Russia’s National Wealth Fund (NWF), established as a financial safeguard for rainy days, is now facing imminent depletion amid ongoing economic challenges. In an article for Russia’s RBC, Former Finance Minister Mikhail Zadornov has raised concerns that the fund’s liquid assets may be exhausted within six months if the current level of war expenditures continue.
As of February 1, the NWF’s liquid assets—comprising foreign currency and gold reserves held by the Central Bank—have dwindled to 3.8 trillion rubles, representing less than 2% of the country’s Gross Domestic Product (GDP). This marks a substantial decrease from the 7.4% of GDP recorded before Russia’s full-scale invasion of Ukraine.
The NWF has been instrumental in covering budget deficits, especially as the nation grapples with the financial strains of the prolonged conflict in Ukraine. The war has led to increased military expenditures and has disrupted traditional revenue streams, notably from the energy sector.
In January 2025, Russia’s budget deficit surged to 1.7 trillion rubles ($17.73 billion), a 14-fold increase compared to the same month in the previous year. This deficit equates to 0.8% of the national output and is attributed to a 73.6% rise in spending early in the year. While officials have described these expenditures as front-loaded and not indicative of the annual trend, the significant increase underscores the mounting fiscal pressures.
The energy sector, a cornerstone of Russia’s economy, is facing significant challenges. Sanctions have restricted access to tankers, and drone attacks have damaged refineries, leading to a potential reduction in oil production. The U.S. recently imposed sanctions on 180 Russian tankers to pressure Russia to end the war in Ukraine. Additionally, drone attacks have targeted Russian refineries, cutting 10% of its refining capacity. These challenges have forced Russia to adapt by acquiring smaller tankers and coping with rising costs, ultimately impacting the Russian economy and oil revenue significantly.
The broader economic landscape presents further concerns. Internal reports from the Russian economy ministry and central bank highlight significant economic risks, including lower oil prices, budget constraints, and rising corporate debt. Despite public claims of economic resilience, these reports indicate the potential for a faster economic slowdown leading to a technical recession, while high inflation persists at 10%. The reports emphasize the risk of high interest rates (expected to stay at 21%), which are curbing lending and investment, threatening growth prospects. Additionally, potential increases in U.S. and OPEC oil output pose further risks to the federal budget. The economy ministry foresees substantial cost increases for companies in 2025, hindering financial stability and potentially leading to more bad debts. Recent economic strains are exacerbated by labor shortages, a weak rouble, and high interest rates. The budget, reliant on energy income, faces challenges despite higher oil prices helping manage fiscal deficits. The National Wealth Fund, used to cover deficits, has significantly decreased, indicating unsustainable long-term support.
Zadornov emphasizes that only by ending the war can the Russian government hope to restore budgetary balance. The prolonged conflict has not only strained public finances but has also led to international sanctions that further pressure the economy.
Let’s hope Mr Zadornov is now avoiding high buildings, and tea, and cars, planes..