10 March 2026
The collapse of commodity rents and the economic slowdown continue to eat into Russian budget revenues, which this year will have to spend every third ruble on the army and the war.
In January-February, the federal treasury posted a deficit of 3.449 trillion rubles—almost 1.5 times higher than in the same period last year, the Finance Ministry reported on Tuesday.
Oil and gas revenues halved (to 826 billion rubles) following the fall in Russian oil prices and forced production cuts by oil companies. Non-resource revenues grew by only 4.1% (to 3.94 trillion rubles), and in real terms—adjusted for inflation—decreased by 1.6%.
As a result, the budget spent almost twice as much as it collected in taxes—8.21 trillion rubles versus 4.76 trillion. And its deficit over the past two months has come very close to the full-year target (3.78 trillion rubles).
“It’s only been two months since the start of the year, and the budget is already in tatters,” notes Alexander Kolyandr, a senior research fellow at the Center for European Policy Analysis (CEPA). Despite increasing VAT and taxes on small businesses, the authorities acknowledged in February that it would be impossible to meet all budget obligations this year. This is evidenced by plans to change the budget rule, Kolyandr notes.
The plan is to lower the oil price cap, which would require using the depleted National Welfare Fund to cover budget gaps, which would simultaneously lead to a cut in some spending. Given that cutting military spending is unrealistic, funding for the already stagnating civilian economy will likely be cut, Kolyandr notes.
The war in Iran, which briefly pushed the price of Brent crude above $100 per barrel, could help the Russian budget, although everything depends on how long the conflict lasts, notes Petras Katinas, an expert at the Royal United Services Institute in London. If it ends in a few weeks, the effect will be minimal, but if the war drags on, the Russian economy could receive a more significant injection, Katinas reasons.
“If oil prices don’t stay high for long and the ruble doesn’t weaken, the Kremlin’s budget problems will persist,” agrees Kolyandr. Expectations to raise more money from the non-resource economy are unlikely to materialize, he warns, as the government is preparing to lower its already dire growth forecast for this year—from 1.3%—to 0.7-1%.
Additional oil revenue from the war in Iran will likely be used to finance the war with Ukraine, according to James Henderson of the Oxford Institute for Energy Studies. “No one will be surprised if military spending increases as a result,” he says. “There will be more money, which means, by default, more money will be allocated to military needs. This is certainly an undesirable consequence.”