# ANALYSIS: Russia +5 Trillion Rubles for War — The Bet of an Economy at Breaking Point

> Imagine a country that spends 46% of its federal budget in a single quarter on its military and security forces, while its revenues cover only two thirds of those military expenditures. Imagine that same country whose GDP contracted by 0.2% in the first quarter of 2026 — its first contraction in three years. And imagine it now planning to increase its war spending by a further

- Author: Maxime Marquette
- Publisher: MadMax (https://mad-max.co)
- Section: Analysis
- Published: 2026-06-28
- Canonical URL: https://mad-max.co/en/article/analyse-russie-5-trillions-de-roubles-pour-la-guerre-le-pari-d-une-economie-a-bo

## Introduction: Putin's impossible equation

### A figure that staggers the imagination

Imagine a country that spends **46% of its federal budget** in a single quarter on its military and security forces, while its revenues cover only two thirds of those military expenditures. Imagine that same country whose **GDP contracted by 0.2%** in the first quarter of 2026 — its first contraction in three years. And imagine it now planning to increase its war spending by a further **4 to 5 trillion rubles** — that is **54 to 68 billion dollars more** than planned. That is the financial reality of **Russia** in **June 2026**.

These figures come from analysis published by **Bloomberg on June 18, 2026** and reported by **Meduza** and **Ground News**: **Russia** is considering increasing its war spending by an additional **4 to 5 trillion rubles** in 2026, which would bring the military budget to nearly **18 trillion rubles** — approximately **244 billion dollars**. If confirmed, military spending would represent approximately **41% of all planned budgetary expenditures**. Added to "national security" spending, the total security bloc could reach nearly **half of the entire federal budget**.

### What these figures reveal

These figures reveal something important about the trajectory of **Vladimir Putin's** regime. This is not merely a financial question — it is a question of political priorities pushed to their extreme. When nearly half of a national budget is devoted to war and repression, the regime has made an existential bet on military victory. And when that same country sees its economy begin to contract, it means that bet is slowly turning against it. This analysis attempts to decode the impossible equation **Putin** is trying to solve: financing an endless war with an economy that is running out of steam.

*+5 trillion rubles more for the war. When I try to visualize that sum — roughly $68 billion more than an already record military budget — I ask myself what it says about the state of mind of a regime that knows its survival is tied to a war it cannot afford to lose. That is the logic of asymptotic escalation.*

## The real numbers of Russia's war budget

### 46% of the budget in one quarter

The first quarter of **2026** revealed the true scale of Russian military spending. According to German economist **Janis Kluge** of the **German Institute for International and Security Affairs**, Russian military spending in Q1 2026 reached **5.9 trillion rubles** — approximately **$81.4 billion**. That represents **46% of total federal budgetary expenditures** for the quarter, and exceeds Q1 2025 military spending by **30%**. In other words: almost every other ruble spent by the Russian government goes to the military.

Even more concerning for the sustainability of this model: Q1 military spending alone represented **2.5% of the GDP forecast** for the entire year 2026. If the Q1 pace holds — not guaranteed but possible given the announced increases — military spending could reach **9 to 10% of GDP** in 2026. That is a level not seen since the most intense years of the Soviet **Cold War**. And even then, the USSR maintained it at the cost of its final collapse.

### The initial budget and its illusions

The budget initially adopted for 2026 projected "national defence" spending of **12.9 trillion rubles** — slightly less than the **13.5 trillion** of 2025. That was supposed to represent fiscal discipline, a signal that the Kremlin was aware of limits and sought to respect them. That intention quickly ran into the reality of war. **Ukrainska Pravda** reported on **June 18, 2026** that war spending could overshoot initial plans by **4 to 5 trillion rubles** — bringing the total to nearly **18 trillion rubles**.

That pattern of military budget overruns is not new. In **2025**, the actual fiscal deficit had systematically exceeded official projections. In **2026**, for just the first four months, the deficit had already reached **5.88 trillion rubles** — approximately **$78.9 billion** — one and a half times the projected annual deficit. The pattern is clear: Russia plans optimistically, executes with unlimited wartime spending enthusiasm, and bridges the gaps through debt and fiscal adjustments.

*The Russian budget is like a homeowner who promised to manage his finances but, once inside, cannot resist renovating every room at once. The deficit deepens, the debt climbs, and the foundations start to crack. Except this house is called a national economy — and when it falls, it is millions of people who pay the price.*

## The contracting GDP: the end of the mirage

### -0.2%: the first contraction in three years

On **May 15, 2026**, **Rosstat** — Russia's federal statistics agency — published data the Kremlin would have preferred to keep quiet: **Russian GDP contracted by 0.2%** in Q1 2026 compared to the same period the previous year. That is the first annual contraction in three years. The contrast with the **4% growth** of 2023 and 2024 — fueled by military spending — is striking. The war machine's ramp-up had created an illusory economic boom. The backlash has arrived.

Several factors explain this contraction. **Heavy snowfall** in January and February 2026 disrupted construction, one of the most dynamic sectors during the war. High interest rates maintained by the **Russian Central Bank** — kept in place to fight stubbornly high inflation — are strangling credit in the civilian sector. **Labour shortages** are severe, with unemployment below **3%** — not from prosperity but because hundreds of thousands of men are mobilized or have fled the country. And **sanctions** continue to degrade industrial productivity.

### The figures Rosstat prefers not to mention

Official **Rosstat** figures tend to be optimistic. A publication by **The New Voice of Ukraine** cited data from the Ministry of Economic Development showing a **0.3%** contraction — slightly worse than the official figures. The non-natural-resources sector entered recession for the first time since the war began, contracting by **0.7%**. Clothing production fell by **13.9%**, metallurgy by **10.1%**. Even the military-industrial complex — absorbing immense state resources — showed signs of contraction with a **0.8%** decline in the "finished metal products" category, which includes ammunition.

The **IMF** revised its growth forecast for 2026 downward to **0.8%**. Russia's Ministry of Economic Development projects **1.3%** — a figure that, accounting for inflation, represents stagnation or slight contraction in real terms. The **Bank of Finland** estimates that Russian growth has returned to its long-term structural potential of approximately **1%** — signaling that the temporary war-stimulation factors have been exhausted. The country is entering a phase of structural economic deterioration.

*-0.2% may seem a modest figure. But in the context of an economy that claimed to be growing at 4% thanks to the war, it is a powerful alarm signal. The narrative of "the Russian economy withstands sanctions" is beginning to crack. Not yet collapse — but the beginning of the end of the illusion.*

## The National Wealth Fund: the safety net that is fraying

### From 6.5% to 1.8% of GDP in four years

**Russia** entered the full-scale invasion in **February 2022** with a sovereign fund — the **National Wealth Fund (NWF)** — whose liquid assets represented approximately **6.5% of GDP**. That financial cushion was supposed to give the Kremlin a reserve to weather economic shocks. By **April 2026**, according to the **Foreign Affairs Forum** analysis published on **June 23, 2026**, the NWF's liquid assets had fallen to just **1.8% of GDP**. Four years of war have practically drained that reserve.

**Russia** has sold gold reserves to cover budget deficits. It has drawn on the NWF to finance military overspending. And according to the **Kiel Institute for the World Economy**, the country now faces "structural exhaustion" — reserve assets available for future shocks are now minimal. If a major new economic shock were to occur — an oil price collapse, additional sanctions, or a banking crisis — **Russia** would have virtually no financial buffer left to respond with.

### Public debt in acceleration

To finance the deficit created by military spending, **Russia** increasingly resorts to **public debt** — primarily domestic bond issuances (**OFZ**), in a context where access to international capital markets is closed off by sanctions. That rapidly expanding domestic debt has several negative effects: it siphons capital from the private sector (crowding out), it increases future budget interest charges, and it creates growing exposure of the Russian banking system to sovereign debt — a fragility that could prove dangerous if confidence in Russian finances were to erode.

Bloomberg reported in June 2026 that **Russia** was "accumulating debt as Ukraine war costs exceed budget." The headline says it all: this is no longer simple budget management — it is debt accumulation driven by a war whose costs chronically exceed projections. Russian finance officials had told **Putin** that war spending was "unaffordable" according to a Bloomberg report of June 1, 2026 — a warning the Kremlin appears to be ignoring.

*The National Wealth Fund fallen to 1.8% of GDP — that is the last safety cushion disappearing. Russia was once proud of its fiscal prudence, its accumulated reserves. All of that has been burned to finance a war that no one in Moscow dares call what it is: a wide-open budgetary catastrophe.*

## Oil revenues: the pillar that is collapsing

### A price cap at $44.10 and Urals at $44.3

The **21st EU sanctions package** of June 2026 maintained the **price cap on Russian oil at $44.10 per barrel**. The **Urals** price — Russian crude — was at **$44.3 per barrel** in June 2026. That is not a coincidence: the convergence between the sanctions ceiling and the market price illustrates the mechanism's effectiveness. And that price is far from recent highs: Urals were still trading at **$109.7 on April 2**. The fall has been spectacular.

For the Russian budget, this reality is devastating. Oil and gas revenues had fallen **24% in 2025** compared to 2024 — a decline that temporarily elevated oil prices driven by the Middle East conflict in 2025–2026 had partly offset. But with Urals near the sanctions cap, that window has closed. Russian energy revenues for 2026 are structurally degraded — not by bad luck, but by the cumulative effect of sanctions, Ukrainian strikes on refineries, and falling prices. That degradation of the oil pillar creates a permanent budgetary strain.

### Putin extends the ban until end of 2027

**Vladimir Putin** responded to the oil sanctions by signing a decree extending the **ban on trade with countries applying the price cap** through end of **2027**. That is a symbolic measure for domestic political survival — it allows Putin to present the situation as a sovereign choice rather than an imposed constraint. In substance, it changes nothing about the market price or the effectiveness of the sanctions cap, but it offers a domestic narrative. **Russia** continues to sell its oil to whoever it can — **China, India, Turkey** — but at discounted prices that reduce its real revenues.

Russian energy revenues had fallen **40% over twelve months** through April 2026, according to Trading Economics data. That spectacular fall, combined with record military spending, creates a structural gap in the Russian budget that neither the VAT increase to 22%, nor domestic borrowing, nor the freezing of social programs can entirely bridge. Russia's budget model is under growing stress — not yet in open crisis, but in continuous degradation whose end point depends on the length of the war.

*The $44 price cap is working. That was not obvious at the outset — many skeptical experts doubted its effectiveness. The June 2026 data show that Russian oil is indeed selling near that ceiling, depriving Moscow of billions in monthly revenues. This is an economic sanction that is bearing fruit — slowly, but concretely.*

## Tax hikes: Russians are paying for the war

### VAT at 22%, new taxes, slashed social services

To try to bridge the budgetary gap, the Kremlin has imposed several tax increases. **Value Added Tax (VAT)** was raised from **20% to 22%** — an additional levy on every purchase by Russian consumers. The corporate tax threshold was lowered, extending the tax burden to small businesses. New taxes and fees were introduced across numerous sectors. And social spending — pensions, family assistance, healthcare — has been cut to its lowest level in at least **20 years**, falling to **25% of the budget** from **38% before the war**.

It is ordinary Russian citizens who are financing the war. They pay higher taxes, receive fewer social services, face persistent inflation, and cannot freely protest. **RBC-Ukraine** reported in December 2025 that the 2026 budget signed by Putin "allocated record spending to the war while drastically cutting social programs and citizens' welfare." The substitution of social spending by military spending is a transfer of wealth from citizens to the war machine — a political decision that has social limits the regime will eventually have to confront.

### Inflation: the invisible tax

**Inflation** is the hidden tax Russians pay on top of the official increases. Driven by massive public spending, shortages of consumer goods, and the distortions created by the war economy, Russian inflation remains stubbornly high — between **7 and 9%** by most estimates. The **Russian Central Bank** maintains high interest rates to rein it in, but that simultaneously throttles private investment and growth. This dilemma — between inflation control and growth support — is unsolvable in the context of a massively militarized economy.

Inflation erodes the purchasing power of the population, a significant portion of which has no income indexed to inflation. Pensioners, civil servants, small business owners — all watch their living standards progressively deteriorate. That silent erosion of popular well-being is perhaps the most durable pressure on the regime's long-term legitimacy. A population impoverished, even under repressive control, eventually expresses its discontent — sometimes unexpectedly.

*VAT at 22% in Russia — concretely, every Russian paying every day, with every purchase, for a war Putin imposed without asking their opinion. Economic conscription accompanies military conscription. And unlike soldiers, consumers cannot flee abroad.*

## The impact on the civilian sector: a two-speed economy

### The military-industrial complex thrives, the rest suffers

Russia's economy in **2026** is a two-speed economy. On one side, the **military-industrial complex** runs at full capacity, benefiting from virtually unlimited state orders, priority access to scarce resources, and high wages that attract skilled workers. Arms-factory workers often earn two to three times as much as their civilian-sector counterparts. On the other side, the civilian sector — clothing production, agri-food, personal services — is contracting, deprived of skilled labour and capital drained toward the war.

This duality creates a **hidden civilian deindustrialization** that overall GDP statistics partially mask. If defence production growth is isolated, the rest of the economy is probably already in recession. The **Foreign Affairs Forum** noted in its June 23 analysis that "the civilian sector is contracting in real terms." Russia is building tanks instead of cars, missiles instead of refrigerators. That substitution can be maintained during wartime, but it accumulates a development lag that peace will eventually have to address.

### Labour shortages: the demographic blowback

The Russian economy suffers from compounding **labour shortages**. The official unemployment rate below **3%** does not reflect economic vitality — it reflects the mobilization of hundreds of thousands of men into the military, the emigration of several hundred thousand skilled Russians (IT professionals, engineers, professionals) following the **2022** mobilization, and the concentration of remaining workers in the defence sector at the expense of other sectors. That labour shortage generates wage inflation in the militarized sector and scarcity in the civilian sector.

Long-term demographics aggravate the problem. **Russia** already had an unfavorable demographic profile — an aging population, low birth rate, limited immigration. The war has added to that demographic deficit military casualties whose real scale is not published. Western estimates suggest hundreds of thousands of dead and wounded on the Russian side since 2022. Those losses are not only humanly tragic — they are economically devastating for an economy that was already short of working-age labour.

*A labour shortage at 3% unemployment while mass-producing tanks: that is the paradox of the war economy. Russia is consuming its human resource for a war from which it cannot emerge as an economic winner. It is the classic pattern of an empire that destroys itself trying to defend itself.*

## The 21st sanctions package: a tightening vice

### Energy, finance, crypto, fisheries, shadow fleet

The **21st sanctions package** adopted by the **European Union in June 2026** extended restrictions to new sectors. The measures target intermediary companies facilitating the circumvention of previous sanctions, cryptocurrency platforms used for Russian financial transactions bypassing the international banking system, and the **shadow fleet** — those tankers under flags of convenience carrying Russian oil in circumvention of the price cap. The package also includes a reinforced ceiling on Russian petroleum products at **$44.10**, down from the previous level.

These new sanctions deliberately target the gaps in previous frameworks. Russia's **shadow fleet** — estimated at several hundred vessels — had allowed Moscow to maintain its oil exports despite restrictions. By more directly targeting those vessels and their insurers, the **EU** seeks to reduce that circumvention capacity. Results will take months to materialize fully, but the direction is clear: each new package tightens the vice on Russian financial and commercial flows.

### The split within the EU

The sanctions policy is not unanimous within the **EU**. **France** and **Italy** opposed certain measures in the package, notably the entry ban on former Russian soldiers. That division reflects differing economic interests — some EU members have more significant economic relationships or communities of Russian origin than others. These internal frictions do not fundamentally endanger the sanctions regime, but they create gray areas that Russia can try to exploit to circumvent certain measures.

The long-term consistency of the sanctions regime is one of the key stakes for the durability of economic pressure on Russia. If divisions deepen and some **EU** members begin to unilaterally soften measures, the effectiveness of the entire apparatus could be compromised. That is why **Zelensky's** special adviser on sanctions, who stated on **June 26, 2026** that the Russian economy had reached a "dead end," insisted on the necessity of maintaining and reinforcing collective Western pressure.

*The Franco-Italian division on sanctions worries me. Not because it immediately endangers the sanctions regime, but because it signals different priorities within the Alliance. Moscow watches those fissures closely and exploits them diplomatically. Sanctions coherence is an internal Western political battle as much as an external pressure on Russia.*

## The Russian economy: not yet collapsed, but structurally exhausted

### The verdict of the Foreign Affairs Forum

The **Foreign Affairs Forum** analysis of **June 23, 2026** offers the most balanced assessment available: Russia is "not on the verge of a sudden catastrophic collapse," but is undergoing "a slow, structurally damaging deterioration that, if sustained by continued Western pressure, could materially constrain Moscow's ability to wage prolonged high-intensity warfare within a 2-to-3-year horizon." That nuanced framing is more useful than prophecies of imminent collapse or assurances of infinite resilience.

The reality of the Russian economy in **mid-2026** is that of a two-speed system in the process of structural exhaustion: the military-industrial sector maintained on a state drip, the civilian sector in real contraction, sovereign reserves practically depleted, oil revenues in structural decline, debt rising, inflation persistent, and demographics deteriorating. This is not the immediate crisis that some had hoped for — but it is a trajectory that makes the war increasingly costly and decreasingly tenable in the medium term.

### Putin's dilemma: stop or continue?

**Putin's** real dilemma is a classic of game theory: he has invested so much in this war — militarily, politically, economically — that stopping now without a visible victory would be perceived as a catastrophic political defeat for his personal survival. But continuing inexorably worsens the economic deterioration, at the risk of a financial crisis that would be even more destabilizing. That is the **sunk cost trap** applied to geopolitics: the more one has invested, the harder it is to stop — even when continuing is irrational.

That dilemma is the underlying logic behind recent statements about a possible resumption of negotiations. **Zelensky** on **June 26, 2026** stated that Ukraine was ready for meetings but that Russia had to take the first step. **Lavrov** affirmed that Russia was ready for talks "at any time." These diplomatic signals, even if they have not yet led anywhere, suggest that economic and military pressure is beginning to create conditions conducive to reopening negotiation channels.

*The sunk-cost trap applies to Putin in a spectacular way. He has invested so much — humanly, economically, politically — in this war that he can no longer retreat without putting himself at risk. But continuing exhausts him. That is the most dangerous scenario: a cornered regime that prefers escalation to capitulation. I will admit: that worries me.*

## Historical comparison: precedents of overextended war economies

### The USSR: the precedent Putin wants to forget

The Soviet **Cold War** offers an instructive precedent. At the most intense moments of competition with the United States in the 1980s, the **USSR** devoted between **15 and 20%** of its GDP to defence — far more than the **9 to 10%** estimated for Russia in 2026. But the USSR maintained those levels in the context of a closed planned economy, without the dependence on hydrocarbon export markets and without the sanctions that have emerged since 2022. The outcome is known: that military exhaustion, combined with other factors, contributed to the Soviet system's collapse in 1991.

Russia in 2026 is not the USSR — it has a more diverse economy, more integrated into global markets (even if diminishingly so), and Putin does not have to manage an empire of satellite countries. But the fundamental lesson applies: economies cannot indefinitely maintain military spending levels that deplete their reserves, contract their civilian sector, and deprive their population of services. There is always, eventually, a breaking point.

### Nazi Germany: another lesson

Another historical precedent: **Nazi Germany** between 1939 and 1945, which maintained a very high-intensity war economy for six years before its final collapse. The key to that maintenance was the conquest and looting of occupied economies. **Russia** has no access to that substitution mechanism — it does not control large captured economies. It depends on its hydrocarbon exports, which sanctions have reduced, and on its autocratic allies who supply ammunition but not capital. The comparison has its limits, but the general pattern — military overextension, progressive economic exhaustion, structural degradation — is telling.

What history teaches consistently: economies that militarize beyond their structural productive capacity eventually collapse — sometimes rapidly, sometimes slowly, but inexorably. **Russia** in **2026** is following that trajectory. The question is not "if" but "when" and "how" — and whether democracies maintain pressure long enough for that "when" to arrive before further irreparable damage is done to Ukraine.

*The comparison with the late USSR is inevitable and troubling. Putin sees himself as Stalin's heir. But the economic conditions that broke the USSR — military overextension, civilian economy abandoned, reserves exhausted — are reproducing themselves. History has a patience that dictators often overestimate.*

## The outlook: three scenarios for 2027

### Scenario 1: Budgetary escalation and medium-term crisis

In the first scenario, **Russia** continues to increase military spending beyond its budgetary capacity, financing the growing deficit through debt and monetary issuance. Inflation spirals. The central bank loses control of price stability. The ruble depreciates significantly. Remaining reserves are exhausted. A financial crisis begins to take shape within **12 to 24 months**. This scenario requires that Western sanctions be maintained and reinforced — and that oil prices remain low.

This scenario is possible but not guaranteed. Russia has already surprised with its resilience. It could find new financing sources, new sanctions workarounds, or benefit from an unexpected oil-price surge. It would be imprudent to count on this collapse as the West's primary strategy. But maintaining economic pressure remains the best way to increase the probability of that outcome.

### Scenario 2: Prolonged stagnation and war of attrition

The most probable scenario is one of **progressive deterioration** — neither immediate collapse nor economic resurgence. Russia continues to finance the war with growing deficits, rising debt, and an impoverished population. The economy stagnates in a **0 to 1% growth range**, masking real contraction in the civilian sector. Military spending maintains an appearance of economic vitality. And the war drags on in a war of attrition whose outcome depends on the relative endurance of both sides and the constancy of Western support for Ukraine.

In this scenario, the role of additional military spending is to extend Russia's fighting capacity without resolving the underlying structural problems. Russia can hold on longer than expected, but at an economic cost increasingly visible to its population. Demographic pressure, progressive impoverishment, and social frustration create risks of long-term internal destabilization.

### Scenario 3: Negotiation under economic constraint

The third scenario — which Ukraine and its allies hope for — is one in which economic pressure, combined with military setbacks, forces **Russia** into serious negotiations. The alarm signal of **June 26, 2026** — Zelensky's adviser stating that the Russian economy had reached a "dead end" — could be an accurate reading of reality, if pressures are sustained. Zelensky's 40-day campaign, the new sanctions, the deep strikes, and the economic deterioration could converge to create a negotiating window before winter.

That scenario requires consistency and perseverance on the Western side — maintaining sanctions, military support for Ukraine, diplomatic unity. It also requires that Russian decision-makers make a rational calculation about their long-term interest. That last point is, I will admit, uncertain — autocratic regimes are not always rational in their defensive behavior.

*The scenario of negotiation under economic constraint is appealing, but I remain cautious. Putin has proven he can absorb economic suffering without changing course. The real question is: where is the limit? And that limit is unfortunately invisible from the outside.*

## What the West must do

### Maintain the pressure, resist the temptations

Faced with this Russian economic reality, the Western strategy is clear: **maintain and reinforce sanctions**, continue military support for Ukraine, and resist the temptations of premature normalization. Any easing of sanctions or commercial compromise would be a lifeline for a regime in difficulty. The temptation is real — some European businesses would like to reopen Russian markets, some governments seek to avoid the economic costs of sanctions. But the logic of economic pressure demands a consistency that the West has not always been able to maintain in its previous crises.

The **21st sanctions package** of June 2026 shows that the European Union is maintaining that pressure despite internal dissensions. That is good news. The next step must be to close the most effective circumvention channels — notably through **China** and third-party states. That requires demanding economic diplomacy with Beijing, Ankara, and other key actors who are not naturally aligned with Western objectives but can be influenced by their own economic interests.

### Fund Ukraine to accelerate the convergence

The best way to accelerate Russian economic degradation is to reinforce Ukraine's capacity to pursue its deep-strike campaign against Russian economic and military infrastructure. Every additional refinery destroyed, every struck weapons factory, every fuel convoy burned contributes to the economic equation constraining the Kremlin. Military support for **Ukraine** and economic pressure on **Russia** are two sides of the same strategy: making the continuation of war costly enough that the political calculation in Moscow eventually shifts toward preferring negotiation over continuation.

The paradox is that the best way to obtain peace is to intensify military and economic pressure — not ease it to "create space for dialogue." The history of peace negotiations shows that parties accept significant concessions when they are under pressure, not when they are offered accommodations. Maintaining and increasing pressure, across both the military and economic dimensions, is the strategy most likely to lead to a durable peace.

*Funding Ukraine is not altruism — it is enlightened self-interest. Every dollar invested in supporting Kyiv costs Moscow far more: in additional military spending, in destroyed infrastructure, in lost oil revenues, in worn political capital. It is the most strategically valuable investment the West can make right now.*

## The shadow fleet and sanctions circumvention: a gap that is closing

### The phantom fleet as a petroleum survival valve

For more than two years, **Russia** managed to partially circumvent the **price cap on its oil** through the **shadow fleet** — a fleet of uninsured tankers flying flags of convenience, transporting Russian crude beyond Western restrictions. That fleet, estimated at over **600 vessels** in early **2026**, allowed **Moscow** to export at prices above the **$60** ceiling to Asian buyers, particularly **China** and **India**. The **21st EU sanctions package** adopted in June **2026** directly targets that gap: it targets shadow-fleet vessel insurers, the ports that receive them, and the financial intermediaries that facilitate those transactions.

The impact of the new **$44.10 price cap** — set by the **21st package** — is already visible in market data. According to **S&P Global**, the **Urals**, Russia's benchmark crude, is now trading around **$44.3 per barrel** in June **2026**, versus **$109.7** at the April 2 peak. That fall of more than **60%** represents an oil revenue loss of around **$200 to $300 million per day** for the Russian budget. The progressive drying up of the **shadow fleet** as a circumvention mechanism is a concrete victory for the sanctions regime that Russia cannot compensate in the short term.

### Russia's allies under Western pressure

Third-party countries facilitating sanctions circumvention — **Turkey**, the **United Arab Emirates**, **Kazakhstan** — face growing diplomatic and economic pressure from the **West**. Secondary sanctions threaten to cut Turkish or Emirati banks off from the international financial system if they continue processing transactions related to Russian oil exports above the cap. That pressure is bearing fruit: several **Turkish** and **UAE** banks have reduced their exposure to Russian transactions, further complicating the financing of **Moscow's** exports. The sanctions circumvention network is shrinking month by month.

**France** and **Italy** expressed reservations about certain measures in the **21st package**, particularly concerning the entry ban for former Russian soldiers — a division that illustrates the internal tensions within the **European Union** over sanctions management. But on the essentials — targeting the **shadow fleet** and reinforcing the **price cap** — European cohesion held. For **Russia's war economy**, that is bad news adding to an already long list of structural constraints.

*The shadow fleet was the open secret of Russian sanctions circumvention. Everyone knew, but no one really acted. The 21st package changes things — not because it is perfect, but because it closes the international community's eyes to oil transfers above the cap. That was the minimum acceptable. It took too long.*

## Militarized GDP: when statistics mask civilian collapse

### The facade growth of a war economy

Russian **GDP** figures present an apparent paradox: the economy posted **3.6% growth in 2024** and **4.1% in 2023**, feeding the narrative that "the Russian economy withstands sanctions." But those growth figures are almost entirely driven by **military spending** — ammunition factories running at full capacity, defence contractors hiring at premium prices, military salaries inflating consumption in certain regions. That type of growth does not create real wealth — it consumes existing resources and accumulates future debts. **GDP expansion** financed by monetary creation and military spending is a facade accounting beneath which a contracting civilian economy is hidden.

The **Q1 2026 contraction of -0.2%** is a sign that even that militarized growth is no longer enough to mask the decline in civilian production. Inflation exceeds **9%**, the central bank's key rate is at **21%** — a level that stifles all private investment —, and unemployment at **3%** is the symptom of a labour shortage tied to the mobilization of millions of workers toward defence factories or the front. This economy is in simultaneous military overheating and civilian starvation — a structurally unsustainable state.

### What ordinary Russians are actually living

Behind the official statistics, the daily reality of **ordinary Russians** is one of **persistent inflation**, increasingly expensive consumer goods, and increasingly degraded civilian public services. The **Russian 2026 budget** now allocates more than **40% of its spending to defence and security** — which means every ruble spent on the war is a ruble not spent on hospitals, schools, civilian infrastructure. The **VAT raised to 22%** in **2025** has increased the cost of living for households, while wages in civilian sectors stagnate against inflation. That is an **economic exaction** that **Putin's** regime imposes on its own population without asking their opinion.

Analysts at the **Foundation for the Advanced Rule of Law (FAF)**, in their study of **June 23, 2026**, concluded that the Russian economy had reached a structural **dead end**: it can no longer grow without financing the war, and financing the war prevents any durable civilian growth. That is the trap of a prolonged war economy — a trap that **Russia** built for itself by invading **Ukraine** in **2022**, and from which it can no longer escape without a major political decision that **Putin** refuses to contemplate.

*Russian GDP growth funded by military spending is like inflating a balloon with your own air: it looks impressive for a while, but the lungs tire and the balloon deflates in the end. Russia's economy is living through that moment. The -0.2% of Q1 2026 is not a statistical footnote — it is the first sign of the deflation to come.*

## Conclusion: The all-in bet of war at any cost

### An economy sacrificed for a regime

The decision to increase war spending by **4 to 5 trillion additional rubles** in 2026, in a context of contracting GDP, exhausted reserves, falling oil revenues, and persistent inflation, is the testament of a regime that has chosen to sacrifice the national economy on the altar of its political survival. This is not economic strategy — it is political survival disguised as military doctrine. **Putin** knows that losing the war probably means losing power. He is therefore prepared to make his people pay that price for as long as necessary.

The Russian economy has not yet collapsed — and prophecies of rapid collapse have proven premature since 2022. But the trajectory is clearly negative. The National Wealth Fund is practically empty. Public debt is rising. Inflation is persistent. The civilian sector is contracting. And military spending keeps increasing, increasingly exceeding what revenues can finance. This is not a sustainable policy — it is the desperate bet of a regime that hopes victory will come before bankruptcy. A bet that the West has every interest in seeing lost.

### The West's role in this denouement

The outcome of this impossible economic equation depends in large part on the decisions the West will make in the months ahead. Maintaining sanctions, supporting Ukraine, closing circumvention channels, increasing pressure on Russia's third-party allies — all of this contributes to accelerating Russia's economic degradation. The objective is not to destroy the Russian people, who also suffer the consequences of their leader's war. The objective is to make the continuation of war so costly that the political calculation in Moscow eventually shifts. The window is open. The pressure must continue.

*Putin bet that the Russian economy could finance a long war. That bet is proving increasingly risky. The reserves are depleting, the shadow fleet is shrinking, inflation gnaws at purchasing power, and civilian factories close while tank factories run at full capacity. History will judge that choice. Ordinary Russians are already paying for it today.*

**By Maxime Marquette, columnist**

## Columnist's transparency note

### 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.

### Method and sources

This text keeps the basic distinction between **verified facts and interpretive analysis**. The rule never changes: a factual claim is published only when a verifiable source supports it, and the sources this article actually used are listed under **Sources**, never here.

**Primary source families** used by the publication, when the story has them: official statements from governments and international institutions, public statements by political leaders, reports from intergovernmental organisations, dispatches from recognised international news agencies.

**Secondary source families**: specialised publications, internationally recognised news media, analyses from established research institutions, reports from industry organisations.

When an article cites statistical, economic or geopolitical data, it comes from the institutions that produce it (intergovernmental organisations, central banks, national statistics offices), and the exact institution is named under **Sources**.

### Nature of the analysis

The analyses, interpretations and perspectives in the analytical sections of this article are a **critical, contextual synthesis** based on the information available, the trends observed and the expert comments cited in the sources consulted.

My role is to interpret these facts, to set them in the context of today's geopolitical and economic dynamics, and to give them a coherent meaning within the larger story of the changes shaping our time. These analyses reflect expertise built through continuous observation of international affairs and an understanding of the strategic mechanisms that drive global actors.

This article describes a documented state of affairs on its publication date, not a prediction: later developments may shift its outlook. No update is promised in advance; when an article is corrected or completed, the change is dated in the text.

## Sources

### Primary sources

- [Meduza — Bloomberg: Russia to increase war spending by an additional 4–5 trillion rubles — June 18, 2026](https://meduza.io/en/news/2026/06/18/bloomberg-russia-to-increase-war-spending-by-an-additional-4-5-trillion-rubles-in-2026)

- [Euromaidan Press — Russia poured 46% of its budget into the military in early 2026 — June 14, 2026](https://euromaidanpress.com/2026/06/14/russia-poured-46-of-its-budget-into-the-military-in-early-2026-even-as-revenue-fell-isw/)

- [Straits Times — Russia's economy posts first quarterly decline in three years — May 16, 2026](https://www.straitstimes.com/business/economy/russias-economy-posts-first-quarterly-decline-in-three-years)

- [Ukrainska Pravda — Russia may raise military spending by 40% despite budget hole — June 18, 2026](https://www.pravda.com.ua/eng/news/2026/06/18/8039951/)

### Secondary sources

- [Foreign Affairs Forum — Russia's War Economy Has Problems But Is Not About to Crash — June 23, 2026](https://www.faf.ae/home/2026/6/23/russias-war-economy-has-problems-but-is-not-about-to-crash-vladimir-putin-is-still-able-to-fund-his-aggression)

- [Janis Kluge (Russianomics) — Russian military spending surges by 30% in early 2026 — June 12, 2026](https://janiskluge.substack.com/p/russian-military-spending-surges)

- RBC-Ukraine — Russia's economy has reached dead end — June 26, 2026

- [SIPRI — A Budget for a Fifth Year of War: Military Spending in Russia's Budget 2026 — March 19, 2026](https://www.sipri.org/publications/2026/sipri-insights-peace-and-security/budget-fifth-year-war-military-spending-russias-budget-2026)

- [Ground News — Bloomberg: Russia to Increase War Spending by an Additional 4–5 Trillion Rubles — June 23, 2026](https://ground.news/article/bloomberg-russia-to-increase-war-spending-by-an-additional-45-trillion-rubles-in-2026)

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Source: Maxime Marquette, MadMax. When citing, name the author and link https://mad-max.co/en/article/analyse-russie-5-trillions-de-roubles-pour-la-guerre-le-pari-d-une-economie-a-bo