Russian financial officials have informed President Putin that the expenses of the Ukrainian war are escalating towards unsustainable levels, marking the most serious signs of internal divisions within Moscow since the start of the full-scale invasion.
The wartime economy of Russia is facing increasing pressure, with factors such as slowing economic growth and rising debt costs potentially leading to further widening budget deficits.
According to reports from Bloomberg, information from insiders and documents reviewed by Bloomberg indicate that officials from the Russian Finance Ministry and Central Bank have advised the Kremlin that the current defense spending levels could pose a risk of expanding government budget deficits.
Insiders say that these officials have become increasingly concerned about Russia’s economic and national budget situation in recent months and have proposed further cuts to defense spending. They suggest that without further efficiency improvements, it will be difficult to alleviate the country’s strained public finances. However, senior officials from the Defense Ministry and some within the Kremlin determined to achieve Putin’s war goals insist on safeguarding military spending. They believe that cutting defense spending would severely harm the economy, as many businesses rely on military-related contracts.
According to some insiders, Putin has instructed finance officials to explore cuts in other budget areas before reducing defense spending. Kremlin spokesman Dmitry Peskov has not commented on this.
Two sources close to the Russian government revealed that the Defense Ministry not only opposes spending cuts but also requests additional funding. They indicate that to cover the budget deficit reaching as high as 3 trillion rubles (approximately 360 billion USD) this year, military expenditures will have to increase.
As the Russia-Ukraine war enters its fifth year, Russia’s economy and finances are facing increasingly severe pressures. The emergence of these discussions indicates that Putin is facing difficult choices in responding to internal warnings about the war’s impact.
Insiders close to the Russian government have told Bloomberg that the rise in oil prices due to the Iran war is not sufficient to solve Russia’s problems. They added that oil prices would need to remain above 100 USD per barrel for at least a year for the economy to significantly improve, and this windfall alone cannot address the structural issues affecting economic growth, inflation, and the banking sector.
Russia’s expanding fiscal hole last week sparked anger from Valery Gartung, a senior member of the State Duma (Russian lower house of parliament) leading the Competition Protection Committee. Gartung questioned, “What are we going to do?”
“Print money? Or what? Let inflation rise by 30% every week like in 1992? We all understand that’s not a solution,” Gartung said.
Russian Finance Minister Anton Siluanov told Kommersant that due to increasing fiscal pressures and the country’s financial constraints, the Finance Ministry is reviewing this year’s budget and considering cuts beyond defense and social expenditures. This indicates that with slowing economic growth and expanding budget deficits, the government may be forced to make tough trade-offs.
Siluanov stated, “In recent years, federal budget expenditures have been increasing at an accelerated pace. Since 2019, these expenditures as a share of GDP have risen by nearly 3.5 percentage points, from 16.6% to 20.0% in 2025.”
He mentioned that the government heavily relies on reserves accumulated previously, including the Russian National Wealth Fund (NWF) and commodity-related revenues.
“All of this requires substantial resources,” Siluanov said, “The reserves are not unlimited.”
According to Moscow Times, from January to April this year, the Russian federal budget deficit reached 5.8 trillion rubles (about 817.8 billion USD), more than double from the same period last year. Economist Kirill Rodionov pointed out that the current deficit exceeds over 60% of the remaining liquid assets in the National Wealth Fund (3.63 trillion rubles, approximately 511.8 billion USD).
Rodionov stated, “Against the backdrop of weak oil and gas revenues, slowing economic growth, and rising debt costs, there are no other viable budget-balancing solutions aside from significant cuts in non-interest expenditures. This is likely the measure the government will have to take this year.”