Russia’s economy, which has weathered Western sanctions better than many anticipated, is now confronting mounting pressure. Nearly four years into the war with Ukraine, the country is experiencing a widening budget deficit, a forecast slowdown in growth, and increasingly disruptive Ukrainian strikes that are reaching deeper into its economic infrastructure.
Economic growth is projected to decelerate to its weakest pace since 2022, while the budget deficit continues to expand. Despite these pressures, Moscow retains a substantial cushion, holding more than $300 billion in accessible reserves. The recent escalation of hostilities in the Middle East has provided an unexpected financial boost, driving energy prices upward and increasing Russia’s export revenues.
This windfall, however, has drawn a response from Washington. The United States is attempting to cut off this revenue stream, with the Senate endorsing tariffs of up to 100 percent on buyers of Russian energy. The move aims to counteract the benefit Moscow receives from higher global oil prices.
The combination of sustained military spending, international sanctions, and the effects of strikes on key economic sites is testing Russia’s ability to maintain fiscal stability. While higher oil income offers temporary relief, the underlying structural weaknesses are becoming harder to overlook, casting doubt on the long-term sustainability of the wartime budget.