The Russian Federation's economy is facing severe difficulties due to a combination of internal and external pressures. The Russian Ministry of Economic Development reported that in November 2025, GDP growth was just 0.1% year-on-year—the weakest result since early 2023, indicating actual stagnation. For the first time in nine months, industrial output dropped by 0.7%.
According to Ukraine’s Center for Countering Disinformation, this decline is not seasonal but structural, primarily affecting the industrial sector that previously sustained war-related growth. Even Kremlin-friendly analysts acknowledge rising recession risks in 2026, citing the exhaustion of budget support, import substitution, and forced lending as economic pillars.
Western sanctions are taking a heavy toll: transport and insurance costs for Russian oil exports have doubled, with Urals crude prices falling to around $34 per barrel amid high logistics expenses. Western markets remain closed, and crude volumes sold to India have also declined.
Russia’s federal budget deficit for 2026 is projected at over 10 trillion rubles. With limited external borrowing, the government is raising taxes, which could further boost the shadow economy. Civilian populations are likely to bear much of the financial burden, as spending on security forces and propaganda increases in anticipation of possible domestic unrest.
Analysts predict acute pressure to ease sanctions will intensify by spring—likely by March, when the first quarter's economic results are assessed. Russian leadership may be forced to seek ways to mitigate sanctions, but Ukraine’s official stance remains firm: any discussion about lifting sanctions can only come after full restoration of Ukraine’s territorial sovereignty.
In summary, Russia's economic stagnation and structural issues are worsening, reducing its ability to sustain war in Ukraine. Budget allocations to internal security and propaganda reflect fears of destabilization within Russia.
