Russia economy under strain as deficit widens and strikes deepen
Russia's economy is showing fresh signs of strain as a widening budget deficit and deeper Ukrainian strikes test its resilience. A new report says growth is expected to slow to its weakest pace since 2022, even though Moscow has so far withstood years of Western sanctions and war spending. The picture is complicated by a separate windfall from higher global energy prices linked to the war in the Middle East, which has lifted Russian oil revenue.
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The report says the budget deficit is widening and that Ukrainian strikes are reaching deeper into the economy. It also says Russia still has more than $300bn in accessible reserves, giving the government a substantial financial buffer. That cushion has helped Moscow absorb pressure for longer than many analysts expected, but the latest assessment suggests the strain is becoming harder to ignore.
The United States has responded by moving to cut off part of that revenue gain. The US Senate has backed tariffs of up to 100 percent on buyers of Russian energy, a step aimed at reducing the benefit Moscow receives from higher oil and gas sales. The measure reflects growing concern in Washington that energy income continues to help finance Russia's war effort despite sanctions already in place.
The timing matters because Russia's economy has become a central front in the wider conflict. Since the start of the war, sanctions have sought to limit Moscow's access to finance, technology and trade, while the Kremlin has relied on energy exports and state spending to keep the economy functioning. A slowdown in growth, if sustained, would add pressure on public finances and could complicate the government's ability to support the war and the domestic economy at the same time.
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The report frames the current moment as a test of how far Russia can continue to absorb shocks. It points to the combination of war spending, sanctions and direct attacks on economic infrastructure as factors weighing on activity. At the same time, the accessible reserves cited in the report suggest the state still has room to manage short-term pressure, even if the longer-term outlook is weakening.
What remains unclear is how quickly the slowdown will feed through to households, industry and state spending, and how effective new US measures would be in practice. It is also not yet clear whether higher energy prices will continue to offset the damage from sanctions and strikes. The next focus will be on whether the deficit keeps widening and whether Moscow is forced to adjust spending or policy in response.
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