22 May 2026

The mood among Putin’s top managers has shifted once again. Expectations of a surge in oil revenues due to the Hormuz blockade have proven excessive. To ensure the leader’s increased military spending, they are pushing every button and engaging in obvious gambles.

During a brief visit to Beijing, Putin brought with him literally every one of his bosses and magnates with any connection to the economy and finance—from Nabiullina to Siluanov, from Oreshkin to Sechin, from Gref to Deripaska—so that they could all bow down to the lord of the PRC.

In search of salvation

All the Russian guests, individually and collectively, urged the Chinese to buy even more Russian raw materials, using every conceivable and unimaginable tactic. Chairman Xi is now the most knowledgeable person in the outside world about the Putin regime’s needs. He has witnessed his younger brothers’ desperate need for money firsthand.

It’s sometimes believed that Putin’s allies are afraid to report to him how dire the economic situation is, while he, in his gullibility, sees everything through a rosy lens. This is apparently reflected in his recent remarks at a “meeting on economic issues”:

The measures recently implemented by the Russian government have begun to yield a certain, let’s say restrained, but still a certain positive result…

But in reality, Putin said this as a smokescreen. The ruler had mentioned his relatively good level of knowledge the day before, speaking to the captains of the military-industrial complex at the so-called congress of the Union of Mechanical Engineers:

I won’t talk about the sad stuff – I won’t talk about the key rate, I won’t talk about the need for “long money” and the strengthening of the ruble…

Putin knows that even arms manufacturers, with all their amenities and benefits, are hampered by high interest rates and an overvalued ruble. He also knows that they demand even more “long-term money”—that is, funds taken from the bank accounts and pension savings of ordinary Russians and handed over to the tycoons in perpetuity, supposedly as “long-term investments.”

The leader plans to rule for a long time and is not prepared to turn his financial system upside down, even at the request of his beloved people. On the contrary, he persuades them to do something they don’t like:

…Our heroes who went through the special military operation… I ask you to actively promote the entry of such people into the domestic defense industry… Concrete actions are needed: expanding professional training programs, internships, and employment opportunities. Yes, these guys are fighting and proving themselves, but they need support, we need to find talented people. There are many talented people out there, I meet them, believe me, talented, modern, and thoughtful. We need to seek them out, find them, and help them… 

Veterans are his love

This string of false praise doesn’t stem from senile sentimentality. Putin acutely feels the practical need to increase the benefits of military service and improve the prospects of those who have served in it. Re:Russia  writes : 

Growing evidence and indirect estimates indicate that the influx of contract soldiers for the war in Ukraine has declined .  The commercial contract model, which the Kremlin has used for nearly three years to replenish losses and attract manpower to the front, appears to be in crisis. This isn’t just a decline in recruitment rates, but a systemic failure that will likely be extremely difficult to overcome.

Whether Putin likes it or not, his calls for veteran support will fall on deaf ears. Managers of the military and civilian economies see the “fighting guys” as dangerous outcasts, and promoting some of them will be purely a distraction.

In the short term, the contract recruitment crisis will be addressed in Putin’s usual way—by flooding the military with cash. Just like the growing difficulties in military production, which Putin mentioned (“the sad part”)—meaning he ordered his financiers to find additional funds for the military-industrial complex. 

The rapid growth of government spending over the past part of 2026 suggests that Putin’s promise not to increase military spending this year has been abandoned or was a sham from the start.

The regime’s top managers, valued by the leader for their talent in carrying out any of his orders, while couching them in financially sound terms, are now rushing around in these uncomfortable coordinates.

Returned severity

Several months ago, technocrats convinced Putin that the fall in oil prices had made things even worse and that it was time to cut government spending, starting at least with civilian spending. At the end of February, citing the leader’s approval, they announced harsh measures, including a long-unseen budget cut.

But since the Iranian war broke out literally at the same time and fuel prices soared, they decided to hold off on harsh measures. By the end of March, the regime’s managers had fallen into a state of euphoria and were waiting for a golden shower. By May, it became clear that Putin’s appetites were growing much faster than expected, while oil revenues were growing much more slowly. And so  Putin’s intellectuals rethought their strategy once again. 

In its current form, it is presented in an analytical note from the government-affiliated Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF), titled “Why Oil and Gas Revenues Are Below Expectations.” Despite the title, it not only explains how current oil revenues are “noticeably below expectations,” but also outlines the technocrats’ business plans for the remainder of this year. Taken together, the points in this note form something of a manifesto.

Thus, April’s oil and gas budget revenues reached a rather impressive 0.86 trillion rubles, but were still 21% lower than in April last year. And for the first four months of 2026 as a whole, they were 38% lower than last year’s total – only 2.3 trillion rubles. That’s not even one-fifth of the total budget revenue.

The reason for the insufficient growth of oil and gas revenues in April is explained by the strengthening of the ruble (which reduces the tax base), the peculiarities of calculating certain taxes, and some   (judging by the hints of the authors of the note, small) decrease in exports due to Ukrainian air strikes. 

In any case, according to the calculations provided in the note, oil and gas revenues will decline to 0.7-0.8 trillion rubles in May. This means that in the first five months of 2026, these revenues will reach only 3-3.1 trillion rubles. And just to meet the annual budget plan (8.9 trillion), a whopping 5.8-5.9 trillion rubles will need to be collected in the remaining seven months. I think it’s possible, but there’s no guarantee.

With a shot at the record

Thus, even the extremely favorable atmosphere of the Iranian war for the Russian treasury will not ensure the annual oil revenue plan will be exceeded. Thanks to this war, it will simply not be missed. This means that oil will not generate the funds to cover the additional military expenditures Putin is concocting on the fly. 

The authors of the memo likely share this view, although they don’t state it directly. According to their estimates, the total annual shortfall in all budget revenues (oil and gas and non-oil and gas) will be quite significant, amounting to 1.6–1.7 trillion rubles. 

And the spending plan is being significantly overfulfilled: from January to April, it increased year-on-year by 16% (to 17.6 trillion, 40% of the annual plan). These figures are consistent with previously stated projections that the annual budget overrun could reach 3-5 trillion rubles. 

Taking into account the revenue shortfall and spending overruns, the final 2026 budget deficit could exceed the planned target (3.8 trillion rubles) by a good 5-7 trillion rubles, jumping to 8-10 trillion rubles. This is significantly higher than the record deficit in 2025 (5.6 trillion rubles) and aligns well with the huge deficit already accumulated in January-April (5.9 trillion rubles).

The published version of the CMACS note does not provide the size of the upcoming deficit out of caution, but does list the methods for covering it:

The scope for a major sequestration mid-year is limited by already funded obligations and the rigidity of a significant portion of expenditures. A more likely option is to…   use remaining funds and reserves, additional OFZ placements, and targeted optimization of specific spending areas. However, debt financing options are also not limitless. High interest rates increase the cost of new borrowing…

Four intentions and three hindrances

Translated from official language, this means that Putin’s technocrats intend to:

1. Conduct a small cut in non-military spending in the second half of the year. The time for a major cut has been lost.
2. Mobilize carryovers and reserves, i.e., spend money allocated for other purposes on the military and the war. This won’t be the first such mobilization, but it seems they’ll be able to scrape together a couple of trillion for the last time.
3. Another direct tax increase is not planned this year. Siluanov vehemently denies this possibility , hinting that he will focus on spending cuts, and the impact of previous increases has been lower than expected. This doesn’t negate the increased formal and informal pressure on all categories of taxpayers.
4. Borrow more money on the domestic market than planned. Hoping that they won’t need much more, as borrowing is extremely unprofitable at current high interest rates.

All of this combined will truly allow the technocrats to somehow make ends meet. At least this year. Unless three obvious obstacles, which they try not to mention publicly, get in the way.

First, if the blockade of the Strait of Hormuz doesn’t end and the price of a barrel of Urals doesn’t fall to the January $40 level. If it does, the budget hole will grow by a good couple of trillion by the end of the year. 

Secondly, this is if oil and petroleum product exports aren’t further disrupted by Ukrainian drones and missiles. For now, the actual reduction in production and exports is measured in percentages, not multiples. And the Ministry of Economic Development’s latest forecast for this year assumes that energy production and exports will remain roughly at 2025 levels in its “baseline” scenario.

The worst-case, “conservative” scenario of this forecast predicts a three-percent decline in exports and production. But what if the impacts become more severe, and the decline becomes significantly greater? All calculations and the entire budgetary harmony will be destroyed.

Technocrats rarely speak of these strikes out loud, but they can’t help but notice them. After all, even ordinary Russians in the latest FOM poll, for the first time since the war, noted that the main current event was no longer the “SVO” (16%), but Ukrainian shelling of Russian territory (18%).

Thirdly, Russian oil trade itself is not protected from sanctions or blockades in today’s world. If it is cut off, the material consequences will be the same as described in the previous points.

The regime’s fear of this prospect is evident in the speed with which Putin and his entire constellation of technocrats rushed to Xi Jinping for patronage and guarantees of energy purchases. But China is patronizing only itself.

***

As Putin persists in prolonging the war, his regime is losing the kind of prudence that has characterized it for so long. And his obedient technocrats, despite their trademark literacy and caution, are becoming increasingly drawn into reckless and unpredictable economic manipulations.    

https://ru.themoscowtimes.com/2026/05/22/finansisti-i-tehnokrati-rezhima-mechutsya-v-poiskah-deneg-na-voinu-a195979