The Russian economy has been based for 2 years mainly on war orders and massive arms charges. Although this model has been effective for any time, its limitations are now becoming clearer. The crisis in the natural materials market, the intensified economical policy of the United States and the tensions in relations with China can lead Moscow to a critical point. Oil prices, the foundation of the Russian budget, are starting to play a decisive function in shaping the future of this system.
Russia under financial pressure
The Russian budget is increasingly affected by the cost of war. Since the beginning of the conflict in Ukraine, spending on the army and defence sector has increased dramatically. To fund this model, the Kremlin is forced to reduce investment in civilian economical departments. The level of interest rates maintained for many months at 21% is not only proof of inflationary tensions, but besides an effort to halt the outflow of capital.
Russian citizens are already experiencing the effects of this policy. More costly credit, limited access to investment and falling purchasing power are everyday life, which shows that the economy ceases to function as before. The model of the war economy clearly loses productivity – industrial processing rates began to decline in early 2025.
Export crisis and decline in natural materials
Russia has been based on exports of oil and natural gas for decades, building almost the full model of state operation around this sector. Today, however, at the falling prices of Urals oil, the Kremlin budget is becoming more and more hollow. Export revenues no longer cover war spending, and the possible of further declines in the oil marketplace only worsens the situation.
Moreover, economical problems besides affect China – 1 of Russia's main trading partners. The customs policy of the United States, especially in the context of Donald Trump's possible return to the White House, poses a threat to further exports of Russian natural materials to Asia. If Beijing limits its purchases, Russia will be in a very hard position.
Slow improvement and creative accounting
Although the Russian authorities stress that unemployment remains low and economical growth does not diverge from the euro area average, many experts consider this data to be unreliable. The global Monetary Fund forecast shows that Russia's GDP growth in 2025 is only 1.5%. In practice, this means stagnation.
It is increasingly hard to hide the real state of the Russian economy. The civilian sector is failing to keep pace with the improvement of the military sector, leading to fragmentation and a simplification in innovation. Industrial processing – 1 of the pillars of all modern economy – is on the brink of productivity.
Oil prices as a decisive factor
According to analysts, a key component that can force Russia to change course is the further fall in oil prices. If the export gross of natural materials continues to decrease, Moscow will face the request for budget cuts and revisions of expenditure. This in turn may open the way for real peace talks, due to the fact that the financial situation will become besides hard to proceed the current course.
Many experts point out that only financial destabilisation can affect Kremlin policy. advanced oil prices have so far allowed Russia to keep the illusion of stability. But now more and more shows that the times of this apparent balance are coming to an end.
The Russian economy is at a hard time. The current model based on natural materials and war orders begins to crumble. Falling oil prices, expanding US trade policy and slowing industrial processing can lead to a breakthrough. If current trends persist, Russia will face the request for extremist decisions. Will the Kremlin decide to change course? The answer will gotta wait, but the force increases from all side.
