ships in the “shadow fleet” of unregistered oil tankers carrying sanctioned oil around the world. Sixty percent of the roughly 1,000-strong “shadow fleet” of oil  tankers are believed to be carrying Russian  oil.

All of above, plus the cost of the war, is beginning to be borne by ordinary Russians. Food inflation, for instance, has soared by 12 percent since Christmas. And if Russians want to eat out that option is fast disappearing along with restaurants and cafes displaying “Open” signs.

Growth in the Russian economy is slowing to a crawl last year it grew by just 0.6 percent and the IMF forecast for this year is 0.4 percent. VAT has gone up. Interest rates are 15.5 percent. Corporate taxes have increased. The government is twisting the arms of bank managers to buy war bonds and the sovereign wealth fund has shrunk from $130 billion at the start of 2025 to $50 billion.

Finance Minister Anton Siluanov is under increasing pressure to produce new and better money-making ideas. His latest is government-owned online casinos.

None of the above is surprising when one considers that the defense budget is reckoned to take up between 40-60 percent of the government budget.

Ukraine is in a terrible state. But Russia—with a million war casualties on top of its economic problems—is not far behind in the war of attrition.

Japan

The unexpected landslide victory of Japan’s Liberal Democratic Party has opened the door to a long-cherished aim of Japanese conservatives—revision of the constitution to allow Japan greater military freedom.

In the aftermath of World War Two the allies forced a constitution on Japan which “forever renounced” war. Over the years the pacifist document has been re-interpreted several times to allow the development of a formidable “self-defense force.” But the Japanese military is still constitutionally prohibited from participating in foreign wars or building any weapons that allow them to do so.

Takaichi wants to change the constitution to allow Japan to develop a “more normal” military. With a two-thirds majority in the DIET she can achieve that aim.

Military normalisation would allow Tokyo to openly develop long-range missile systems and aircraft carrier fleets without hiding behind euphemisms. Japan would no longer be a passive observer but an active player, ready to intervene should its vital sea lanes come under threat. Japan’s defence posture would shift permanently from shield to sword, with explicit counter-strike capabilities.

At home, Takaichi is expected to overhaul Japan’s defence industry to make it globally competitive. Freed from constitutional constraints, firms such as Mitsubishi Heavy Industries would gain a green light to export advanced military technologies, creating new dependencies among partner states. Takaichi appears acutely aware that military autonomy is a prerequisite for political autonomy, particularly in managing a sometimes unpredictable alliance with the United States.

For Beijing, Japan’s renunciation of pacifism, is a strategic alarm bell: the end of a pacifist Japan that long served China’s interests. Takaichi will likely want to deepen Japan’s role in the Quadrilateral Alliance with Australia, India and the US and seek entry into AUKUS’ second pillar. Such moves would create a new security pole challenging China’s dominance.

But the reverbations will be felt throughout the Pacific, including in the southern waters. One of the clearest policy shifts under a Takaichi supermajority will be the expansion of Japan’s Official Security Assistance (OSA). For decades, Tokyo supported ASEAN primarily through economic aid. OSA marks a decisive break, providing direct assistance to strengthen the military capabilities of neighbouring states. With an overwhelming parliamentary mandate, Takaichi is likely to dramatically increase OSA funding as part of a systematic effort to build a strategic buffer around China’s sphere of influence in the South China Sea, with ASEAN as its anchor.

Taiwan is at the centre of Japanese strategic thinking. Before the election, Takaichi infuriated Beijing by suggesting that Japan would come to ##taiwan’s defense if it was attacked by China. With the prospect of a revised Japanese constitution, Beijing is issuing dire warnings of revived Japanese militarism.

* Tom Arms is foreign editor of Liberal Democrat Voice. He also contributes to “The New World” magazine and lectures on world affairs. He is the author of “America Made in Britain,” two editions of “The Encyclopaedia of the Cold War” and “The Falklands Crisis.”