The war in Ukraine is beginning to take its toll on the Russian economy, which is facing a sharp slowdown due to declining oil revenues and Western sanctions. The country is "on the verge of recession," said Maxim Rechetnikov, the economy minister, during the St. Petersburg Forum – the so-called "Russian Davos" – in June.

President Vladimir Putin immediately rejected that assessment, eager to praise Russia's resilience in the face of sanctions. But the numbers do not lie. In July, the International Monetary Fund lowered its growth forecast for the country from 1.5% to 0.9% for 2025. This is a far cry from the spectacular rates of 4% seen in 2023 and 2024, when the state devoted all its financial resources to the war.

Another troubling sign: The budget deficit has exploded, reaching, according to the Finance Ministry, 4.9 trillion rubles (about €56 billion) at the end of July – a surge of 30% compared to the annual target set by the government. The economic slowdown, the drop in oil and gas revenues, as well as the depletion of reserve funds – practically exhausted after three years of war – make up a new reality: Cuts are coming. The Finance Ministry will find it difficult to slash spending on defense and security, which account for just over 40% of expenditures. The government will therefore have to reduce social contributions as well as support for civilian industries.

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