Western predictions of a dramatic collapse of the Russian economy have not materialised, but the Kremlin now faces its most precarious economic position since the invasion of Ukraine. After a wartime boom, growth has slowed sharply, with the International Monetary Fund forecasting just 0.6% growth in 2025 and 0.8% in 2026 – the lowest rates outside the pandemic years.
Falling oil prices are a key factor, with the price of Ural crude dropping from around $90 a barrel in early 2022 to about $50 by end of 2025. Fossil fuel revenues, which made up 40% of the federal budget in 2022, have fallen to an estimated 25% in the first three quarters of 2025. Sanctions have also constrained Russia's ability to find new markets, with India winding down purchases amid US tariff threats.
Long-term demographic pressures are compounding the economic malaise. Russia's population has fallen from 145.5 million in 2019 to 143.5 million in 2024, due to low fertility, war casualties and emigration. Labour shortages are severe, and corporate bankruptcies are rising.
To bridge the fiscal gap, ordinary Russians face tax hikes and cuts to public services, as the state prioritises military spending. Isaac Levi of the Centre for Research on Energy and Clean Air said Russia's fossil fuel export earnings in 2025 were 13% below prewar levels, squeezed by sanctions, drone strikes on energy infrastructure and lower global prices. He urged Ukraine's allies to target Russia's shadow fleet to further constrain its war chest.
