Russian Budget Revenues Collapse as War, Sanctions, and Mismanagement Eviscerate the Economy
Russian government budget revenues continue to collapse as the combined weight of war spending, international sanctions, and systemic mismanagement tears into the foundations of its economy. In May 2025, the Kremlin recorded a federal budget deficit of 167.7 billion rubles—despite May traditionally being a month of budget surpluses for Russia.
Total federal revenues for May fell to 2.46 trillion rubles, a 6% drop compared to the same month last year. The collapse is driven primarily by a catastrophic 35% year-on-year fall in oil and gas revenues, which plunged to just 512.7 billion rubles. Non-oil revenues, once a rare bright spot, grew only 8% year-on-year—well below the country’s 10% inflation rate, indicating a contraction in real terms.
For a regime that built its fiscal policy around energy rents and wartime mobilization, the numbers are devastating. Since February, non-oil tax revenue growth has steadily slowed, while oil-linked revenues have plummeted. The sharp decline in hydrocarbon income reflects both lower global prices and tightening enforcement of Western sanctions targeting Russia’s shadow fleet and energy export channels.
Meanwhile, federal spending continues to surge unchecked. In May, the government spent 2.63 trillion rubles—20% more than in May 2024. That spending growth, paired with weakening revenue, pushed the budget deeply into the red. It’s a stark reversal from the Kremlin’s past performance: May produced surpluses in every year from 2021 to 2024.
This year marks a full-blown collapse:
- 2021: +112 billion rubles
- 2022: +425 billion
- 2023: +20 billion
- 2024: +410 billion
- 2025: –168 billion
The deficit trend is even more alarming in cumulative terms. Ministry of Finance data shows Russia’s total deficit for 2025 tracking far worse than any year since at least 2020. Compared to previous years, the 2025 budget line is plunging downward at record speed—already exceeding the pandemic-era lows.
Charts of tax intake reveal a deepening bifurcation. Oil and gas tax revenue, after surging early in 2024, began collapsing by mid-year and has remained negative since. In May 2025, it hit –35% year-on-year. Non-oil revenue growth, once steady above 30%, slowed to 0–2% this spring and cannot keep pace with inflation. The Kremlin is left with no growing sources of income—only shrinking ones.
Spending, by contrast, continues to explode. January 2025 opened with a 64% year-on-year jump in expenditures. By May, the year-over-year increase stood at 20%, indicating continued massive outlays for military operations, domestic repression, and social pacification in the face of mounting instability.
The message from the numbers is clear: Russia is burning through cash to sustain an unwinnable war while revenues dry up. The illusion of macroeconomic stability has collapsed. What remains is a wartime economy devouring itself.
With a shrinking tax base, falling export income, and unsustainable spending, the Kremlin is now locked into a fiscal death spiral—barreling full speed into the wall.
