Before the start of Israel and the United States’ war against Iran, Russia was experiencing a pessimistic economic scenario.
India’s decision to stop buying Russian oil, after pressure from the Trump administration, and the shutdown of 40% of the country’s capacity to export the commodity (an index calculated by the Reuters agency based on market data), due to attacks by Ukraine on its infrastructure in the sector and the seizure of oil tankers, left a cloudy horizon for the regime of dictator Vladimir Putin.
However, the conflict in Iran came, and the rise in oil and gas prices due to the blockade of the strategic Strait of Hormuz by the Ayatollah regime, combined with a partial removal of American sanctions on Russian energy exports, gave Moscow a boost.
Collaborating with Iran with drones, military intelligence and humanitarian aid, Putin’s desire is for a long war, so that Russian coffers continue to count on the extra income.
However, experts have pointed out that not even the conflict in the Middle East will be able to resolve a major Russian bottleneck in recent years: the public deficit.
Russia’s consolidated budget deficit jumped from 1.7% of GDP to 3.9% in 2025.
“Thanks to rising oil prices, the worst-case scenario for Russia is unlikely to materialize. But the deficit will inevitably continue to increase due to the fall in non-oil and gas revenues,” said economic analyst Sergei Shelin, in an article for The Moscow Times newspaper.
The expert highlighted that the big concern for Putin is that Russia’s spending on the war in Ukraine “has exceeded projections every year since 2022”.
According to data from the World Bank, Russia’s military expenditure rose from 3.6% of GDP in 2021, the year before the start of the war in Eastern Europe, to 7.1% in 2024.
In an interview with People’s Gazetteeconomist and doctor in international relations Igor Lucena stated that he believes that the war in Iran will have a resolution soon and that the relief for Russia generated by the conflict will only be temporary.
Even with a “war economy”, in which investments in defense mitigate the losses that other economic sectors suffer from sanctions, the analyst highlighted that the situation of the Russian State’s accounts is not sustainable.
“You cannot believe that the Russian economy will be able to sustain itself within this model for another three, four years,” said Lucena.
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The expert stated that there are sectors with the potential to diversify Russia’s economy and make it stop being so dependent on energy exports, such as the car, luxury and tourism industries, but Putin has no interest in such diversification happening.
“Government interference in the command of companies [por meio de aliados do ditador] and the need to increasingly explore the state sector and try to make other countries dependent on Russian energy capacity prevent this,” said Lucena.
“This is also a basis for his maintenance of power. From the moment Putin released the flow of capital so that companies began to become international giants, he would lose political power to economic power”, he added.
Putin rules out spending cuts for now
To reinforce its cash flow, Russia sold around 15 metric tons of gold from its reserves in the first two months of the year, the highest amount since 2002, according to data from the World Gold Council.
Furthermore, according to information from the EFE agency, last Friday (27) the Kremlin admitted that at least one oligarch offered to finance the war in Ukraine in a closed-door meeting with the dictator, who, according to independent media, asked for donations to be able to continue the aggression against Kiev in the face of the growing public deficit.
Even with the accounts out of control, Putin’s regime should not implement cuts in public spending for now to try to alleviate the deficit.
In early March, Reuters sources pointed out that Russia was considering 10% cuts in “non-sensitive” spending this year, a plan that would obviously not include cuts in military spending. However, last Friday, Bloomberg agency sources reported that this adjustment had been discarded.
