(MOSCOW AND KYIV) – Economic pressures on Russia are intensifying as the war against Ukraine enters its fifth year, with falling energy revenues, expanding sanctions and sustained Ukrainian strikes placing increasing strain on the Kremlin’s ability to finance prolonged military operations.
Analysis by Jake Broe, a former United States Air Force nuclear and missile operations officer and a prominent military commentator, highlights what he describes as a steady erosion of Russia’s war economy. According to data cited by Reuters, Russian oil and gas revenues fell by approximately 24 percent year on year in 2025, while January figures showed a decline of nearly 47 percent compared with the same period the previous year.
Oil and gas traditionally account for around a quarter of Russia’s federal budget. The scale of the decline represents a significant reduction in revenue rather than profit, limiting the Kremlin’s fiscal flexibility as military spending continues to rise. Broe noted that the Russian authorities have attempted to offset these losses through higher value added tax and excise duties, measures that place additional pressure on the civilian economy.
Sanctions remain a key factor in the downturn, particularly those targeting Russia’s shadow fleet of oil tankers used to bypass international restrictions. Increased insurance costs, higher wages demanded by crews operating in high risk waters, and rising shipping expenses have all reduced profitability. Ukrainian strikes on refineries and fuel infrastructure have added further costs through lost production and repairs.
Broe argued that Russia’s leadership shows little indication of adjusting its strategic objectives, instead choosing to increase coercion at home through higher taxes, asset seizures and reduced public services. He said the absence of internal resistance has encouraged the Russian dictator to continue prioritising military spending over economic stability.
Ukraine’s strategy, by contrast, is focused on increasing systemic pressure rather than predicting a precise point of collapse. Continued long range strikes on refineries, logistics hubs and industrial facilities supporting Russia’s war effort are designed to raise costs and reduce output over time.
Broe also highlighted the role of misinformation within Russia’s governance system, where officials are incentivised to present favourable data to senior leadership. He cited examples where Russian military commanders publicly claimed control of cities later shown to be firmly under Ukrainian authority, illustrating what he described as a widening gap between official narratives and battlefield reality.
Despite repeated setbacks including the loss of Kherson, Ukrainian advances in Kharkiv Oblast and strikes deep inside Russian territory, the Kremlin has continued to project confidence, asserting inevitable victory while avoiding acknowledgement of reversals.
Ukraine’s position, Broe said, remains one of necessity rather than optimism. Continued resistance, despite heavy civilian and infrastructure losses, is viewed as the only alternative to occupation and the destruction of Ukrainian national identity.
The broader implications extend beyond Ukraine. Broe warned that economic decline combined with authoritarian governance limits innovation and long term growth in Russia, reinforcing dependence on raw material exports while discouraging technological development.
