(Moscow) – Russia’s economy is beginning to unravel under the weight of global sanctions, with rising inflation, dwindling fuel reserves, and a budget in deep deficit, according to Ukraine’s Ministry of Economy. While Moscow grapples with shrinking revenues and severe economic pressures, Ukraine is seeing signs of recovery and growth despite facing an ongoing war.
During a recent conference titled Fair Play: How to Make Sanctions Work, Ukraine’s First Deputy Minister of Economy, Oleksii Sobolev, presented evidence that sanctions are producing clear effects at the macroeconomic level, particularly in Russia.
Sobolev revealed that in the first quarter of this year, Russia’s economy shrank by 6 percent compared to the final quarter of last year. It marked the first recorded decline since the start of the full invasion of Ukraine in 2022. He stressed that the Russian economy is buckling, despite the Kremlin’s continued access to large volumes of natural resources.
Meanwhile, Ukraine’s economic outlook has been improving. Sobolev noted that after stabilising in the second half of last year, Ukraine’s gross domestic product has been on a steady upward trend. He predicted this year’s growth rate would slightly improve, pointing to resilience in the face of war and adversity.
Russian resources, by contrast, are rapidly drying up. Energy storage fuel levels have dropped by 70 percent, while the country’s budget deficit has already reached 90 percent of its annual target. Inflation, even by the Russian regime’s own manipulated figures, stands officially at over 20 percent. Sobolev explained that real inflation, felt across households and businesses, could be as high as 50 percent.
“The inflation they publicly acknowledge is over 20 percent,” he said. “But we know it is much worse. This creates social pressure and instability.”
A key driver of Russia’s fiscal troubles has been energy sanctions. According to Sobolev, Moscow has lost around 90 billion US dollars in oil export revenue due to price caps and strict shipping restrictions. That is roughly £71 billion in losses. Sanctions have targeted 400 to 500 tankers out of Russia’s 700-vessel fleet, which has severely disrupted the Kremlin’s ability to transport and sell oil globally. This disruption has increased operating costs and further weakened state revenues.
Russia’s Central Bank posted its first loss in many years, losing over half of its profits. Several major companies have suspended dividend payouts, a sign of economic stress reaching across sectors.
Sobolev urged the international community to increase pressure on other sectors vital to Russia’s war economy, including metallurgy, the chemical industry, and nuclear production. He argued that the weakening of Russia’s economic foundation would only continue as sanctions are tightened and enforced more rigorously.
“We are already seeing clear signs of exhaustion in their economy,” Sobolev concluded. “This trend will not reverse. In fact, it will deepen as sanctions do their job.”
