ANALYSIS: +5 Trillion Rubles — The Bet of a Spent Russian Economy

June 18, 2026: a financial bomb from London

On June 18, 2026, Bloomberg News published a report that traveled through trading floors and chancelleries like a shockwave: Russia plans to increase its military spending by an additional 4 to 5 trillion rubles in 2026 — roughly 40 percent more than what had been budgeted. To fund this surge, Moscow intends to borrow between 2 and 3 trillion additional rubles on the domestic market, the agency reported, citing anonymous sources.

The figure is staggering in its bluntness. The initial 2026 budget had already allocated 16.84 trillion rubles to defense and security — nearly 40 percent of the total federal budget of 44.1 trillion rubles. With the addition of 4 to 5 trillion, security spending could represent 41 to 45 percent of the total budget, and the defense-only budget could approach 18 trillion rubles ($244.8 billion). This is militarization without precedent in Russia's modern history, including compared to the Cold War years.

A deficit exploding even before the announcements

These projections for additional spending arrive as Russia's budget deficit is already out of control. According to data from the Russian Finance Ministry compiled by Bloomberg, the deficit for the first five months of 2026 reached 6 trillion rubles (2.6 percent of GDP), exceeding by 60 percent the initial annual target of 3.8 trillion. This deficit even surpasses the full-year 2025 deficit (5.6 trillion) — and we are only halfway through the year.

To compensate, Moscow is drawing on domestic borrowing at high interest rates — the yield on Russian government bonds is running around 15 percent. Debt servicing has become the fifth-largest line item in the federal budget, absorbing nearly 9 percent of total spending — roughly 4 trillion rubles per year. And that is before the additional borrowing planned to finance the war.

When I read these numbers, I think about what 5 trillion rubles means in human terms. It is the equivalent of 30 years of health spending for several large Russian regions. It is the monthly invoice for the war — 2.7 billion rubles per hour, according to economist Janis Kluge. And Putin wants even more. I do not know whether that is madness or calculation. Perhaps both.

5.9 trillion rubles in three months

Economist Janis Kluge, researcher at the German Institute for International and Security Affairs (SWP), published on June 12, 2026 an analysis that has become the reference in expert circles. His calculations, based on data published by the Russian Finance Ministry, show that Russian military spending reached 5.9 trillion rubles (approximately $83.2 billion) in the first quarter of 2026 — up 30 percent from the first quarter of 2025 (4.5 trillion).

That figure represented 46 percent of all federal budget spending — meaning practically one ruble in two spent by the Kremlin went to the war effort. For the first time since the start of the full-scale conflict, the military share crossed the symbolic threshold of 46 percent of the total budget. In terms of rate: 2.7 billion rubles per hour, 65 billion per day, 2 trillion per month. These figures are staggering — and they are accelerating.

The budget paradox: Moscow wanted to cut, it is spending more

The historical irony is striking: the 2026 budget law had projected a reduction in military spending from 7.8 to 6.2 percent of GDP — a nominal reduction that perhaps reflected hope for a diplomatic solution. Result: in just three months, military spending reached 12 percent of quarterly GDP, or double the annual target. If this pace holds — a hypothesis Kluge himself considers probable — Russian military spending could reach 9 to 10 percent of GDP for the full year. Unprecedented since the USSR.

How to explain this gaping chasm between forecast and reality? Economists advance two hypotheses. First hypothesis: massive advance payments on armaments contracts in the first quarter. Second hypothesis, more alarming: Russia has simply decided to accelerate its military spending because the situation at the front demands it — and the budgetary consequences have become secondary.

Kluge's analysis struck me through its rigor and restraint. He does not try to dramatize — he lays out the numbers. And the numbers are dramatic in themselves. 2.7 billion rubles per hour. I repeat: per hour. That is the equivalent of the annual budget of a mid-sized Russian city, spent in 60 minutes on a war that nobody in Russia seems able to stop.

June 10, 2026: the Duma erases budget limits

Revealing of the budgetary panic in Moscow: on June 10, 2026, the State Duma (the Russian parliament) approved a law allowing the government to increase spending and debt without the usual lengthy procedures for amending the budget law. Concretely, Moscow can now modify its borrowing and debt ceilings without parliamentary debate, without publicity, and without the delays that previously took months.

This law is an explicit admission that the Russian government can no longer manage its finances within the normal framework. By erasing the legal guardrails that had governed military spending, the Duma handed the Kremlin a blank check to spend as much as it wants — whenever it wants — on the war. Anton Siluanov, Finance Minister, made clear that changes to debt and spending plans will no longer be publicly disclosed. Russia's financial transparency, already limited, is now officially buried.

Internal financial alarm signals

Even before this law, alarm signals had emerged from within the Russian system itself. According to Bloomberg of June 1, officials from the Finance Ministry and the Russian Central Bank warned Putin that current military spending is on an "unsustainable" trajectory and risks dangerously widening the deficit. This is the most serious sign of internal division within the Kremlin since the full-scale invasion began. Central Bank Governor Elvira Nabiullina mentioned "pro-inflationary risks" tied to foreseeable budget overruns over the next three years.

Putin, according to sources cited by Bloomberg, refused to cut military spending. He instead asked the Finance Ministry to identify cuts in civilian sectors. The hierarchy of priorities is absolutely clear: the war above everything else. Healthcare, education, social welfare — everything can be compressed. Not the war machine.

When a country's Finance Minister and Central Bank Governor warn their head of state that spending is "unsustainable," that is an exceptional event. In a democracy, it would trigger a political crisis. In Russia, it is a politely ignored warning. But the warning was given. And it will be documented for history.

Borrowing at 15%: the debt trap

To finance the budget overrun, Russia is borrowing heavily on its domestic market. Russian government bonds (OFZ) trade at yields of approximately 15 percent — an extraordinarily high rate that reflects the risks perceived by domestic investors. These high rates are themselves a consequence of Central Bank policy, which maintains elevated benchmark rates to contain galloping inflation fueled by war spending.

The problem with this spiral: every ruble borrowed today costs 15 kopecks in interest per year. On 2 to 3 trillion rubles of additional borrowing, that represents 300 to 450 billion rubles in additional annual interest to be paid in coming years. A debt burden added to an already colossal bill. At the current pace, according to Le Grand Continent of June 20, 2026, Russia could devote 15 percent of its GDP to debt servicing over the next ten years — equivalent to its entire public debt outstanding.

The sovereign wealth fund: reserves melting away

The Russian National Wealth Fund (NWF) — the savings accumulated during the oil boom years — is draining before our eyes. According to the Institute for Strategic Sciences, its liquid assets fell from 9.7 trillion rubles in March 2022 to approximately 3.9 trillion in April 2026 — a two-thirds reduction in four years. At this pace, liquid reserves could be practically exhausted within the next 12 to 18 months, without a significant recovery in oil prices or a drastic reduction in spending — two unlikely scenarios.

Without a sovereign wealth fund, Russia will be entirely dependent on current revenues and borrowing to finance the war. Its oil revenues are compressed by sanctions and the price cap effect. Its borrowing is expensive. And its tax receipts are under pressure. The financial picture is bleak — even as the Russian government does everything to obscure it.

The Russian sovereign wealth fund — that war chest accumulated during the easy-oil years — was Putin's great insurance against economic shocks. Watching it shrink by 75 percent in four years is first-order strategic intelligence. Without that safety cushion, Russia will be far more vulnerable to the next shock — whether it comes from oil prices, sanctions or the front.

VAT up, services down

To partially offset the rise in military spending, the Russian government has raised VAT — bringing it to 22 percent this year. Healthcare, education and civilian infrastructure see their budgets compressed. Aid to small businesses has been cut. The rule is simple: everything not directly tied to the war can be cut. And Putin has asked government agencies to reduce their non-essential spending by 10 percent.

The State Duma warned at the end of June 2026 of the risk of an impending "social explosion" — a rare signal from a parliament that is normally servile. Duma members close to the real economy see rising prices, disappearing services, falling purchasing power. Inflation remains elevated. The cost of living is increasing. And Russian families are bearing the full brunt of the consequences of a war the Kremlin presents to them as an inevitable victory.

53 trillion rubles since 2022: a generation mortgaged

Since the start of the full-scale invasion in February 2022, Russia has spent a total of approximately 53 trillion rubles ($746.6 billion) on the war in Ukraine, according to Janis Kluge's calculations. To put the scale in perspective: this amount covers 28 years of budget spending on healthcare, 30 years of education spending and 100 annual budgets of major Russian regions. It is an entire generation mortgaged to a war whose strategic benefits remain deeply contested.

This spending carries deep social consequences that will only fully materialize in the years ahead. Human capital investments — education, health, research — that determine long-term economic growth are being sacrificed on the altar of short-term military spending. Putin's Russia is consuming its future in an attempt to conquer a past that no longer exists.

53 trillion rubles. 30 years of education. 28 years of healthcare. These numbers are abstract until you translate them into human terms: hospitals not built, schools not equipped, researchers not trained. Russia is paying the real cost of this war not in the trenches of the Donbas, but in its underfunded clinics and its universities watching their best minds leave.

Neither collapse nor recovery: structural purgatory

The most serious economists, including those at the Foreign Affairs Forum or the ISW, agree on one point: the Russian economy is not on the verge of collapse, but it is deteriorating structurally. Putin can still fund his war. But the hidden costs — growing debt, persistent inflation, brain drain, underinvestment in civilian life — are accumulating in ways that will not be easily reversed.

GDP contracted by 0.2 percent in the first quarter of 2026 — its first contraction in three years. The civilian construction sector is stagnating. Household consumption is softening. And medium-term prospects are grim: by maintaining military spending at 9–10 percent of GDP, Russia is inflicting on itself the same economic wounds as the USSR in the 1980s — the kind that do not kill immediately but undermine the foundations of any future growth.

Bloomberg was right, but not soon enough

It is worth recalling that the Bloomberg revelation of June 1, 2026 — financiers warning Putin of spending unsustainability — came as no surprise to economists who had been tracking the situation since 2022. What changed was the brutality of the first-quarter figures and the announcement of 4 to 5 additional trillion planned. Bloomberg crystallized what many knew: Russia is betting its economic future on a military victory that looks increasingly out of reach.

That bet may be rational from Putin's perspective: to stop now is to admit failure and risk losing power. To continue is to go all in on the military card — but stay in power while the dice fall. That is the logic of a dictator who has fused his personal fate with his country's fate. And it is precisely that logic that makes the situation so dangerous.

Putin's bet looks increasingly desperate to me. He is borrowing at 15 percent to fund a war that his own finance ministers call unsustainable, hoping Ukraine will collapse before he does. It is an existential wager — and dictators who make that kind of wager generally know only one outcome.

From financial cushion to structural exhaustion

The Russian National Wealth Fund (NWF) — designed as a safety cushion for crisis periods — has been systematically emptied since 2022 to fund the war. From 9.7 trillion rubles in March 2022, its liquid assets fell to approximately 3.9 trillion rubles in April 2026 — a reduction of more than 60 percent in four years. More significantly: Russia sold its physical gold reserves in November 2025, a desperate act that reveals the scale of its immediate financial needs.

This squandering of the sovereign wealth fund is irreversible in the short and medium term. Even if the war stopped, it would take years of budget surpluses to rebuild those reserves — and a post-war Russian economy would face massive reconstruction and industrial conversion needs. Putin has consumed the reserves his predecessors accumulated, mortgaging the country's financial stability for a generation. It is a political choice he made alone, without consultation or democratic mandate.

Domestic public debt: a worrying spiral

To compensate for the depletion of reserves, Russia is borrowing heavily on its domestic market. OFZs — Russian government bonds — are being issued at rates approaching 15 to 16 percent, reflecting the inflation and risk perceived by Russian investors themselves. These interest payments will absorb approximately 9 percent of federal spending in 2026, a sharply rising share. The more the state borrows at high rates, the more resources it must devote to debt servicing — a classic vicious cycle.

Russian banks, the primary holders of these government bonds, see their balance sheets loaded with assets of uncertain real value. If the government were to default on its obligations, the entire banking sector would suffer. Alexandra Prokopenko, a former Russian Central Bank official, was blunt: "Practically all non-military or social spending is on hold." Russia is operating on the credit of its own future.

What strikes me about Russia's financial management is the total absence of an exit strategy. Putin is spending the reserves, borrowing massively, raising taxes — but never explaining how he will repay this debt or replenish these reserves. It is a fait-accompli policy: commit the resources and sort it out later. That "later" belongs to future generations, not to the current regime. It is short-term politics financed by the long-term future of ordinary Russians.

Social budgets compressed to feed the war machine

As military spending explodes, Russian civilian budgets are being systematically compressed. Healthcare — already underfunded before the war — sees its allocations reduced in real terms. Regional hospitals are short of medications, equipment and medical staff, partly because doctors have left regions for military salaries or for exile. The life expectancy of Russian men, which had progressed in the 2000s, is declining again according to independent demographic data.

Education is in a similar situation. Russian universities are losing their best professors and researchers — gone abroad for political or economic reasons. Curricula have been ideologized, incorporating war propaganda into school programs. Over the long term, it is the cognitive and scientific capacity of the nation that is being damaged. A generation of students educated in a context of censorship and heightened nationalism will be less competitive in the global knowledge economy.

Civilian infrastructure in decay

Roads, bridges, drinking water networks, district heating systems — Russia's civilian infrastructure is suffering from chronic underinvestment worsened by the war. Regions distant from Moscow, already underfunded, see their budget allocations cut even further. Telling incidents are multiplying: burst pipes, collapsing aging buildings, heating failures in the depths of winter. These are symbols of the decay of a state that chooses missiles over plumbing.

Public investment in civilian transportation and telecommunications is frozen. Infrastructure projects announced with fanfare before the war have been quietly abandoned or postponed indefinitely. Russia increasingly resembles a country that devotes all its resources to war while letting the foundations decay on which a peacetime economy could eventually be rebuilt. It is an intergenerational sacrifice imposed by a single man.

There is a cruel paradox in this Russia of 2026: a country that claims to defend its civilizational greatness while letting its hospitals, schools and roads crumble. Putin's great Russia is a military power burning its own society as fuel. I do not know what historians will call this period — but I know they will not call it an era of greatness.

The verdict of the numbers

The figures of June 2026 paint a brutal portrait of the Russian economy. Deficit at 2.6 percent of GDP in five months. Military spending at 46 percent of the budget. Sovereign wealth fund reduced by two thirds. 5 additional trillion to be spent. Borrowing at 15 percent interest. These numbers do not describe a wartime economy that is suffering but holding — they describe an economy systematically devoured by its own war machine.

Pressure to maintain without letup

For Ukraine and its allies, the lesson is clear: maintain the pressure. Sanctions that create component shortages, military support that forces Russia to spend even more, and international exposure of Russian financial concealment efforts — all of these contribute to accelerating the structural deterioration of an economy that the war is consuming from within. Let us not let up now.

I end this analysis with a thought for ordinary Russians who are paying this bill: through heavier VAT, less well-equipped hospitals, pensions gnawed by inflation. They are not all responsible for this war. But they are paying the price. And when Putin is gone — for everything passes — it will be they who must rebuild what the madness of this war will have destroyed.

By Maxime Marquette, columnist

Editorial stance

I am not a journalist but a columnist and analyst. My expertise lies in observing and analysing the geopolitical, economic and strategic dynamics that shape our world. My work is to take political strategies apart, to understand global economic movements, to put the decisions of international actors in context and to offer analytical perspectives on the changes that are redefining our societies.

I do not claim the cold objectivity of traditional journalism, which stops at reporting facts. I claim analytical clarity, rigorous interpretation and a deep understanding of the complex issues that concern us all. My role is to give meaning to the facts, to place them in their historical and strategic context, and to offer a critical reading of events.

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