How to shake the unshakable: why economic pressure on Russia must continue

The Kremlin's financial stability, which seemed unshakable in the first two years of the invasion, is beginning to show cracks. According to preliminary estimates of the Russian Ministry of Finance, the federal budget deficit for January-July 2025 amounted to approximately 4.879 trillion rubles (2.2% of GDP), while revenues grew only slightly during this period, compared to the sharp jump in expenditures.

In July, oil tax revenues dropped significantly: the oil production tax brought in RUB 885.2 billion, down 34% from a year ago and the lowest since January 2023. This coincides with the introduction of the price ceiling at the end of 2022 .

Another factor aggravating the situation is the growing consolidated deficit of regions and state funds. According to the Federal Treasury, this deficit exceeded RUB 4.95 trillion in the first half of the year. This is an additional source of risk to the overall financial stability of the Russian Federation. A deficit of this magnitude means that the government is spending significantly more than it earns, which could lead to borrowing, inflation, or reduced funding for critical expenditures.

This also signals an increase in pressure on regional budgets and state funds, weakening the country's overall financial stability. In addition, regional funds cover payments received by Russians who sign contracts with the Russian Ministry of Defense.

Despite all this, Russia continues to bluff, claiming to be able to wage a campaign "as long as it takes," to capture all of Ukraine, and other rhetoric that is disconnected from reality. In reality, these statements are just part of a negotiating strategy designed to hide economic weakness and military incapacity.