Russia’s oil collapse. Budget deficit surges – Reuters

Read also: Russia's oil and gas revenues plunge to record low

Why Russia’s budget deficit is rising

According to calculations by economists at a Russian government analytical center, energy revenues in 2026 could fall by 18% compared to the initial plan. This would push the budget deficit up to 3.5%–4.4% of GDP, while the official target is only 1.6%.

Overall revenues are expected to decline by 6%, reaching 37.9 trillion rubles.

The main pressures on the Russian economy remain the drop in oil purchases by India, rising trade discounts on Russian raw materials (over 20% below world prices), high interest rates, and a labor shortage.

In January alone, Russia’s budget revenues from the energy sector halved, reaching their lowest level since summer 2020.

Risk of depleting reserves

Currently, Russia has about 4.1 trillion rubles in budget reserves to cover the deficit. However, analysts predict that at the current rate of revenue decline, these funds could be almost entirely exhausted within a year.

VTB Bank analysts calculated that in 2026, the aggressor state could spend 2.5 trillion rubles from its reserves, leaving only a minimal "safety cushion" of 1.6 trillion rubles.

In addition, experts consider the assumptions in the current budget about reducing military spending unrealistic given the ongoing war.

Russian oil exports are falling

Previously, it became known that the US is increasing pressure on buyers of Russian oil to limit financing for the Kremlin’s war machine. In particular, sanctions on the tanker fleet Russia uses to bypass the price cap were discussed.

Indian refineries have also increasingly refused Russian premium-grade oil due to fears of secondary sanctions and payment issues.

In January, Russia’s revenue from oil and gas exports fell by almost half year-on-year, reaching the lowest level since July 2020.