(MOSCOW) – Russia is seeking about 1.2 trillion rubles (roughly US$12.4 billion) to reduce a growing federal budget deficit and sustain its military campaign in Ukraine as oil and gas revenues fall sharply.
Official budget plans for 2026 allocated 12.9 trillion rubles (about US$133.5 billion) to defence spending, but Moscow now anticipates a shortfall as core revenue streams shrink. Analysts say losses in energy income have left few alternatives for raising funds at scale.
In early 2026, Russia increased value-added tax (VAT) to 22 per cent and lowered the threshold at which businesses must register for VAT from 50 million to 10 million rubles. This change means many more companies now pay VAT, adding pressure on small and medium enterprises already struggling with costs and reduced demand. Thousands of firms have announced closures in the first months of the year as they struggle to absorb the extra burden.
The federal government is considering additional revenue measures, including new environmental damage fees and higher export duties on commodities such as diamonds, gold and silver. However, critics warn such measures risk further weakening industrial sectors already facing bankruptcies and falling investment.
Inflation and rising prices within Russia, combined with deteriorating internet connectivity for online firms, have compounded business challenges. Regional budgets, which once subsidised local enterprises, now have limited funds themselves and are cutting back on financial support.
Economic difficulties extend into public services. Reports from regions including areas in Russia’s far east and near Moscow describe utility problems caused by underinvestment and maintenance shortfalls.
The government is also debating whether to legalise casinos, taxing them at 30 per cent, but policymakers acknowledge this alone will not resolve the broader fiscal gap.
External pressures, including sanctions and sustained Ukrainian drone strikes on energy infrastructure, have disrupted oil and gas exports. Projections assume crude oil prices may average US$59 per barrel in 2026, but actual prices are below that, adding further strain.
Moscow’s search for revenue comes amid broader economic uncertainty and persistent military spending. Officials maintain that the government’s fiscal measures are necessary to maintain national defence budgets. Critics argue the approach could accelerate economic decline unless new sources of sustainable revenue are found.
