Russian Economy: 46% of Budget for the Military, Gasoline Shortage

The war in Ukraine and Ukrainian long-range strikes are increasingly hitting the Russian economy, creating pressure on multiple fronts simultaneously. According to estimates cited by the website Russianomics and the Moscow Times newspaper, as much as 46 percent of Russia's federal budget is now allocated to military spending. An additional problem is that a large portion of the budget is kept secret, and it is almost entirely used to finance the war.

Oil Sector Under the Biggest Blow

Ukraine has specifically targeted Russia's oil industry, leading to serious disruptions. Russia has been forced to ban the export of all petroleum products, including gasoline, at least until the beginning of 2027. A gasoline shortage has broken out in the country, prompting Russia to start importing gasoline and other petroleum derivatives from abroad, including from Belarus, India, and Morocco.

Although crude oil exports slightly increased during the summer of 2026, revenues are under pressure from several factors. Due to sanctions, buyers are demanding a discount of about $20 per barrel for Russian oil. The price of a barrel of Urals crude, which was around 60 euros before the war, is currently around $80. An additional blow came from exchange rate differences during the summer, when Russia lost as much as 20 percent of its revenue due to an overvalued ruble when converting dollars and yuan into the domestic currency.

E-commerce Giant Sinks, Banks Fear

Problems are spilling over into other sectors. The Ukrainian attack on the warehouse of Wildberries, Russia's e-commerce giant, in St. Petersburg has further shaken the financial system. Wildberries has loans worth several billion euros, and it is increasingly likely that it will face serious difficulties in repaying its debts. The burden could fall on the already weakened state-controlled bank VTB.

Experts: Gradual Decline, Not Sudden Collapse

Laura Solanko, a senior advisor at the Bank of Finland, points out that the root of all problems is the war. "The war significantly increases government spending, and for one reason or another, they have not wanted or been able to limit it. It seems that cost growth has been out of control for some time," Solanko told YLE. However, she does not expect a sudden crash. "It is hard for me to see that any of these things individually, or even all together, would completely disrupt the country's economy."

Solanko explains that the Russian economy, unlike the Soviet one, is based on market principles and is capable of adapting. "This also does not mean that the Russian economy is more resilient to crises than any other. It means that things gradually get worse and worse, and then belts are tightened and companies try to come up with various tricks to fix things," she added.

Broader Picture of the Conflict and Moscow's Response

Doctor of Military Sciences Ilmari Käihkö analyzes the broader strategy. Ukraine is forced to use asymmetric warfare, and has now discovered that in the air war it is easier to attack than to defend, especially given the vast territory of Russia. However, Moscow has begun to respond in kind, targeting Ukrainian ports, cargo ships, and industrial facilities to weaken the country's exports.

Käihkö expresses concern that the deterioration of living conditions in Russia could have a paradoxical effect. Due to the authoritarian nature of the regime, citizens cannot openly protest against their own leadership. "People may start to see Ukraine as the problem, and then the solution is to take increasingly harsher measures," Käihkö warns.

The failed sale of Russian government bonds last week is a testament to the situation becoming increasingly difficult. No one wanted to buy them at the offered interest rate. According to Laura Solanko, the Russian leadership still has tools at its disposal - it can force banks to provide loans or, in extreme cases, start printing money. The question is who will hold out longer.