Summary and Key Points: Russia’s war on Ukraine is devouring its finances. War spending now totals 16.8 trillion roubles ($238 billion) — nearly 40% of the entire 2026 budget — and Putin’s own finance minister, Anton Siluanov, has privately warned of a possible economic collapse, urging deep cuts to avert it.
-The deficit is the largest since the 2022 invasion, growth has flatlined at 0.4%, and analysts say Moscow is faking its books.
Challenger 2 Tank. Image Credit: Creative Commons.
Challenger 2 Tank. Image Credit: Creative Commons.
The Ukraine War Is Damaging Russia’s Finances
According to a 30 May report in the Financial Times, Russian government spending on the war in Ukraine is on track to exceed budget allocations by about 2 trillion Russian roubles (US$ 28bn) this year.
These figures come from an official letter shown to the FT by a senior Russian minister. If the figures are accurate, there will be increasing pressure put on the budget due to what has been described as a “ballooning” deficit.
This estimate for 2026, plus projections for the out years, is putting a spotlight on a case of runaway, almost uncontrollable spending – all due to the increasing costs of sustaining the war effort.
This year, the allocation for the war effort totals 16.8 trillion roubles (US$238 billion), accounting for almost 40 percent of this year’s budget.
This entire sum was allocated to defense and security outlays in 2026, which is what prompted the contents of the letter. The correspondence came from Russian finance minister Anton Siluanov in February 2026. His strong recommendation was for the cabinet to freeze close to 2.9 trillion roubles (US $40.8bn) in planned non-defense or war-related spending this year as a means of staving off a serious economic problem.
Siluanov also warned that overspending on the conflict in 2026 could amount to as much as 4 trillion roubles by the end of this year, culminating in what he calls a “negative scenario”. Part of that forecast is his additional projection that overspending beyond budgetary allocations for 2027 and 2028 could total 4 trillion roubles per annum.
T-84 Tank Ukraine. Image Credit: Creative Commons.
Deficits And Resilience
Russia’s budget is already 5.9 trillion roubles in the red, which is 2.5 percent of the nation’s GDP.
This is Russia’s largest deficit since President Vladimir Putin ordered the full-scale invasion of Ukraine in February 2022.
Projections are that war spending could push Russia’s budget even deeper into the red if cuts cannot be made elsewhere in state spending.
To cover the constantly rising costs of the war in Ukraine, the non-defense spending that would need to be frozen in the out years comes to 5.4 trillion roubles in 2027, and 7.1 trillion in 2028. These are more signs of a deteriorating Russian economic situation as Putin insists on continuing to escalate the war effort against Kyiv.
Meanwhile, economic growth is also stagnating, with Russia’s GDP now expected to rise only 0.4 percent this year. This is down from a previous projection of more than three times this amount this year, of 1.3 percent.
In a 20 May New York Times op-ed, Sweden’s Foreign Minister Maria Malmer Stenergard warned the West could be overestimating Moscow’s resilience – “an overused word in reference to Russia,” said a Ukraine colleague who spoke to National Security Journal for this article. The Swedish diplomat explained that the Russian economy is more unstable than advertised.
Russia claimed its GDP expanded 13 percent between 2020 and 2024, but Sweden’s analysis of “nighttime luminosity” indicates that Russia’s economy instead contracted by only 8 percent during that time frame.
Perennially, Moscow has also substantially underballed inflation, according to Stenergard. Specifically, she pointed to the “official” inflation numbers for Russia in 2024, announced at 10 percent, while the central bank hiked interest rates to 21 percent that year.
Sweden’s military intelligence chief estimated that Russia’s inflation this year is likely at 15 percent, rather than the government’s official statistic of 5.2 percent. “This would mean Russia is overstating its purchasing power, and that its military spending capacity is weaker than it appears,” Stenergard stated.
Obsession With the Donbas
In the meantime, Putin is still reportedly obsessed with taking the entirety of the Donbas region, which his military has been unable to accomplish in more than a decade. Sources within Russian elites say the president still believes his forces can take all of Donetsk and Luhansk by the autumn.
However, Russia’s financial situation would make these ambitions unrealistic.
As the Polish Foreign Minister Radosław Sikorski pointedly stated in April of last year, “You will never rule here [in Poland] again. Not in Kyiv, not in Riga, not in Tallinn, not in Chisinau [Moldova].”
“Better ask yourselves if you can even hold on to Haishenwai,” he said— pointedly using the Chinese name for Vladivostok, Russia’s famous Pacific Coast seaport. Chinese officials have long talked about “taking back” this region of Russia that used to be part of China.
But as an assessment from the European Center for Policy Analysis (CEPA) from four years ago states, “Russia is rotting, giving China a huge range of options with its declining neighbor. If current trends persist, China can reasonably expect its old territories to one day fall into its lap.”
About the Author: Reuben F. Johnson
Reuben F. Johnson has thirty-six years of experience analyzing and reporting on foreign weapons systems, defense technologies, and international arms export policy. Johnson is the Director of Research at the Casimir Pulaski Foundation. He is also a survivor of the Russian invasion of Ukraine in February 2022. He worked for years in the American defense industry as a foreign technology analyst and later as a consultant for the U.S. Department of Defense, the Departments of the Navy and Air Force, and the governments of the United Kingdom and Australia. In 2022-2023, he won two awards in a row for his defense reporting. He holds a bachelor’s degree from DePauw University and a master’s degree from Miami University in Ohio, specializing in Soviet and Russian studies. He lives in Warsaw.
