Russia's economy faces a trillion-dollar deficit crisis, with the fiscal dilemma worsening by 2026

Russia is experiencing a rare economic hardship. According to the latest Bloomberg report, Moscow authorities are facing a massive budget shortfall of up to 12 trillion rubles, highlighting the fragility of an energy export-driven economy. Against the backdrop of ongoing geopolitical conflicts, Russia’s economic pressures are manifesting across multiple dimensions.

Energy depletion and a sharp decline in export revenues

Russia’s traditional economic pillars—oil and natural gas exports—are rapidly shrinking. Urals crude oil prices have plummeted from an expected $59 per barrel to $35, a decline of over 40%. More concerning is that the energy sector’s revenue forecasts face a significant 25% risk, with an estimated 2.2 trillion rubles in expected income potentially evaporating. Meanwhile, although the ruble has appreciated strongly in exchange rates, this has suppressed dollar-denominated export earnings, creating a paradox of “apparent appreciation, actual revenue decline.”

Clash between military ambitions and fiscal realities

With little hope for a peaceful resolution in Ukraine, Russia’s military spending in 2026 is projected to surpass 12.9 trillion rubles, setting a new record. This enormous expenditure, combined with the dual pressures from energy revenues, further strains the government budget. Analysts suggest that fiscal pressure is shifting from a simple revenue shortfall to a severe imbalance of income and expenditure, risking a crisis.

Radical emergency measures, industry sectors under pressure

To cover the 12 trillion ruble deficit, the Russian government is considering a series of aggressive fiscal measures. These include legalizing casinos in certain regions and imposing a 30% tax on gambling revenues; levying new tariffs on diamond exports; and significantly increasing ecological taxes on metallurgy, mining, and energy companies. Once implemented, these policies are likely to heavily impact related industries and may also provoke discontent among businesses and the public.

Looking ahead: Russia’s economic outlook is bleak

Russia’s economic difficulties are no longer short-term fluctuations but a complex, structural problem involving multiple factors. Falling energy prices, shrinking export income, high military spending, and the lack of peace—these combined issues cast a heavy shadow over Russia’s economic prospects into 2026. As the government seeks radical measures to rescue the economy, policy uncertainty will increase further, potentially triggering far-reaching geopolitical repercussions.