Oil revenues provide Russia with the resources for war, but the budget deficit is breaking records
Despite a temporary increase in oil export revenues, Russia’s economy continues to accumulate serious imbalances due to the war and high military spending. The budget deficit is growing rapidly, inflation is accelerating, and reserves are gradually being depleted. Analysts point out that oil revenues are only temporarily masking deeper problems. This is reported by ISW.
Russia is reaping short-term financial benefits from rising oil prices, but this does not alter the overall picture of economic pressure, which is intensifying due to the war. This is stated in an analysis by the Institute for the Study of War (ISW), which emphasizes that the additional revenue does not offset the massive expenditures on military needs.
The financial gap in the Russian budget already exceeds projected figures. According to Ukraine’s Foreign Intelligence Service, the Russian Federation’s federal budget deficit for the first quarter of 2026 reached 4.6 trillion rubles, while the planned annual deficit was significantly lower. This indicates an accelerated depletion of the financial system.
The Kremlin is also forced to use accumulated reserves. This refers to the National Welfare Fund, whose liquid portion is gradually decreasing, and part of the coverage of expenses is already being provided by gold sales. Such a policy allows for temporary support of expenditures but undermines long-term financial stability. At the same time, inflation is intensifying in the Russian economy. Food prices are rising, and official figures do not reflect the full picture recorded by independent analysts. The labor shortage caused by the war is driving wage growth, which further fuels inflationary pressure.
Against this backdrop, layoffs are on the rise in Russia. According to Russian trade unions and business publications, companies are increasingly forced to lay off employees due to a lack of funding and budget constraints. This is already affecting both the civilian sector and industry.
ISW analysts note that oil revenues allow the Kremlin to temporarily plug budget gaps but do not solve systemic problems. The bulk of the additional revenue is directed toward military spending, which further widens the imbalance between the defense and civilian economies.
As a result, expenditures exceeding planned targets do not stabilize the situation; on the contrary, they fuel inflation and sustain high interest rates, which put pressure on the business environment.
On all fronts in the immediate combat zone, the enemy has been observed making a massive shift from expensive strike drones to budget alternatives such as the Molniya.
In border regions of the Russian Federation, infrastructure is being expanded to launch new-generation jet drones, which are planned to be used for strikes against Ukraine.
