PORTRAIT: The ruble of war, military spending and Russia's internal trade-offs

Introduction

A national budget is never just an addition of figures; it is a silent declaration of priorities, and the one Russia is preparing for 2026 quietly reveals just how much the war has reshaped the state's internal trade-offs. Russia's 2026 budget assumes oil and gas revenue of 8.9 trillion rubles, according to The Moscow Times on October 28, 2025.

These forecasts, already considered optimistic by several analysts at the time of publication, must now be read in light of the sanctions on Rosneft and Lukoil, which directly reduced Russian oil revenue, according to the U.S. Treasury cited by Reuters on November 17, 2025.

A budget built on weakened assumptions

8.9 trillion rubles, a figure already contested before it could even materialize

The forecast of 8.9 trillion rubles in oil and gas revenue for 2026, documented by The Moscow Times, rested on price and export volume assumptions that were directly affected by the strengthened Western sanctions announced a few weeks later against the two largest Russian oil companies.

This temporal contradiction, between the publication of budget forecasts and the announcement of sanctions on Rosneft and Lukoil, illustrates the structural difficulty the Russian government faces in planning its public finances in an environment of constantly renewed Western economic pressure.

A downward revision that has become practically inevitable

A budget resting on assumptions already outdated at the moment of its publication is not simply optimistic; it is the symptom of a state forced to produce reassuring figures before even knowing whether they will hold. This tension between budget communication and economic reality, documented by the growing gap between forecasts and actual sanctions, could force Moscow to revise its budget projections in the months following their initial publication.

The direct impact of sanctions on Rosneft and Lukoil

A reduction confirmed by the leading American financial authority

According to the U.S. Treasury, cited by Reuters on November 17, 2025, the sanctions imposed on Rosneft and Lukoil directly reduced Russian oil revenue, an official confirmation that carries particular weight given that it comes from the very institution responsible for designing and enforcing these sanctions.

This documented reduction, though not precisely quantified in the Treasury's statement according to available sources, fits within a broader trend of cumulative financial pressure exerted by major Western powers since the conflict began in 2022.

Two companies at the heart of the Russian oil economy

Rosneft and Lukoil are not two companies among many; they are the financial pillars of a state that has built a significant share of its budget on the revenue they generate, which makes any sanction directly targeting them damaging to Russian public finances. This centrality, documented by the historical weight of these two companies in Russian oil exports, explains why Western sanctions have prioritized them since the strengthening of economic measures in 2025.

The cost of munitions production, another major budgetary burden

An annual trillion rubles adding to existing pressures

Munitions production reportedly costs the Russian state roughly 1 trillion rubles a year, according to estimates from Estonian intelligence reported by Euromaidan Press on February 11, 2026. This figure, put in perspective against oil and gas revenue forecasts, illustrates the scale of resources mobilized to sustain the war effort at full pace.

This financial burden, documented independently of official Russian budget figures, adds to other already considerable military spending items, sketching the outline of an increasingly constrained budgetary trade-off for Kremlin authorities since the start of 2026.

A trade-off that necessarily affects other sectors

Every ruble devoted to munitions production is a ruble that does not go elsewhere; in a national budget with limited resources, this trade-off is never neutral, it shifts priorities and redefines, often silently, what the Russian state chooses to fund or sacrifice. This budgetary reality, documented by the coexistence of growing military costs and energy revenue under pressure, illustrates the internal tensions now shaping Russian economic policy.

The postponed Lukoil asset divestment deadline, a revealing signal

A pushed-back deadline that betrays the difficulty of finding buyers

The postponement of the Lukoil asset divestment deadline to May 30, 2026, documented by Reuters on April 29, 2026, concretely illustrates the difficulty of finding buyers under the current sanctions regime, a situation that further complicates the company's ability to generate the revenue needed to partly fund the state budget.

This postponement, far from a simple administrative adjustment, reveals the practical limits of Western sanctions in a global market where potential buyers must themselves weigh the legal and reputational risks tied to any transaction with sanctioned Russian entities.

A signal that worries Kremlin budget planners

An asset no one wants to buy is no longer really a liquid asset; it is dead weight on the balance sheet of an already weakened company, and this finding, repeated several times since the sanctions were imposed, should worry those planning the Russian budget for the years ahead. This persistent difficulty, documented by the repeated postponement of divestment deadlines, illustrates the real effectiveness of Western sanctions on the liquidity of sanctioned Russian oil assets.

The tension between military spending and civilian needs

A war economy that redefines national priorities

The combination of reduced oil revenue and increased military spending, particularly for munitions production, creates a budgetary tension that could, over time, affect investment in civilian infrastructure, public health, or education, sectors already under pressure according to several independent economic analyses.

This budgetary reorientation, indirectly documented by the coexistence of these various financial pressures, illustrates the structural choices the Russian government has embraced since the conflict began, systematically prioritizing the military effort at the expense of other national priorities.

An opacity that limits precise assessment of these trade-offs

What the official Russian budget never says is the exact detail of the sacrifices made elsewhere to finance the war; it is precisely this opacity that makes any external assessment necessarily partial, built from fragments rather than a complete picture. This structural opacity, characteristic of Russian budget communication since 2022, limits Western observers' ability to precisely measure the real scale of these internal trade-offs.

Comparison with Western budgetary constraints

A shared burden, but of a different nature

While Western countries supporting Ukraine also face budgetary tensions tied to financing their military aid, the nature of these constraints differs significantly from those Russia faces, whose economy must simultaneously fund the war effort and cope with the loss of energy revenue caused by sanctions.

This asymmetry of constraints, documented by the structural difference between a sanctioned economy and economies that freely choose their level of military support, shapes fundamentally different budgetary dynamics between Russia and its Western adversaries.

A cumulative pressure that intensifies as the conflict drags on

The longer a war lasts, the more expensive it becomes, and this basic finding weighs differently depending on whether one can, or cannot, rely on stable energy revenue to fund this prolonged effort; Russia now must contend with both difficulties at once. This cumulative pressure, documented by the buildup of Russian budgetary constraints since 2022, logically intensifies as the conflict drags on with no diplomatic resolution in sight.

What these figures reveal about Russian economic resilience

A real capacity for adaptation that is reaching its limits

Russia's ability to sustain its war effort despite these cumulative budgetary constraints demonstrates a real economic resilience, documented by the continuation of military production despite financial pressures, but this resilience should not be mistaken for a total absence of structural difficulties.

This nuance, essential for a balanced assessment of the Russian economic situation, distinguishes the ability to hold out in the short term from the long-term sustainability of an economic model increasingly dependent on mechanisms for circumventing Western sanctions.

A trajectory that remains, at this stage, uncertain

No one can say with certainty at what point these cumulative pressures will become unsustainable for the Russian economy; it is precisely this uncertainty that makes every new budget figure, every new deadline postponement, worth close analytical attention. This uncertainty over the future trajectory of the Russian war economy should continue to fuel debate among Western analysts in the months ahead.

Western instruments of complementary economic pressure

Price caps, a tool that adds to targeted sanctions

Beyond the direct sanctions targeting Rosneft and Lukoil, the European Union has also lowered its price cap on Russian oil, a complementary measure that further restricts the financial room to maneuver available to the Russian government in a context of already considerable economic pressure.

This combination of instruments, documented by the coexistence of targeted sanctions on specific companies and market-wide price-cap mechanisms, illustrates the growing sophistication of the Western strategy of economic pressure on the Russian war economy.

A coordination that remains, despite everything, imperfect

Coordinating sanctions among several Western powers with sometimes divergent interests is never a simple exercise; the results achieved, however significant, remain below what perfect coordination could have produced in terms of economic pressure exerted. This imperfect coordination, documented by differences in enforcement across Western jurisdictions, limits the theoretical maximum effectiveness of these economic pressure instruments.

The role of sovereign reserves in absorbing these shocks

A reserve fund that has already largely absorbed the first shocks

Russian sovereign reserves, mobilized since 2022 to partially offset the loss of revenue tied to sanctions, have already been significantly reduced according to several independent economic analyses, which limits the room to maneuver available to absorb new budgetary shocks like those documented by the sanctions on Rosneft and Lukoil.

This gradual reduction of available reserves, documented independently of official Russian budget figures, is one of the most closely watched indicators used by Western economic analysts to assess the medium-term sustainability of the Russian war economy.

A growing dependence on workaround mechanisms

When reserves run dry, a state must find other ways to fund its priorities; this is precisely what is pushing Russia toward increasingly sophisticated workaround mechanisms, from the shadow oil fleet to parallel import networks for sanctioned components. This growing dependence, documented by the proliferation of investigations into these mechanisms since 2024, illustrates the forced ingenuity of an economy under constant sanctions pressure.

The consequences for the ordinary Russian population

Inflation and budgetary restrictions that touch daily life

The budgetary trade-offs documented in this file are not confined to circles of power: according to several independent economists, they translate into persistent inflation and budgetary restrictions that directly affect the purchasing power of the ordinary Russian population, in a context of limited access to independent economic information inside the country.

This social dimension of the budgetary trade-offs, rarely documented with precision for lack of full independent access to Russian territory, deserves to be factored into any complete assessment of the real consequences of this war economy, ongoing since 2022.

A public silence that masks real tensions

What the Russian population truly thinks of these trade-offs remains, for the most part, invisible from the outside; the absence of reliable independent polling and the surveillance of public space make it impossible to precisely measure the level of social tension this war economy actually generates. This social opacity, consistent with the budgetary opacity documented elsewhere, considerably limits the ability of outside observers to assess the internal Russian situation.

The possible scenarios for Russia's budgetary evolution

A stabilization scenario that would depend on diplomatic détente

A first scenario, raised by several economists consulted on the Russian budgetary trajectory, would rest on some form of diplomatic détente allowing a gradual easing of Western sanctions, a hypothesis that remains, at this stage, purely conditional and dependent on the evolution of the Ukrainian conflict itself.

This scenario, however desirable for the Russian economy, currently finds no support in official Western statements, which instead maintain a trajectory of continued strengthening of sanctions since the start of 2026.

A scenario of continued deterioration, considered more likely by several analysts

What the current trajectory suggests is not an imminent stabilization, but a gradual accumulation of constraints that, without being individually decisive, end up weighing heavily on the budgetary capacity of a state at war for more than four years. This second scenario, considered more likely by several Western economic analysts, anticipates a gradual deterioration rather than a sudden collapse of Russian public finances.

What this file means for the Western strategy of supporting Ukraine

An additional argument for maintaining economic pressure

Documenting these Russian budgetary fragilities constitutes, for advocates of maintaining or even strengthening Western economic pressure, an additional argument in favor of continuing current sanctions rather than a premature easing that could give Moscow additional budgetary room to maneuver.

Every fragile budget figure documented becomes, almost mechanically, an argument in Western debates over how long sanctions should be maintained; economic statistics, too, have their own political life beyond the circles of specialized analysts.

The methodological questions framing this budgetary analysis

A limited transparency that requires caution around aggregated figures

All the figures presented in this portrait come from Western or intelligence sources, for lack of direct, verifiable access to internal Russian budget documents, a methodological limit that requires treating each data point as a credible estimate rather than an absolute accounting certainty.

Analyzing the budget of a state that does not publish the entirety of its accounts always amounts to assembling a puzzle with missing pieces; the resulting picture remains useful and broadly reliable, but it will never replace the full transparency that direct access to official documents would have allowed.

Conclusion

Russia's 2026 budget, built on a forecast of 8.9 trillion rubles in oil and gas revenue already weakened by the sanctions on Rosneft and Lukoil, illustrates the increasingly constrained internal trade-offs the Russian government must now navigate. The annual cost of roughly 1 trillion rubles for munitions production alone, combined with the postponement of the Lukoil asset divestment deadline to May 30, 2026, sketches the portrait of a war economy under growing pressure.

A budget that must fund a war with shrinking revenue is never more than an impossible equation pushed further down the road; Russia keeps solving it, one way or another, but every postponed deadline, every downward revision, brings a little closer the moment when the equation will stop holding.

Signature

Signed Maxime Marquette, columnist

Columnist's Transparency Box

Editorial positioning

This portrait adopts an analytical perspective favorable to Western support for Ukraine, while relying strictly on facts documented by identifiable journalistic and institutional sources. Interpretations regarding the future sustainability of the Russian economy are presented with the methodological caution required.

Methodology and sources

This portrait relies on Russian budget forecasts documented by The Moscow Times on October 28, 2025, on the U.S. Treasury's confirmation reported by Reuters on November 17, 2025, on Estonian intelligence estimates published by Euromaidan Press on February 11, 2026, and on the Lukoil deadline postponement documented by Reuters on April 29, 2026.

Nature of the analysis

Projections about the future evolution of Russian budgetary constraints are presented conditionally where not confirmed by official data, in keeping with the methodological caution that governs this entire text.

Sources

Primary sources

Reuters — Effect of sanctions on oil revenue, U.S. Treasury — November 17, 2025

Euromaidan Press — Cost of munitions production, Estonian intelligence — February 11, 2026

Secondary sources

The Moscow Times — Russian 2026 budget forecasts — October 28, 2025

European Commission — Dynamic price cap mechanism on Russian oil — January 15, 2026

Fox News — Context on the shadow fleet and Russian workaround mechanisms — July 8, 2026

Interfax — Presidential decree on the price cap, context of the Russian response to sanctions — June 26, 2026