<\/p>\n
Low oil prices, a\u00a0global glut of\u00a0crude, a\u00a0strong ruble, and sanctions are all weighing on\u00a0Russia\u2019s oil and gas revenues. As\u00a0a\u00a0result, oil and gas accounted for a\u00a0record-low share of\u00a0the federal budget\u2019s income in\u00a02025, marking Russia\u2019s weakest dependence on\u00a0commodities in\u00a0at\u00a0least two decades. The authorities are trying to\u00a0boost other sources of\u00a0revenue to\u00a0offset the shortfall, primarily through higher taxes on\u00a0households and businesses. Without shoring up\u00a0the budget this way, the state would struggle to\u00a0find the resources needed to\u00a0continue its war against Ukraine. Even so, the Kremlin shows no\u00a0sign of\u00a0moving toward peace \u2014 a\u00a0choice that bodes poorly for the Russian economy in\u00a02026.<\/p>\n
Why are Russia\u2019s oil and gas revenues falling?<\/strong><\/p>\n A\u00a0January report<\/a> from Russia\u2019s Finance Ministry on\u00a0the execution of\u00a0the 2025 federal budget showed a\u00a0sharp drop in\u00a0oil and gas revenues. Income from raw-material exports went down 23.8 percent, totaling 8.48 trillion rubles last year versus 11.13 trillion in\u00a02024. ($111.2 billion versus $146 billion).<\/p>\n By\u00a0the end of\u00a02025, oil-and-gas revenues made up\u00a0less than 23 percent of\u00a0the federal budget, while other income accounted for just over 77 percent \u2014 something Russia hasn\u2019t seen in\u00a0at\u00a0least two decades. The last time the share of\u00a0commodity revenues fell below 30 percent was in\u00a02020, when pandemic lockdowns crushed global demand and oil prices.<\/p>\n Prices remain depressed today, and that \u2014 alongside a\u00a0strong ruble \u2014 is\u00a0one of\u00a0the main reasons Russia\u2019s commodity revenues are shrinking. In\u00a0December 2025, Russia\u2019s Urals crude fell<\/a> below $40 a\u00a0barrel. The global market is\u00a0awash in\u00a0oil: increased production and rising inventories have outweighed the impact of\u00a0potential export disruptions, according to<\/a> analysts at\u00a0the U.S. Energy Information Administration (EIA).<\/p>\n You\u2019re currently reading Meduza, the world\u2019s largest independent Russian news outlet. Every day, we\u00a0bring you essential coverage from Russia and beyond. Explore our reporting\u00a0here<\/a>\u00a0and\u00a0follow us<\/a>\u00a0wherever you get your news.<\/p><\/blockquote>\n Russian Finance Minister Anton Siluanov has already acknowledged<\/a> that the share of\u00a0oil and gas revenues in\u00a0the budget is\u00a0set to\u00a0fall even further by\u00a0the end of\u00a02026. His deputy, Vladimir Kolychev, has warned<\/a> that current trends, combined with the need to\u00a0front-load spending at\u00a0the start of\u00a0the year, will lead to\u00a0a\u00a0sizable budget deficit.<\/p>\n That said, it\u2019s too early to\u00a0draw firm conclusions about what impact the deficit will have. Advance payments are meant to\u00a0spread budget spending more evenly over the year. Additional revenues from raising the value-added tax to\u00a022 percent will only begin to\u00a0flow in\u00a0beginning in\u00a0the second quarter (taxes paid in\u00a0the first three months cover the previous year\u2019s fourth quarter). And the government still has tools to\u00a0plug budget gaps, including higher domestic borrowing and the National Wealth Fund\u2019s reserves (though those have shrunk by\u00a0roughly half during the full-scale war).<\/p>\n The EIA forecasts<\/a> an\u00a0average Brent price of\u00a0$56 a\u00a0barrel in\u00a02026, down from $69 in\u00a02025. Urals crude trades at\u00a0a\u00a0discount to\u00a0Brent under sanctions, yet the government\u2019s 2026 budget assumes an\u00a0average Urals price of\u00a0$59 a\u00a0barrel \u2014 one dollar higher than in\u00a02025. That leaves the budget exposed to\u00a0further shortfalls in\u00a0oil and gas revenues. \u201cCould oil and gas revenues end up\u00a0much lower than our projections? Of\u00a0course they could. That\u2019s not something we\u00a0control. We\u00a0will compensate using the National Wealth Fund, as\u00a0the [budget] rule provides for,\u201d Kolychev said in\u00a0January.<\/p>\n According to\u00a0Kolychev, the Finance Ministry is\u00a0counting on\u00a0faster growth in\u00a0non-oil-and-gas revenues this year. It\u00a0was precisely to\u00a0finance military spending that the authorities raised the main non-oil-and-gas tax \u2014 the VAT \u2014 to\u00a022 percent.<\/p>\n Russians pick up\u00a0the tab The Kremlin\u2019s new tax hike aims to\u00a0plug a\u00a0record deficit and fund the war \u2014 but it\u00a0may not be\u00a0enough<\/a>Russians pick up\u00a0the tab The Kremlin\u2019s new tax hike aims to\u00a0plug a\u00a0record deficit and fund the war \u2014 but it\u00a0may not be\u00a0enough<\/a>What about the rest of\u00a0the government\u2019s revenues?<\/strong><\/p>\n Amid ongoing increases in\u00a0a\u00a0wide range of\u00a0taxes and fees on\u00a0households and businesses, other revenues are in\u00a0better shape than Russia\u2019s income from oil and\u00a0gas. By\u00a0the end of\u00a02025, non-commodity revenues were up\u00a012.6 percent compared with 2024. Even so, the total haul from non-oil-and-gas sources \u2014 28.8 trillion rubles ($377.2 billion) \u2014 still came in\u00a0below<\/a> what had been projected when the budget was approved back in\u00a02024 (29.36 trillion, or\u00a0$384.5 billion).<\/p>\n On\u00a0the spending side, the federal budget overshot its targets by\u00a0nearly 7 percent last year. The result was<\/a> a\u00a02025 budget deficit of\u00a05.6 trillion rubles ($73.4 billion), or\u00a02.6 percent of\u00a0GDP \u2014 slightly below the fall estimate of\u00a05.7 trillion ($74.7 billion).<\/p>\n Under the government\u2019s plan for 2026, the budget will remain in\u00a0the red, but the deficit is\u00a0expected to\u00a0narrow drastically, to\u00a01.6 percent of\u00a0GDP (down from 2.6 percent in\u00a02025). Making that forecast a\u00a0reality would require exceptionally strong tax collection across the economy, including flawless receipts from the higher VAT, pushing ahead with plans to\u00a0ramp up\u00a0domestic borrowing, and the absence of\u00a0any unplanned, emergency spending, such as\u00a0bailouts of\u00a0state-owned companies or\u00a0regional budgets.<\/p>\n What lies ahead for Russia\u2019s budget?<\/strong><\/p>\n The drop in\u00a0oil and gas revenues is\u00a0unfolding alongside a\u00a0broader economic slowdown \u2014 one so\u00a0pronounced that growth has essentially stalled. According to\u00a0Russia\u2019s Federal State Statistics Service (Rosstat), GDP growth fell to\u00a00.6 percent in\u00a0the third quarter of\u00a02025, down from 1.1 percent the previous quarter. (Data for the fourth quarter have yet to\u00a0be\u00a0released.) <\/p>\n Other indicators point in\u00a0the same direction. In\u00a0January, the Central Bank\u2019s Business Climate Index slipped<\/a> to\u00a01.7 from 2.6 a\u00a0month earlier, while capacity utilization declined for a\u00a0fourth consecutive quarter. The Central Bank now expects<\/a> the economy to\u00a0grow by\u00a0just 0.5\u20131.5 percent this year; the Economic Development Ministry puts the ceiling even lower, at\u00a0no\u00a0more than 1.3 percent.<\/p>\n \u201cIt\u2019s still too early to\u00a0say that the current structure of\u00a0the economy is\u00a0forcing Russia to\u00a0scale back the war,\u201d says<\/a> Alexandra Prokopenko, an\u00a0expert at\u00a0the Carnegie Russia Eurasia Center in\u00a0Berlin. \u201cMore accurately, the current structure of\u00a0the economy is\u00a0screaming that the war should never have been started.\u201d Russia\u2019s civilian industries are in\u00a0recession, Prokopenko says, and some sectors have already reached the stage of\u00a0deindustrialization, since all industrial growth over the past three years has come solely from the military-industrial complex.<\/p>\n Civilian production is\u00a0also being squeezed by\u00a0prohibitively expensive credit, a\u00a0result of\u00a0the Central Bank\u2019s high , which remains in\u00a0the double digits. At\u00a0its final board meeting of\u00a02025, the regulator only managed to\u00a0cut the rate to\u00a016 percent. The next meeting is\u00a0scheduled for February 13, but accelerating inflation<\/a> driven by\u00a0the VAT increase could force the Central Bank to\u00a0pause further easing and keep the rate unchanged.<\/p>\n The structure of\u00a0Russia\u2019s 2026 budget makes clear that military spending remains an\u00a0absolute priority for the Kremlin. The same can\u2019t be\u00a0said for investment in\u00a0production or\u00a0human capital. Between 2021 and 2025, the share of\u00a0military expenditures \u2014 combining defense and national security \u2014 rose<\/a> from 24 percent to\u00a040.3 percent. Now, it\u00a0is\u00a0set at\u00a038 percent for 2026. That expansion has coincided with sharp cuts to\u00a0social spending, which fell from 38 percent in\u00a02021 to\u00a025 percent in\u00a02026, and to\u00a0outlays on\u00a0the national economy, down from 17.6 percent in\u00a02021 to\u00a011 percent in\u00a02025\u20132026.<\/p>\n Stalling growth, falling oil prices, and the civilian sector sacrificed Meduza\u2019s top five takeaways on\u00a0the Russian economy heading into 2026<\/a>Stalling growth, falling oil prices, and the civilian sector sacrificed Meduza\u2019s top five takeaways on\u00a0the Russian economy heading into 2026<\/a><\/p>\n Text by\u00a0Yulia Starostina<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"Low oil prices, a\u00a0global glut of\u00a0crude, a\u00a0strong ruble, and sanctions are all weighing on\u00a0Russia\u2019s oil and gas revenues.…\n","protected":false},"author":2,"featured_media":309025,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[174],"tags":[79,179,18,19,17,1175,1170,1173,1162,1155,1167,1157,1168,1174,1163,1151,1158,1152,1160,1161,1153,1156,1154,1172,1166,1159,1171,1169,1165,1164],"class_list":{"0":"post-309024","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-eire","11":"tag-ie","12":"tag-ireland","13":"tag-1175","14":"tag-1170","15":"tag-1173","16":"tag-1162","17":"tag-1155","18":"tag-1167","19":"tag-1157","20":"tag-1168","21":"tag-1174","22":"tag-1163","23":"tag-1151","24":"tag-1158","25":"tag-1152","26":"tag-1160","27":"tag-1161","28":"tag-1153","29":"tag-1156","30":"tag-1154","31":"tag-1172","32":"tag-1166","33":"tag-1159","34":"tag-1171","35":"tag-1169","36":"tag-1165","37":"tag-1164"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@ie\/115975972759550375","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/309024","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=309024"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/309024\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/309025"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=309024"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=309024"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=309024"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}