Russia Budget Deficit Surges as Oil Revenues Fall

Russia’s public finances are under strain as oil and gas revenues slide. The budget deficit of Russia has ballooned in 2025, while spending keeps rising. Buffers like the National Welfare Fund are shrinking, and growth is stalling. These findings come from the KSE Institute’s August 2025 Russia Chartbook by Benjamin Hilgenstock, Yuliia Pavytska, and Matvii Talalaievskyi. 

What’s Driving the Gap: Context Behind the Numbers

Russia’s oil export earnings rose to $14.3 billion in July, supported by slightly higher global oil prices that kept Russian export prices near $60 per barrel. Still, the global oil market outlook points to lower prices for Russian exports through the rest of this year and into the first half of 2026. As a result, budgetary pressures are expected to persist. While oil and gas revenues increased in July compared to June due to quarterly tax payments, they were more than 30% lower in May–July than during the same period last year. Extraction tax receipts remain very weak and are unlikely to recover soon.

Challenging Outlook for Russian Oil and Gas Exports

Sanctions are increasingly squeezing Russia’s ability to move oil abroad. The number of sanctioned shadow tankers has climbed to 535, with 124 of them directly listed by the EU, UK, and US. This means that nearly two-thirds of the shadow fleet is now under sanctions, raising pressure on Moscow’s export routes.

Stronger enforcement will be key, as gaps still allow some shipments to move despite restrictions. In July, the shadow fleet’s share in Russian oil exports rose slightly, likely helped by higher global prices. This suggests that Russia is leaning even more on risky channels to keep its oil flowing, leaving its energy revenues vulnerable to tighter controls in the months ahead.

Russian Budget Deficit Deepens as Revenues Fall

Russia’s public finances came under heavy strain in July. The monthly budget deficit soared to 1.5 trillion rubles, driven by weak oil and gas revenues combined with surging expenditures.

This pushed the cumulative shortfall for January–July 2025 to 4.9 trillion rubles, a sharp increase from just 1.1 trillion during the same period in 2024. Alarmingly, the deficit has already reached 129% of the full-year target set after the most recent budget revision.

The rapid deterioration highlights how falling energy revenues and rising spending are creating mounting fiscal risks for Moscow.

Key Research Findings

• Oil and gas revenues fell 19% year over year, while expenditures jumped 21%, driving the Russian budget deficit wider.
• The liquid part of the National Welfare Fund is about 4.0 trillion rubles and could be used up within 6–12 months.
• Domestic debt issuance (OFZ) reached 3.0 trillion rubles in Jan–Jul, with falling yields showing strong bank demand.
• Growth slowed to 1.1% year over year in Q2, signaling a stalling economy; inflation eased to 8.8% while the policy rate stands at 18%.

What it Means: Risks and Next Steps

If oil prices drift toward $60 Brent into 2026, budget pressure will persist. The state may lean more on domestic borrowing and the National Welfare Fund, raising financial stability risks as buffers thin. With limited labor and capital, output has little room to grow, and policy goals clash: restrain prices or fund spending. Further monitoring of the Russian budget deficit and oil price trends is essential. 

Meet The Researchers

• Benjamin Hilgenstock — KSE Institute. 
• Yuliia Pavytska — KSE Institute. 
• Matvii Talalaievskyi — KSE Institute.

Read The Full Report

Explore the full findings and detailed analysis by reading the complete report on the KSE Institute’s website. Additionally, you can view more policy briefs from the KSE Institute on the FREE Network’s website.

Explore Other Editions of KSE Institute’s Russia Chartbook

• KSE Institute’s Russia Chartbook – August 2025
• KSE Institute’s Russia Chartbook – July 2025
• KSE Institute’s Russia Chartbook – June 2025
• KSE Institute’s Russia Chartbook – May 2025
• KSE Institute’s Russia Chartbook – April 2025
• KSE Institute’s Russia Chartbook – March 2025
• KSE Institute’s Russia Chartbook – February 2025
• KSE Institute’s Russia Chartbook – January 2025