The Finance Ministry acknowledged that the federal budget deficit reached 3.449 trillion rubles ($43.5 billion) in January–February, almost 1.5 times higher than in the same period a year earlier.
Oil and gas revenues fell by half to 826 billion rubles ($10.4 billion) due to the decline in Russian oil prices and forced production cuts by oil companies. Non-oil revenues grew by only 4.1%, reaching 3.94 trillion rubles (about $49.8 billion). However, in real terms, accounting for inflation, they decreased by 1.6%.
Consequently, the budget spent nearly twice as much as it collected in taxes: 8.21 trillion rubles (approximately $103 billion) versus 4.76 trillion (approximately $60 billion). The deficit accumulated in the first two months of the year has already approached the full-year target of 3.78 trillion rubles (about $47.7 billion).
“Only two months have passed since the beginning of the year, and the budget is already in tatters,” said Alexander Kolyandr, a senior researcher at the Center for European Policy Analysis.
Despite increases in VAT and taxes on small businesses, Russian authorities already acknowledged in February that it would be impossible to fulfill all budget commitments this year, which is reflected in plans to revise the budget rule.
The proposal is to lower the oil price threshold at which the depleted National Welfare Fund can be used to cover budget shortfalls, which would likely lead to cuts in some expenditures. Since reducing military spending is considered unrealistic, funding for the already stagnating civilian economy will likely be reduced.
The Iranian war, which temporarily pushed the price of Brent crude above $100 per barrel, could help Russia’s budget, although much depends on how long the conflict lasts, said Petras Katinas, an expert at the Royal United Services Institute in London.
If the war ends within weeks, the effect will be minimal, but if it drags on, Russia’s economy could receive more substantial inflows.
“If oil prices do not remain high for long and the ruble does not weaken, the Kremlin’s budget problems will not disappear,” Kolyandr added. He warned that the government’s plan to collect more revenue from the non-resource sector is unlikely to succeed, noting that officials are preparing to lower the already modest economic growth forecast for the year from 1.3% to 0.7–1%.
Additional oil revenues generated by the Iranian war would most likely be used to finance Russia’s war against Ukraine, said James Henderson of the Oxford Institute for Energy Studies.
“No one will be surprised if military spending increases as a result,” he said. “There will be more money, and therefore, by default, more money will be allocated to military needs. This is certainly an undesirable consequence.”
Earlier it was reported that Russia’s oil and gas revenues in 2025 had fallen to their lowest level since the COVID-19 pandemic.