# OPINION: Russia's deficit explodes: Putin is financing his war on credit

> Some numbers tell the truth better than any speech. Russia's budget deficit has exceeded $80 billion in 2026. Not according to hostile Western analysts. According to data compiled by United24 Media on June 23, 2026, cross-referenced with undeniable market signals: Russian government bonds have collapsed, pushing yields to approximately 15%. When creditors demand 15% to lend to

- Author: Maxime Marquette
- Publisher: MadMax (https://mad-max.co)
- Section: Note
- Published: 2026-06-28
- Canonical URL: https://mad-max.co/en/article/billet-le-deficit-russe-explose-poutine-paie-sa-guerre-a-credit

## Introduction: the numbers Moscow can no longer hide

### $80 billion in the red

Some numbers tell the truth better than any speech. **Russia's budget deficit** has exceeded **$80 billion** in **2026**. Not according to hostile Western analysts. According to data compiled by **United24 Media** on **June 23, 2026**, cross-referenced with undeniable market signals: **Russian government bonds** have collapsed, pushing **yields to approximately 15%**. When creditors demand **15%** to lend to a state, that state has a very serious credibility problem.

**Moscow** continues to proclaim the «**stability**» and «**resilience**» of its economy. The **Kremlin** regularly produces carefully filtered statistics to demonstrate that sanctions «**are not working**» and that **Russia** is adapting admirably. At the same time, the government is preparing an increase in war spending of **4 to 5 additional trillion rubles** in **2026** — a sum that must be found somewhere, in a budget already deep in the red.

### The war as a ruble vacuum

The **war in Ukraine**, in its financial dimensions, functions as a ruble vacuum. **Soldiers' salaries**, bonuses to families of the dead, **accelerated weapons procurement**, **reconstruction of destroyed equipment**, **support to occupied regions**, sanctions circumvention — all of this costs hundreds of billions. And revenues are stagnating: oil sold at massive discounts to **China** and **India**, sanctions closing the most profitable export markets, civilian industry cannibalized by the military effort.

**Zelensky**'s sanctions adviser said the right word on **June 26, 2026**: «**dead end**». This is not an immediate collapse. It is something more insidious — an economic system that can still function, but that is progressively losing its capacity to absorb additional shocks. And every refinery that burns, every additional embargo, every sanctions package is one more shock.

*Putin is financing his war on credit. Literally — with sovereign debt that markets will only buy at 15% yield. That is not the hallmark of a «resilient» economy. It is the hallmark of a state that creditors have decided to treat as a high risk.*

## The additional 4 to 5 trillion rubles: where will Moscow find the money?

### Three financing options — all painful

**Bloomberg** reported on **June 23, 2026** that **Russia** plans to increase its war spending by **4 to 5 additional trillion rubles** in **2026**. For a federal budget already running a deficit of **$80 billion**, this increase imposes impossible choices. There are essentially three ways to finance such a surplus: borrow on the markets, cut civilian spending, or monetize the debt by printing rubles.

**Russian bond markets** are partially closed — foreign investors have been gone since **2022**, and domestic investors demand **15% yields** to accept this sovereign risk. Cutting social spending — **pensions, healthcare, education** — is politically dangerous in a regime whose popular legitimacy is already weakened by military losses. Printing rubles, finally, generates **inflation** — a phenomenon that ordinary Russians feel directly in their grocery bills and energy costs.

### The silent inflation devouring Russian savings

**Inflation** is the hidden tax of Russia's war. While the government announces «**wage increases**» for defense industry workers, **inflation** eats away at the purchasing power of those with no link to the military machine. Independent data on real inflation in **Russia** is hard to obtain, but private estimates put it well above official figures, particularly for imported goods.

The **Russian Central Bank** maintains extremely high benchmark rates to try to contain this inflation — around **16 to 18%** in **2026**. Rates that high strangle **business lending**, slow private investment, and push small and medium enterprises toward insolvency. The Russian civilian economy is thus sacrificed twice over: once through the taxes that finance the war, and once through the interest rates that kill business financing.

*15% bond yields. 16–18% benchmark rates. These are not geopolitics — they are accounting. They say an economy is paying the price of catastrophic political decisions. And that price, in the end, is borne by ordinary Russian people.*

## Russia's regions drowning in debt

### A pain-transfer mechanism

Russia's fiscal model is highly centralized: resources flow up to **Moscow**, and regions receive transfers decided by the center. Since **2022**, this model has created unprecedented tensions: regions have been forced to co-finance direct military expenses — mobilization bonuses, local equipment, support to soldiers' families — without their budgets being compensated proportionally.

Data reported by the portal **dn.gov.ua** on **June 22, 2026** shows that **Russian regions** are drowning in debts that far exceed their fiscal capacity. **Regional governors** find themselves in a state of technocratic insolvency: they must maintain public services, co-finance the war, and manage a workforce gutted by military mobilizations — all with budgets that cannot cover expenditures.

### Regional economic mobilization and its limits

**Russia** has tried to compensate for these pressures by allowing regions to issue their own bonds — a form of regional debt theoretically backed by the federal guarantee, but which adds to the total debt of the system. These regional bond issuances find takers among Russian state banks — creating a circular financing loop that analysts at the **Kiel Institute** were already calling «**structural exhaustion**» as of **June 23, 2026**.

This exhaustion is not only financial. It is also human: the regions most affected by mobilizations — rural regions, ethnically minority areas, often among the poorest in the **Federation** — are losing their active male workforce. Men leave for the front, women and the elderly remain. The productive capacity of these regions declines. And when soldiers return — if they return — they find a depleted local economy.

*Russia's regions are being sacrificed twice over: by sending their men and by having their budgets bled dry. It is the classic mechanism of an empire financing its wars from its periphery. The Roman Empire used the same method. History knows how that ended.*

## The Kiel Institute and The Economist: the collapse that never comes

### Why Russia is not collapsing — yet

An essential nuance is warranted, and I will not hide it: neither the **Kiel Institute** nor **The Economist** foresees an imminent Russian economic collapse. The **Kiel Institute** speaks of «**structural exhaustion**» — a slow process, not a knockout blow. **The Economist** headlined on **June 22, 2026** that «**Russia's war economy has problems but is not about to crash**». These are serious institutions I cite with respect.

**Russia** has structural assets that delay the moment of reckoning: still-substantial **foreign exchange reserves** (even if partially frozen by sanctions), a **relatively low public debt-to-GDP ratio** before the war, a defense industry running at full capacity and employing millions, and a political regime that can impose sacrifices on its population without risking a democratic change of government.

### What «not collapsing» actually means

But «not collapsing» does not mean «performing well». **Russia's GDP in the first quarter of 2026** is negative at **-0.2%**. The **IMF** has revised its annual growth forecast down to **0.8%** — a significant downward revision. The economy officially **grows**, but all of that growth is concentrated in the military sector. The civilian economy — consumption, private investment, services — is contracting.

This is a war economy in the most literal sense: an economy running to make war, not to sustain its citizens. This model can last for years. But it generates progressive impoverishment, degradation of civilian infrastructure, and an accumulation of frustrations that cannot be contained indefinitely, even by an authoritarian regime.

*«Not collapsing» is the lowest bar you can set for an economy. Putin's Russia in 2026: it is not collapsing. That is the bottom line. That is not a performance. It is a survival. And ordinary Russians understand the difference between the two better than any economist.*

## The 21st sanctions package: tightening the stranglehold further

### The European proposal of June 27

The **European Union** proposed a **21st sanctions package** against **Russia**, announced on **June 27, 2026**. This new package primarily targets the **shadow fleet** of tankers circumventing official embargoes, as well as entities in third countries facilitating Russian access to controlled technologies. It is a direct response to the workarounds **Russia** has put in place since **2022** to maintain its energy exports.

The **shadow fleet** has become the symbol of the limits of first-generation sanctions: sanction Russian oil on Western markets, and the tankers get bought up under flags of convenience, sail without international insurance, and deliver to clients willing not to verify the origin. This system works, but at growing cost — shadow tankers carry higher freight rates, longer routes, and greater risk of technical incidents.

### The Baltic states want total embargo

The **Baltic states** are pushing to go well beyond the **21st package**. Their objective is a **total embargo on Russian oil**, including via the pipelines that still supply some **EU** members in **Central Europe**. Resistance from **Hungary** and certain Central European countries that still depend on these pipelines is slowing this option.

But the **Baltic states** have an irrefutable core argument: as long as Russian oil can reach **Europe** by any route, **Russia** continues to draw revenues that finance its war. The principle that one cannot simultaneously condemn a war and finance its budget is one of absolute moral clarity. The difficulty is practical and political, not ethical.

*The Baltic states have the moral clarity that geography taught them. They live next to the monster. Their impatience with European compromises is legitimate and I share it. The question is not whether a total embargo is right — it is. The question is when Europe will find the courage to impose it.*

## What bond yields say about Russia's trajectory

### 15%: the price of market defiance

The yield on **Russian government bonds** at around **15%** is not just a financial indicator — it is a confidence signal. When markets lend to **Germany** at **2–3%** and to **Russia** at **15%**, that is a collective declaration that **Russia** carries five times greater risk. This risk spans several dimensions: default risk, ruble devaluation risk, new sanctions risk, political instability risk.

These elevated yields have direct consequences on the state's borrowing capacity. Every additional percentage point of yield means billions of additional rubles in interest charges on an already-strained budget. It is a vicious cycle: the higher the deficit, the larger the risk premium demanded by investors, the higher the interest costs, the deeper the deficit grows.

### The ruble under structural pressure

The **ruble** has undergone repeated devaluations since **2022**. The Russian government uses **capital controls** to limit currency flight, but these controls themselves create economic distortions. Russian companies that need to import materials cannot freely access foreign currency. Individuals who want to save in stable currencies — **dollars, euros, yuan** — face growing restrictions.

This pressure on the **ruble** feeds directly into **inflation**: imports cost more in devalued rubles. And for an economy like **Russia**'s that, despite its proclaimed autarky, still depends on significant imports for industrial equipment, medicines, electronics — this imported inflation is a permanent shock, not a passing anomaly.

*The ruble slides. Yields climb. The deficit deepens. That is the trifecta of fiscal unsustainability — the same mechanics that preceded Russia's financial collapse of 1998. The conditions are not identical. But the signals look familiar.*

## The shadow economy: Russia behind the curtain of official figures

### Russian statistics as a propaganda tool

**Russia's official economic statistics** are produced by **Rosstat**, the federal statistics office, which is under government control. Since **2022**, **Rosstat** has modified its calculation methodologies, delayed the publication of certain data, and refused to make public information that was previously accessible. This growing opacity is itself a signal: the data that leaks out — through independent sources like **The Moscow Times** or private financial analysts — is systematically less flattering than the official figures.

Analysts attempting to reconstruct an accurate picture of the Russian economy cross-reference multiple sources: data from **Russia's trading partners** (who publish their own import and export statistics), satellite readings of industrial activity, **maritime traffic** data to track shadow tankers, and surveys of Russian companies that have left the country. This shadow economy underperforms the official economy. And it says the picture is dark.

### Corruption as a crisis multiplier

**Systemic corruption** amplifies the effects of the economic crisis. War funds are siphoned off at every level of the military-industrial chain — from arms contracts to equipment purchases for soldiers. **Defense officials** overbill orders, **intermediaries** capture rents from sanctions circumvention, **oligarchs** close to the Kremlin enrich themselves on reconstructions in occupied territories. This corruption is not an exception — it is the normal mode of operation of the system.

Corruption has direct consequences on Russian military effectiveness. Soldiers receive expired bulletproof vests because officials preferred to pocket the difference between market price and the price paid. Night-vision equipment arrives at the front in poor condition. Food rations are supplied at inflated prices by contractors close to power. This is a war where the economic predation of Russian elites directly weakens military capabilities — and budget deficits reflect that reality too.

*Russian corruption is the hidden tax on the war. Every ruble diverted by an oligarch or corrupt official is a ruble that does not pay for a shell, a vest, or a ration. It may be the most effective form of economic sanction — it comes from within.*

## What the IMF and the Kiel Institute do not say out loud

### The limits of economic forecasting in wartime

International economic institutions — the **IMF**, the **World Bank**, research institutes — publish forecasts for the Russian economy with unusually wide uncertainty margins. The reason is simple: **Russia** publishes less data, the data published is less reliable, and classical economic models perform poorly in a war economy with partially centralized planning. The **IMF**'s **0.8%** growth figures hide a range of possible outcomes spanning from strongly negative to slightly positive.

The **Kiel Institute**, which analyzes the Russian economy with particular rigor, uses the term «**structural exhaustion**» to describe a dynamic that aggregate **GDP** figures do not capture: the progressive degradation of Russia's long-term productive foundations — human capital in flight, investment in free fall, growing dependence on Chinese imports for industrial goods. These degradations are invisible in the short term but decisive over a **5 to 10 year** horizon.

### The prolonged-maintenance scenario and its conditions

The scenario in which **Russia** maintains its war economy in a prolonged fashion — five years, ten years — requires specific conditions: **oil prices** held above **$70 per barrel**, **China** continuing to buy at discounted prices without reducing purchases, **India** maintaining its Russian oil imports despite American pressure, and the absence of a major internal shock — political, military, or economic. Each of these conditions is uncertain.

Western sanctions are aimed precisely at eroding these conditions one by one. The tanker embargo attacks export volumes. Price caps attack margins. Technology restrictions attack industrial modernization capacity. The combined effect, over a **three-to-five year** horizon, creates growing pressure that even Russia's structural assets will not be able to absorb indefinitely. This is the strategy of calculated exhaustion — and in **June 2026**, it is still on course.

*Russia's economy is at war with itself as much as it finances a war against Ukraine. Predation, corruption, brain drain, lost human capital — all of this digs a hole that oil revenues fill today but cannot fill indefinitely.*

## Conclusion: the war on credit always gets paid back

### The history of debt-financed wars

Economic history teaches one simple, brutal lesson: wars financed by **debt** and money printing always eventually generate a crisis. The form and timeline vary — hyperinflation, forced devaluation, debt restructuring, political collapse — but the mechanism is invariant. **Putin** does not escape this rule. He delays it, temporarily circumvents it with oil revenues, with Chinese assistance, with the repression of economic dissent. But he does not abolish it.

The **$80 billion deficit**, the **4 to 5 additional trillion rubles** planned, the **15% yields**, the regions drowning in debt, the **negative first-quarter GDP** — each of these signals is a message that markets and economists are sending to the regime. For now, **Putin** can ignore these messages. But debt is always repaid. In rubles, in blood, or in political power. Usually in that order.

### What the West must do while the bill grows

The rational strategy for the **West**, while **Russia** accumulates its war debts, is to maintain pressure without letup. Sanctions must hold — at least until **2027** as the **EU** has decided. Military support to **Ukraine** must continue so that the costs of war for **Russia** remain high. And Ukrainian strikes on oil production infrastructure — refineries, depots, terminals — must be politically supported, because they directly target the revenue source that allows **Putin** to finance his war debt.

The war on credit that **Putin** is waging is not free. It will be paid — by **Russia**, by its population, or by its successors. The **West** must ensure that the bill arrives as soon as possible, at the highest possible cost, and that **Ukraine** is still standing to see it settled.

*A war on credit always gets paid back. In rubles, in blood, or in political power. Putin is betting that the West will pay its bill before he pays his. The West must make the opposite bet — and have the patience to hold it.*

**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

- [United24 Media — Russia's budget deficit tops $80 billion despite Kremlin stability claims — June 23, 2026](https://united24media.com/world/russias-budget-deficit-tops-80-billion-despite-kremlin-stability-claims-20083)

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

- [RBC-Ukraine — Zelensky's sanctions adviser: Russian economy has reached a dead end — June 26, 2026](https://newsukraine.rbc.ua/news/russia-s-economy-has-reached-dead-end-zelenskyy-1782474737.html)

- [Daily Finland — EU proposes 21st sanctions package against Russia — June 27, 2026](https://www.dailyfinland.fi/europe/49757/EU-proposes-21st-package-of-sanctions-against-Russia)

### Secondary sources

- [Foreign Affairs Forum / Kiel Institute — Russian economy: structural exhaustion, Q1 GDP -0.2%, IMF revised to 0.8% — 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)

- [The Economist — Russia's war economy has problems but is not about to crash — June 22, 2026](https://www.economist.com/finance-and-economics/2026/06/22/russias-war-economy-has-problems-but-is-not-about-to-crash)

- [dn.gov.ua — Russian regions drowning in debt because of the war — June 22, 2026](https://dn.gov.ua/en/news/rosiiski-rehiony-tonut-u-borhovii-iami-cherez-viinu)

- [Kyiv Post — Baltic states press EU on Russian oil embargo, sanctions extended one year — June 27, 2026](https://www.kyivpost.com/post/79112)

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Source: Maxime Marquette, MadMax. When citing, name the author and link https://mad-max.co/en/article/billet-le-deficit-russe-explose-poutine-paie-sa-guerre-a-credit