How long can Russia’s economy keep paying for the war?
Russia’s economy is close to a recession, but experts say the country can still afford to keep funding the war in Ukraine for now.
Even though new US and EU sanctions are hurting Russia and its economy is slowing down, experts believe this won’t stop Moscow’s ability to pay for the war anytime soon.
“Recession doesn’t mean much for Russia’s stability right now,” said Vladislav Inozemtsev, co-founder of the Center for Analysis and Strategies in Europe (CASE), an independent EU-based think tank.
Inside Russia’s economy
Military spending has helped keep Russia’s economy going, but warning signs are clear. Inflation is still high, and the economy is slowing down.
Inflation hit 10.3% in March and dropped to 8% in September — still twice the Bank of Russia’s target of 4%. Despite this, the central bank surprised markets by cutting interest rates again on October 24, reducing them by 0.5 percentage points to 16.5%.
Growth is being held back by high borrowing costs and a lack of workers, with unemployment at just 2.1%. Russia’s economy grew by 1.4% in the first quarter of 2025 and 1.1% in the second, compared to 4.1% growth in both 2023 and 2024.
Business confidence is also falling. The S&P Global Russia Composite PMI dropped to 46.6 in September from 49.1 in August — its lowest level since October 2022 — showing the private sector has been shrinking for four straight months. Both manufacturing and services have been affected.
Russia’s Economy Faces Slow Growth and New Sanctions
According to Oxford Economics, Russia’s economy has not entered a recession yet, which means it hasn’t seen two straight quarters of decline. However, the firm told Euronews Business that growth in the third quarter is expected to be very weak — only about 0.2% compared to the previous quarter.
Economists said they expect similar slow growth soon, but warned that new oil sanctions could push Russia into a recession.
Vladislav Inozemtsev from CASE told Euronews: “Business confidence is very low. Many business owners expect things to get worse, with little economic activity, lower consumer spending, and higher taxes.”
He predicts a mild recession in the coming months, with no growth in 2025 and a decline of 1% to 1.4% in 2026.
A report from the Center for Analysis and Strategies in Europe (CASE) said that Russia’s economy has adjusted to the war and is currently stable but stagnant. The report forecasts that Russia will face long-term political and economic stagnation over the next decade, with little progress or prosperity.
Do Sanctions Work?
In October 2025, the European Union and the United States announced new sanctions against Moscow. These add to the many restrictions already in place since Russia’s invasion of Ukraine in 2022.
The US placed direct sanctions on Rosneft and Lukoil, Russia’s two biggest oil companies, and their subsidiaries.
The EU approved its 19th package of sanctions, which includes:
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A full ban on Russian liquefied natural gas (LNG) starting in 2027
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A ban on oil and gas imports from Rosneft and Gazprom Neft
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New rules to stop Russia from avoiding earlier restrictions
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A ban on investment and financial services to Russia
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A ban on trading materials that support the war effort
The EU said these actions will “significantly increase pressure on Russia’s war economy.”
However, the Kremlin claims the new sanctions will not affect its economy or war strategy in Ukraine.
Experts say Russia is hard to pressure because it exports key products like oil, gas, fertilisers, wheat, and precious metals. Russia has also found ways to avoid sanctions — such as using a “shadow fleet” of oil tankers and increasing exports to China and India.
Now is the time to stop the killing and for an immediate ceasefire. Given President Putin’s refusal to end this senseless war, Treasury is sanctioning Russia’s two largest oil companies that fund the Kremlin’s war machine. Treasury is prepared to take further action if necessary… https://t.co/tbJTyf8x2V
— Treasury Secretary Scott Bessent (@SecScottBessent) October 22, 2025
Experts are unsure if sanctions can really stop Russia’s war efforts, even if they push the country’s economy into recession.
Sanctions have affected Russia’s energy income, but energy sales are not the main source of money that funds the war, said Elina Ribakova from the Brussels-based think tank Bruegel.
Data from CASE shows that Russia’s federal budget now depends less on oil and gas. Their share of total revenues dropped from over 50% in 2011–2014 to just 25% by mid-2025.
This drop is due to lower oil prices, reduced oil production, a stronger rouble, and the effects of Western sanctions.
According to economist Vladislav Inozemtsev, Ukrainian drone strikes on Russian oil refineries have not greatly reduced exports. “If a refinery is destroyed, Russia just sells more crude oil instead of processed oil,” he explained.
Russia’s income from oil and gas is still going down because prices are falling. Analysts at Oxford Economics said that in September 2025, the Russian budget received RUB 582.5 billion (€6.3 billion) from oil and gas—25% less than in the same month in 2024.
“These sanctions don’t really matter,” Inozemtsev said. “Putin doesn’t pay for the war with foreign currency from exports. He pays in roubles, which the Central Bank can print or collect from taxes.” In fact, tax revenue from Russian businesses grew 13.2% year-on-year in October.
In the long term, if India and China buy less Russian oil, it could reduce income. But even if exports to both countries fall by one-third, “the military will not feel it for at least a year, maybe longer,” said Inozemtsev.
Experts at Oxford Economics agreed. They said the war could continue for years because Russia still has money in its sovereign fund—equal to 5.9% of GDP in September, including 1.9% in cash assets.
Another source of money is government borrowing within Russia. The budget deficit is expected to be 2.6% of GDP, and national debt could reach 17.7% of GDP by the end of 2025. This still gives Russia a stable financial outlook.
“The government can fund the war as long as the deficit remains manageable and is covered partly by the sovereign fund and partly by selling domestic bonds,” said Oxford Economics.
Inozemtsev also noted that private savings in Russian banks are large—about five times bigger than the entire 2025 military budget.
“So people should not expect that falling exports will quickly weaken Putin’s ability to fight the war,” he said. “We may only see real effects by late 2027.”
As for exports, it’s unclear if they will actually fall. “Most likely, Russia will keep exporting oil but at a bigger discount and through more middlemen to hide its origin,” said Ribakova. “It is almost impossible to track oil transactions between Russia and China.”
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