Russia on brink of economic crisis over war machine costs – Ukraine intel

Next week Russia’s State Duma will consider a government bill on revising federal budget indicators. Urgent action is required over huge imbalance in the budget’s revenues and expenditures, according to the SZRU press service

Mounting negative trends in Russia’s economy come as a result of a significant excess of expenditures over revenues, primarily due to the need to fuel Russia’s war machine against Ukraine, the Foreign Intelligence Service emphasized.

According to the review, due to the said imbalance, the Russian government is now being forced to increase budget deficit by 220% (from $12 billion to 42 billion). At the same time, the Russian finance ministry says the projected GDP growth rate will remain unchanged at 2.5%, allegedly because of the expected “increase in non-oil and gas revenues”.

In fact, the SZRU explained, this implies an unprecedented increase in tax pressure on businesses, believed to be the toughest in Russia’s recent history.

To normalize the situation of the economy, the Russian government intends to increase revenues from personal income tax by 180%, those from corporate profit tax by 110%, and by 17% – from value added tax. At the same time, up to 30% of small and medium-sized businesses in Russia are already on the verge of bankruptcy. By the end of 2025, their share is expected to increase to 50%.

As per Russia’s finance chief Anton Siluanov, “the priorities of the Russian budget remain unchanged… all national development goals will be met regardless of external conditions and factors…”.

However, intelligence analysts noted that the finance minister stops short of mentioning the fact that the Russian budget’s revenue part depends on critical oil exports by over 30%. In the first quarter of 2025, Urals oil significantly lost value.

Currently, purchases of Russian oil in the ports of Primorsk and Novorossiysk range at $47-49 per barrel, while the budget initially laid the price down at $69.7 per barrel. Therefore, the fall in Russia’s oil and gas revenues in annual terms could be up to 30%, or $30-40 billion, which is in fact equal to the Russian budget deficit for 2025.

“In the context of manipulating official statistics, the situation is similar with the inflation rate. The russian government sets the rate at 7.6 %, while we estimate that real inflation in Russia is already exceeding 20%,” the SZRU added.

As Ukrinform reported earlier, against the backdrop of decreasing hydrocarbon revenues to the budget, Russia is trying to increase revenues by increasing excise taxes on alcohol.