Russian Authorities Are Cutting The Budget

17.03.2026, 23:22

Rising oil prices are not saving the day.

The year 2026 began not so long ago, and the Russian authorities are already preparing to cut budget expenditures. At first it was only rumors, but then the information was confirmed by the Ministry of Finance - and revealed some details. Predictably, it was decided not to touch the expenses related to the conduct of the war in Ukraine. Why the Russian budget is not coming together despite another tax increase and rising oil prices caused by the war in the Middle East - in the material DW.

What happens to the Russian budget in 2026

In the first two months of 2026, the federal budget deficit amounted to 3.45 trillion rubles (1.5% of GDP) - against the annual plan of 3.79 trillion (1.6% of GDP). This is a record value for the beginning of the year.

Oil and gas revenues amounted to Br826 billion - more than Br300 billion less than the planned level. Compared to the same period of 2025, they have decreased by almost 50%.

All the assumptions laid down in the budget turned out to be wrong. According to the government's forecast, on the basis of which it was made, a barrel of Urals oil this year should have cost an average of 59 dollars. However, in January for the calculation of oil and gas taxes it was necessary to take 41 dollars per barrel (this was the average price in December 2025), in February - 44.6 dollars. At the same time, the ruble turned out to be too strong. The budget is based on 92 rubles per dollar, while in practice the exchange rate was 77.6 rubles in January and 76.9 in February.

Non-oil and gas revenues are growing. To increase revenues, the government has once again raised taxes - in particular, revised the VAT rate. But so far the growth has been restrained - only by 4.1%, up to Br3.94 trillion. If the dynamics does not accelerate, it may not be possible to fulfill the annual plan of Br31.4 trillion, experts of the Gaidar Institute say. On the one hand, the VAT increase will start to be translated into revenues only from the second quarter - now the budget revenues are at the previous rate. On the other hand, the collections may not reach the plan due to the ongoing economic slowdown, which threatens to turn into a recession.

In the meantime, expenditures at the beginning of the year grew ahead of schedule. In the first two months, they added 5.8% year-on-year, although the government's plan was to grow by only 2.9%.

Why high oil prices are not saving the Russian budget

The U.S. and Israel's war with Iran was an unexpected gift to the Russian economic authorities. Oil prices rose sharply because of the threat of blocking the Strait of Hormuz, a narrow sea corridor through which the Persian Gulf countries export oil to the world market.

The price of a barrel of Brent rose from $70 to more than $100. The price of a barrel of Russia's Urals crude, which is close to Middle East crude, approached $80 by the end of the second week of the war, according to Argus Media data cited by Bloomberg. Some deals were made at nearly $100.

In March, oil and gas revenues for the Russian budget will still be modest - taxes will be calculated based on the low February price ($44.6 a barrel). In April, according to Reuters calculations, if prices remain at the current level until the end of March, the Russian budget will be able to receive about 590 billion rubles. What will happen next is unknown.

"Russia's energy revenues fell sharply at the beginning of the year due to the tightening of sanctions and because of logistical restrictions affecting export volumes, so even with the current rise in oil prices, it will probably take several months of sustained high prices to at least compensate for the losses for January - February," says Isaac Levy, an expert at the Center for Research on Energy and Clean Air (CREA), in a comment to DW.

Which budget expenditures the government will try not to cut

Minfin has so far confirmed only the fact of future spending cuts. The media report on its size, citing informed sources. According to Reuters and Vedomosti, the Finance Ministry initially notified the ministries of the prospect of cutting "all" expenditures, but then it began to discuss cutting only "insensitive" ones - by 10%.

The so-called "protected" items of expenditures will probably not be cut, economist Dmitry Polevoy writes in his Telegram channel. These include spending on defense (Br13 trillion), national security and law enforcement (Br4 trillion), social policy (Br7 trillion) and public debt servicing (Br3.9 trillion).

In addition, according to the economist, the so-called public regulatory obligations (these are, in particular, pensions and benefits) in the amount of about Br1.5 trillion, as well as inter-budget transfers (money, which the federal budget transfers to the regions) in the amount of Br9 trillion, will not go under the knife.

All these items add up to about Br38 trillion. In total, the government planned to spend just over Br44 trillion in 2026. As a result, about Br6 trillion worth of expenditures will be cut. In this case, the government can save about Br600 billion - if we are really talking about 10%, concludes Polevoy.

But there are other estimates. Experts of the Gaidar Institute believe that we may be talking about Br1-2 trillion. A similar estimate - about Br1.5 trillion - is given by former Russian Deputy Finance Minister Sergei Aleksashenko. Bloomberg also estimates the maximum size of the sequester at Br2 trillion.

However, experts believe that "economic" expenditure items will be cut first of all. These are, for example, various national projects (their implementation may be postponed or extended in time), investments in infrastructure and road construction. In other words, economic development will have to be sacrificed in order to preserve the bloated military expenditures.

PATREON Support the website

Write your comment

Russian Authorities Are Cutting The Budget

Follow Charter97.org social media accounts

Interview

Opinion