The Guardian: 2026 Brings Clear Signs Of The Destruction Of Russia's Economy
- 7.02.2026, 10:19
Oil revenues no longer save the budget.
In 2026, Russia has begun to show clear signs of a systemic economic crisis: growth has virtually stopped, oil revenues are falling and the budget is increasingly squeezing the population.
The Guardian writes The Guardian.
"In 2026, there are clear signs that Russia's economy is finally collapsing," the piece says.
Although the catastrophic collapse expected in the West may not happen, the Kremlin faces a combination of problems that make further warfare increasingly economically painful, the publication notes.
Oil revenues no longer save the budget
Oil and gas revenues, long the financial foundation of Russia's war machine, are shrinking rapidly. In 2022, tax revenues from fossil fuels provided about 40 percent of the federal budget, and that was more than enough to cover the cost of the war.
But preliminary data for the first three quarters of 2025 show that their share has fallen to 25 percent. One reason is falling prices: Urals crude has fallen from around $90 a barrel in early 2022 to around $50 by the end of 2025 amid a global oversupply.
Loss of markets and pressure on the "shadow fleet"
Additional pressure comes from Western sanctions, despite Moscow's attempts to refocus exports. Since the invasion, Russia has increased oil shipments to China, India and Turkey, compensating for the loss of the European market. However, by 2026, total trade with these countries was well below pre-war levels.
The decline in purchases from India was particularly notable amid threats of trade duties from US President Donald Trump.
Russia's revenue from fossil fuel exports in 2025 was 13% below pre-war levels. Sanctions, Ukrainian drone strikes on energy infrastructure, difficulties with gas exports and falling global oil prices contributed to this.
Experts note that further strengthening of sanctions could hit the Kremlin's revenues even harder. In particular, the detention of "shadow fleet" vessels and the fight against flagless oil transportation could sharply reduce exports and foreign currency revenues.
Demographic crisis
One of Russia's key problems remains demography. The country's population is shrinking from 2019: from 145.5 million people to 143.5 million in 2024. The reasons are falling birth rates, war losses and emigration. Unlike Western countries, where falling birth rates are partially compensated by immigration, Russia has no such demographic reserve. The population decline has led to a severe labor shortage.
Tax hikes and inflation
To cover the budget deficit, the Kremlin has gone for steep tax hikes. In 2025, corporate tax rose from 20% to 25%, income tax rates were raised, and in early 2026, a VAT increase from 20% to 22% - higher than in the US and most EU countries - took effect.
The tax hikes come amid persistent inflation, which has hit prices of essential goods. The authorities' attempts to curb inflation are only adding to the slowdown in economic growth.