Putin’s Ukraine war risks financial collapse for Russia - Washington Post

Despite statements by US President Donald Trump claiming that Russia is supposedly maintaining an advantage in the war against Ukraine, the country’s economic situation suggests otherwise.

Russian leader Vladimir Putin has spent a substantial portion of the cash reserves and borrowed funds that previously financed military expenditures, with new financial challenges looming ahead.

Impact of sanctions on the economy

New, tougher US sanctions targeting Russia’s oil sector are widening the budget deficit and creating additional risks for the financial system.

The restrictions have hit major companies, including Rosneft and Lukoil, forcing Moscow to offer oil discounts of more than $20 per barrel. Experts say the oil and gas industry is sliding into crisis, and the new measures are only accelerating this process.

Risk of a banking crisis

There are growing risks of defaults and a banking crisis next year, even if the Russian leader maintains a hard line in negotiations on ending the war.

Economists stress that 2026 could become the first year in which the war truly becomes a heavy burden for Russia’s economy.

Reaction of the elite and society

At the same time, most representatives of Russia’s elite do not expect mass social protests or economic hardship to influence the Kremlin’s political decisions.

By the end of 2025, Russia’s economic situation will continue to deteriorate amid rising inflation, a widening budget deficit driven by military spending, and declining oil and gas revenues, while economic growth is slowing noticeably.

Preparations for the New Year holidays in Russia are taking place amid a clear drop in consumer activity, as rising prices are forcing Russians to cut spending and forgo customary purchases.