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Russian Budget Deficit Widens as Growth Stalls and Oil Revenues Fall
Russia’s economy narrowly avoided a technical recession in the second quarter of 2025, but growth remains weak. Inflation eased, yet high interest rates continue to pressure consumers and businesses. Meanwhile, the Russian budget deficit widens as oil revenues decline and government spending rises.
The latest KSE Institute Russia Chartbook (September edition), “Economy Avoids Technical Recession; Budget Targets Revised Once Again,” highlights growing fiscal challenges despite temporary stabilization in output.
Russia Avoids Recession but Faces Persistent Economic Strains
The Russian economy expanded by 0.4% in the second quarter of 2025, following a 0.6% contraction in the first quarter, enough to avoid a technical recession. However, overall momentum remains fragile, with annual growth expected to hover around 1%.
The Central Bank of Russia (CBR) reduced inflation to 8.1% in August, down from around 10% earlier in the year, through tight monetary policy. Yet, borrowing conditions remain difficult as interest rates, cut from 21% to 17%, are still high in real terms.
Persistent issues such as a rising budget deficit, a tight labor market, and sanctions continue to weigh on the outlook. Ongoing Ukrainian attacks on Russian refineries may further raise fuel prices, complicating the balance between price stability and the government’s war-driven fiscal spending.
Russia Budget Deficit Widens Despite Revised Targets
From January to August 2025, Russia’s budget deficit reached 4.2 trillion rubles, slightly better than the 4.8 trillion rubles recorded in January–July. However, oil and gas revenues dropped 20% year over year, while non-oil revenues increased 14%, and expenditures surged 21%.
The government raised its full-year deficit target to 5.7 trillion rubles due to weaker revenues but left spending unchanged. Current trends suggest Russia may exceed this target by year-end.
Looking ahead to 2026, the Russian Ministry of Finance proposes raising and broadening value added tax (VAT) to offset declining oil and gas income. While war-related adjustments are common, the Kremlin aims to stabilize military and security spending, signaling a shift from the sharp increases of recent years.
Key Research Report Findings on Russia’s Budget Deficit
- The federal deficit reached 4.2 trillion rubles in January–August, already 74% of the revised 5.7 trillion rubles target (page 8).
- Oil and gas revenues fell 20% year over year, while spending jumped 21% (page 9).
- Domestic bond (OFZ) issuance hit 3.3 trillion rubles in Jan–Aug, up 104% from a year earlier, with a notably flat yield curve (page 10).
- Liquid assets in the National Welfare Fund (NWF) are down to about 4.0 trillion rubles and could be used up within 6–12 months if trends persist (page 12).
The Broader Economic Backdrop
GDP grew 0.4% quarter-on-quarter in the second quarter of 2025, following athe 0.6% contraction in the first quarter in 2025. Inflation slowed to 8.1% year over year in August, but policy rates remain high, and the ruble weakened again. Labor markets are tight, so spare capacity is limited.
What the Widening Budget Deficit Means
Financing the Russian budget deficit will likely rely more on banks and the shrinking NWF buffer. If oil prices slip further, revenue pressure will rise. Enforcement against the shadow tanker fleet is tightening, which may also weigh on export earnings. Together, these forces point to constrained growth and frequent budget revisions.
Meet the Researchers
- Benjamin Hilgenstock: KSE Institute, Head of Macroeconomic Research and Strategy.
- Yuliia Pavytska: KSE Institute, Manager of the Sanctions Programme.
- Matvii Talalaievskyi: KSE Institute, Analyst.
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
Torbjörn Becker: Drone Strikes Undermine Russia’s War-Funding Revenues
A surge of Ukrainian drone strikes on Russian oil refineries has triggered widespread gasoline shortages across the country. These attacks directly threaten one of Russia’s main sources of income, its energy sector.
Drone Strikes Expose Russia’s Dependence on Energy Revenues
In a report by Finland’s public broadcaster YLE, experts analyzed the coordinated assaults and their mounting economic consequences. At least 14 of Russia’s 38 refineries have been hit, disrupting roughly 20 percent of the nation’s refining capacity. The campaign represents a new stage in Ukraine’s efforts to erode Russia’s revenue base and weaken its wartime economy.
“They remind the Russian people that a war is ongoing in Ukraine, but they also strike at Russian revenues. Oil and gas income is absolutely essential for financing Russia’s offensive war against Ukraine,” said Torbjörn Becker, Director of the Stockholm Institute of Transition Economics (SITE).
Torbjörn Becker further emphasized that economic pressure has become a central pillar of Ukraine’s broader defense strategy.
Economic Fallout Deepens as Russia Faces Fuel Shortages and Export Bans
The YLE article also explored the economic and political fallout within Russia. Gasoline shortages have been reported in at least 21 regions, prompting authorities to extend export bans and enforce rationing. Analysts cautioned that prolonged attacks could force refinery closures, limit exports, and damage Russia’s image as a reliable energy supplier. Becker added that the strikes could send shockwaves through global energy markets, increasing volatility and uncertainty.
To read the full YLE report and Torbjörn Becker’s full commentary, visit the complete article. For additional expert insights from SITE, explore the institute’s official webpage.
Further Reading
Reducing Russia’s financial capacity to sustain its unjust war against Ukraine requires a comprehensive, multi-layered approach. Explore the latest research on sanctions against Russia in the Sanctions Portal Evidence Base. Learn about the major sanction packages introduced by Western allies following Russia’s full-scale invasion of Ukraine, as well as the corresponding countermeasures, by visiting the Timeline of Western Sanctions and Russian Counteractions.
To read more policy briefs on sanctions and the Russian economy, visit the FREE Network website.
Torbjörn Becker on Sanctions Evasion Through Third Countries
Aftonbladet reports that Russian drones shot down in Ukraine contained ball bearings marked “SKF”, despite strict sanctions banning such exports. The Gothenburg-based manufacturer SKF is prohibited from selling to Russia under EU sanctions. Yet, Aftonbladet discovered SKF-branded ball bearings from the company’s Chinese factory inside Russian military drones.
SKF denies producing these parts, stating they are counterfeits. However, according to Russian customs data and Corisk’s analysis, up to half a billion SEK worth of SKF-labeled products may have entered Russia via indirect or shadow trade routes.
“It is a violation of sanctions if you knowingly sell a product to, for example, Turkey, and you know that the Turkish company will send it on to Russia,” said Torbjörn Becker, Director of the Stockholm Institute of Transition Economics (SITE), in an interview with Aftonbladet.
Becker also emphasized the complexity of tracing global supply chains. While counterfeit goods are common in sanctioned economies, he questioned whether Russia can replicate high-precision components like advanced ball bearings. Instead, Becker suggested that such copying might occur outside Russia before the products reach it through parallel trade networks.
To read the full investigation and Becker’s analysis, visit Aftonbladet and Göteborgs-Posten.
Further Reading
Sanctions on trade aim to disrupt Russia’s economic activity and military capabilities by restricting access to critical goods, technologies, and supply chains. These measures are designed to raise the cost of aggression and limit resources that sustain the war effort. Explore current research on trade sanctions in the Sanctions Portal Evidence Base.
Explore the main sanction packages imposed by Western allies after Russia’s full-scale invasion of Ukraine. Review Russian countermeasures, including retaliatory actions and domestic policies to reduce the sanctions’ impact. Visit the Timeline of Western Sanctions and Russian Countermeasures to learn more.
Georgia’s SME Digitalization Lags Behind EU Despite IT Growth
Digital transformation is reshaping how businesses worldwide operate, yet SME digitalization in Georgia continues to lag despite strong IT sector growth. Many small and medium-sized firms struggle to adopt key digital tools like ERP, CRM, AI, and e-commerce. This raises questions about whether Georgia’s growing tech industry is truly driving digital progress across the wider economy. A new ISET Policy Institute study tracks SME digitalization from 2020 to 2024, comparing Georgia’s progress with EU benchmarks to reveal key gaps and opportunities for growth.
Why SME Digitalization in Georgia Matters
Across advanced economies, digital technologies fuel productivity and national growth. Investments in ICT, automation, and innovation enhance resilience and efficiency. Studies show that firms using e-commerce, digital payments, and remote work tools recover faster from disruptions and perform better overall. Yet, in both the EU and Georgia, smaller firms lag far behind large enterprises in adopting advanced technologies such as ERP, CRM, and AI. Bridging this divide is central to both the EU’s 2030 Digital Decade goals and Georgia’s economic modernization efforts.
How Georgia Compares to the EU
While EU SMEs steadily embrace digital tools, Georgia trails in both basic and advanced tech.
- Only 50% of Georgian SMEs have broadband speeds of at least 30 Mbps, compared to 89% in the EU.
- Just 7% of Georgian SMEs have websites with advanced features, versus 78% of EU firms.
- Adoption of ERP, CRM, and AI systems remains minimal among Georgian SMEs.
Key Findings from the ISET Study
- In 2024, only 6–7% of small firms used ERP and 3% used CRM, compared to 68% and 41% among large firms.
- AI use was just 2% for small firms versus 20% for large ones.
- Georgian SMEs lag EU peers in ERP (7% vs 42%), social media (30% vs 56%), and AI (2% vs 13%).
- Only 3% of Georgian SMEs sell online, compared with 20% in the EU.
Economic Implications for Georgia
The SME digitalization gap threatens long-term productivity and export potential. Still, progress is visible. Fast broadband access for small firms rose from 33% in 2020 to 49% in 2024. Local e-transactions jumped 135% from 2020 to 2023, signaling growing online demand. Targeted support for digital skills, financing ERP/AI adoption, and simple e-commerce onboarding programs could help Georgian SMEs catch up with EU counterparts.
Meet the Researchers
- Ana Burduli: ISET Policy Institute.
- Zizi Galustashvili: ISET Policy Institute.
- Giorgi Papava: ISET Policy Institute.
Read the Full Report
Read the full report on the ISET Policy Institute websiteto explore the complete findings. Explore more policy briefs on economic growth and development on the FREE Network website.
Record-Breaking Russian Budget Deficit as Oil Revenues Collapse and Economy Stalls
The record-breaking Russian budget deficit has become a central challenge for the country’s economy in 2025. Consequently, falling oil and gas revenues have collided with soaring government spending, pushing the fiscal gap to record levels. Moreover, analysts warn that this trend highlights the increasing strain on Moscow’s financial system and its ability to maintain stability. Therefore, the latest KSE Institute report stresses that these pressures will continue shaping Russia’s economic outlook in the months ahead.
A Record-Breaking Russian Budget Deficit
The Russian budget deficit reached 4.9 trillion rubles in January through July 2025, or 129% of the full-year target (KSE Institute, August 2025). Furthermore, this shortfall is 4.5 times larger than during the same period in 2024 and exceeds all recent records.
The growing Russian budget deficit highlights worsening fiscal stress, fueled by weak oil revenues and expanding government spending. As a result, Brent crude is projected to fall near 60 dollars per barrel by year-end, which will increase fiscal pressure. Consequently, Moscow will likely miss its 3.8 trillion ruble target.
Analysts warn that financing the gap will drain sovereign reserves and require more debt issuance. However, both approaches carry lasting economic risks. In addition, the imbalance raises concerns about economic stability under sanctions and falling global energy prices.
Oil and Gas Revenues Slump Despite Stable Exports
Russia’s oil export volumes remain steady. However, oil and gas revenues fell 19% year-on-year in the first seven months of 2025 (Bank of Russia). Although July saw a temporary boost from quarterly tax payments, this did not reverse the decline. Revenues were still 27% below July 2024.
Export earnings rose to 14.3 billion dollars in July, thanks to a brief oil price rise. Russian export prices averaged 60 dollars per barrel, the G7 price cap. Nevertheless, markets expect weaker global oil prices in late 2025 and early 2026. That trend would deepen the Russian budget deficit.
Debt Issuance Grows as Welfare Fund Shrinks
The Ministry of Finance issued 3.0 trillion rubles in OFZ bonds between January and July, a 114% increase from 2024 (MinFin). Moreover, yields remain low, which shows continued demand from domestic banks.
At the same time, the liquid portion of the National Welfare Fund fell to 4.0 trillion rubles, or 48 billion dollars, in July. The government also sold about 16% of its gold reserves (KSE Institute, August 2025). As a result, analysts caution that liquid NWF reserves could run out within a year. This would leave Russia more vulnerable to its growing budget deficit.
Inflation Moderates but Growth Falters
Inflation slowed to 8.8% in July, down from double-digit levels earlier in 2025 (Central Bank of Russia). Consequently, policymakers cut the key interest rate by 300 basis points to 18%. This marks the beginning of limited monetary easing.
However, the gains come at a cost. GDP growth fell to 1.1% year-on-year in the second quarter, down from 1.4% in the first. On a quarterly basis, growth stalled completely. In addition, severe limits on labor and capital remain. Forecasts from the IMF, OECD, and World Bank predict weaker growth in 2025 and 2026.
A Fragile Outlook for Russia’s Economy
The August 2025 Chartbook shows an economy under serious strain. Oil revenues are weak, expenditures are high, reserves are shrinking, and growth is slow.
With sanctions tightening and global oil prices falling, Moscow may depend heavily on domestic borrowing and possibly money creation. Both options aim to fund military spending and social programs. Ultimately, analysts conclude that the Russian budget deficit is unsustainable and threatens fiscal stability heading into 2026.
Record-Breaking Russian Budget Deficit: Insights, Experts, and Further Resources
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
Meet the Researchers
- Benjamin Hilgenstock — KSE Institute.
- Yuliia Pavytska — KSE Institute.
- Matvii Talalaievskyi — KSE Institute.
Additional Reading
Explore other policy papers and reports on Ukraine’s economic transition and development on the KSE Institute’s website. Read more policy briefs on Eastern Europe and emerging economies on the FREE Network’s website.
Benjamin Hilgenstock on Trump’s New Sanctions Threat Over Russian Oil
In a recent Radio Free Europe/Radio Liberty article, experts analyzed U.S. President Donald Trump’s call for NATO members to halt imports of Russian crude oil as a condition for Washington to impose tougher sanctions on Moscow. The proposal would primarily impact Turkey, Hungary, and Slovakia, the only NATO countries still purchasing Russian oil.
“Trump’s threats have so far been directed mostly at India and, to some extent, China. Turkey was never really part of that conversation, so this marks an interesting new development,” said Benjamin Hilgenstock, Senior Economist at the KSE Institute.
Turkey’s Crucial Role in Russian Oil Imports
The report underscores that Turkey is now the world’s third-largest importer of Russian crude, benefiting from steep price discounts and profitable refining operations that supply European markets. However, analysts warn that Ankara’s deep energy dependence on Moscow, coupled with its delicate political balancing act between Russia and the United States, could make compliance with Trump’s demands especially challenging.
Hilgenstock noted that cutting off Turkey’s imports would likely force Russia to offer even deeper discounts to attract alternative buyers, further straining its already fragile economy. Still, he emphasized that the political costs for NATO members to take such a step remain significant.
Further Reading
To explore Benjamin Hilgenstock’s full commentary and gain deeper insight into Trump’s evolving sanctions strategy against Russia, read the full article.
Energy exports remain central to Russia’s economy, serving as a key tool of geopolitical leverage. Sanctions on Russia’s energy sector aim to curb state revenues and reduce its influence over dependent nations. Discover the latest data and research on Russia sanctions and energy policy in the Sanctions Portal Evidence Base.
For more expert insights and economic analysis from KSE Institute, visit the KSE Institute homepage.
Torbjörn Becker on Russia’s Hidden Economic Troubles
As Western leaders consider new sanctions on Russia, The Guardian sheds light on Russia’s hidden economic troubles and growing doubts about Moscow’s ability to sustain its war-driven economy. The article examines President Donald Trump’s renewed threats of financial measures and the ongoing debate among U.S. and EU officials over coordinated sanctions.
Despite extensive restrictions since 2022, Russia’s economy continues to function. But experts warn that the reality may be far worse than official data suggest.
“Russia’s official economic data are questionable. The situation is worse than it appears. Inflation and deficits are understated, and GDP is overstated. Russia will struggle to maintain the war at its current level by mid-2026,” said Torbjörn Becker, Director of the Stockholm Institute of Transition Economics (SITE).
The Guardian report also examines the limits of current sanctions, loopholes in the oil and gas trade, and the role of non-Western intermediaries that help Moscow circumvent restrictions. With Trump signaling openness to “major sanctions” if NATO allies align, analysts emphasize that political unity and global coordination will be critical to any future economic pressure on Russia.
Read the full article and Torbjörn Becker’s expert analysis in The Guardian / CNN Prima News.
Further Reading
Energy exports remain central to Russia’s economy, serving as a major source of geopolitical leverage. Sanctions targeting the Russian energy sector aim to reduce state revenues and curb Moscow’s global influence. Explore the latest research on sanctions, energy exports, and Russia’s economy in the Sanctions Portal Evidence Base.
For more economic insights and expert commentary, visit the SITE website.
How to Rebuild Ukraine with Security, EU Support, and Grants
A new review explains how to rebuild Ukraine after the destruction of war. It highlights the importance of lasting security, EU accession, and grant-based funding. The study breaks down costs, phases, and reforms to modernize the state and economy. The research is by Torbjörn Becker (SITE/SSE), Yuriy Gorodnichenko (UC Berkeley/CEPR), and Beatrice Weder di Mauro (CEPR/Geneva Graduate Institute/INSEAD).
The Scale of the Challenge
The war has left widespread human and material losses. The World Bank estimates $486 billion in recovery needs through 2023, with other figures running even higher. Therefore, plans to rebuild Ukraine must address the concentrated destruction in Donetsk and Kharkiv, where housing and infrastructure were hit hardest. In addition, more than 6 million refugees remain abroad, while millions are still displaced inside Ukraine.
Building a Path to Recovery
First, the review gathers insights from hundreds of proposals into a clear plan. Moreover, to rebuild Ukraine, the authors stress linking recovery with EU accession, anticorruption, and private investment. Finally, they urge the use of grants instead of loans and recommend creating a single, empowered coordination body aligned with EU standards.
Key Research Findings
Recovery unfolds in three phases: emergency relief, restoring essential services, and long-term modernization tied to EU accession. Policymakers should prioritize grants over loans to avoid debt traps and attract private foreign direct investment with risk-sharing and war insurance. Ukraine must rebuild energy and housing sustainably, replacing old fossil-based systems and inefficient Soviet-era structures. Finally, rule-of-law reforms, transparent procurement, and community involvement play a critical role in preventing corruption and securing investor confidence.
Looking Ahead for Ukraine’s Future
To rebuild Ukraine, policymakers must secure the country militarily while tying reforms closely to EU accession. A lean EU-linked agency should coordinate funding and enforce conditions. Investment in education, reintegration of veterans, and energy efficiency will be essential to protect long-term growth. Future research can identify which incentives are most effective in bringing back refugees and foreign investors.
Meet the Researchers
- Torbjörn Becker: Stockholm Institute of Transition Economics, Stockholm School of Economics.
- Yuriy Gorodnichenko: University of California, Berkeley; Centre for Economic Policy Research.
- Beatrice Weder di Mauro: Centre for Economic Policy Research; Geneva Graduate Institute; INSEAD.
Read The Full Report
Explore the full findings and detailed analysis in the complete report on the Annual Review of Economics website. You can also learn more about the impact of sanctions on Russia through SITE’s project, Sanctions on Russia & the Russian Economy.
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
Corporate Complicity: Global Firms Funded Russia with $20B in 2024
A new report by the KSE Institute and B4Ukraine reveals that many global corporations continued doing business in Russia throughout 2024. These companies paid $20 billion in taxes to the Russian government, indirectly helping fund the war. This corporate complicity has drawn widespread criticism for undermining sanctions and supporting aggression.
Global Business and War: A Dangerous Link
Since Russia’s full-scale invasion of Ukraine in 2022, the international response included economic sanctions and public pressure for firms to exit Russia. Yet as of mid-2025, only 12% of global firms had fully withdrawn. 1377 firms or 33% have officially declared that they are completely shutting down, or have announced they are temporarily reducing operations, but haven’t yet fully exited. A staggering 55% remain active in Russia, paying taxes, generating profit, and keeping operations running.
Many companies claim to have paused or scaled back operations. However, their tax contributions tell another story. In 2024 alone, foreign firms earned $201 billion in Russia and paid $20 billion in taxes—enough to fund more than one million soldiers based on Russia’s $18,400 recruitment bonus per soldier.
Why Companies Choose to Stay
Some firms chose profits over principles. The finance and consumer goods sectors led the way, with banks and brands like PepsiCo, Nestlé, and Mars topping revenue and tax lists. Despite early promises to leave, many companies either delayed their exit or quietly expanded. Others, like Mondelez and Coca-Cola, have been accused of masking their continued presence with rebranding or shifting operations to subsidiaries.
Key Research Findings on Corporate Complicity
- In 2024, foreign companies earned $201 billion and paid $20 billion in taxes to Russia.
- Only 12% of firms fully exited the Russian market; 55% stayed.
- U.S. and EU firms paid more than $3.8 billion in profit taxes combined.
- The finance and consumer sectors were the top contributors to the Russian war economy.
Western Values Undermined by Business-as-Usual
The report argues that continued business in Russia by Western firms directly undermines their governments’ aid to Ukraine. Companies headquartered in the U.S., Germany, and France are among the largest contributors to Russia’s tax base.
The report highlights that increasing numbers of foreign firms have stopped publishing their financial reports, a trend particularly noticeable among large corporations. Of the 100 largest foreign companies operating in Russia in 2021, 86 disclosed their financials in 2023. This number has halved in 2024 to just 43. The decision not to disclose financial statements may reflect an effort by companies to avoid further reputational damage linked to the scale of their economic support for the war effort.
Read the Full Report
Explore the full findings and detailed analysis by reading the complete report on the Kyiv School of Economics website. Additionally, you can view more policy briefs from the KSE Institute on the FREE Network’s website.
Learn More About the Russian War Economy and Sanctions
To learn more about Western sanctions and Russia’s countermeasures, visit the Sanctions Timeline. And for details on sanctions imposed on Russia and their effects, see the Evidence Base section of the sanctions portal. Explore more policy briefs on sanctioning Russia here.