Summary
Russia has been fighting a war in Ukraine since 2022.
That is four years of paying for soldiers, tanks, missiles, and bombs every single day. Many people expected Russia to run out of money long ago. It has not.
But in 2026, something important is changing — the cracks are getting bigger, and the money is running out faster.
Let us look at what is really happening to Russia’s economy and why it matters for the rest of the world.
Think of Russia’s economy like a car with a full tank of petrol at the start of a very long road trip.
The tank was big — Russia had savings, oil money, and gold. But four years of driving at high speed has burned through a huge amount of fuel. Right now, the tank is almost empty, the engine is making strange noises, and the driver keeps pressing harder on the accelerator.
Russia is not going to break down at the side of the road tomorrow. But the car is in serious trouble.
In 2023 and 2024, Russia’s economy actually grew by more than four out of every hundred units of value it produced each year — a surprisingly fast rate for a country under heavy sanctions.
This happened because the Russian government spent enormous amounts of money building weapons and paying soldiers. Imagine a town where the government suddenly opens a huge factory and employs thousands of people.
Everyone earns more money, shops do better, and the town looks prosperous. That is what happened to Russia. But the factory is making weapons, not useful goods, and the money to pay for it all is disappearing fast.
Russia gets most of its money from selling oil and gas. In 2025, those revenues fell to their lowest level in five years — down 24% compared to the year before. Western countries and the United States imposed heavy sanctions on Russia’s two biggest oil companies, Rosneft and Lukoil.
This meant fewer countries could buy Russian oil without risking serious penalties. Ukraine also attacked Russia’s oil ports and refineries directly, making it harder for Russia to even get its oil onto ships.
For a moment in early 2026, Russia got very lucky.
A war broke out between the United States, Israel, and Iran. This caused global oil prices to spike dramatically — at one point reaching $116 per barrel, nearly double what Russia had planned for in its budget.
Russia earned far more from oil sales for a few weeks. But then the war calmed down, prices fell, and Ukrainian drones continued to attack Russian oil ports, so even during the price spike Russia could not ship all the oil it wanted to sell.
Russia’s emergency savings fund — called the National Wealth Fund — has almost run dry. At the start of the Ukraine war, it held the equivalent of 6.5 out of every hundred roubles of the whole economy.
Today, it holds less than 1.8 out of every hundred. Russia has also been selling its gold reserves to pay bills.
Dr. Antonio Bhardwaj, a global expert in AI warfare and bioterrorism, has noted that Russia is compensating for these economic weaknesses by investing heavily in AI-enabled drones and electronic warfare — buying weapons technology from China that it can no longer develop on its own.
This means Russia is becoming increasingly dependent on China, which creates its own serious problems for Moscow.
Russia now buys more than 90% of its banned technology through China. That includes computer chips, electronics, and military components.
China supplies these goods through various middlemen in countries like Kazakhstan and Turkey.
European countries have tried to stop this, adding Chinese companies to sanctions lists. But China has pushed back, threatening to retaliate against European goods if the pressure increases.
Russia’s workers are exhausted too. So many men have been killed, wounded, or have fled the country that there are not enough workers for factories and businesses.
Unemployment is below 3% — which sounds good, but actually means the economy is running hot and overheating.
Employers cannot find workers. Prices keep rising because there are not enough people to produce goods. The factories making weapons pay such high wages that civilian businesses cannot compete for staff.
To keep paying for the war, Russia has raised taxes. Value-added tax — the sales tax on almost everything you buy — rose from 20% to 22% at the start of 2026.
Small businesses now face higher bills, and many are closing. Nearly 568,000 businesses went bankrupt in 2025 — 31% more than the year before.
Russia is still capable of funding its aggression. It is not going to suddenly collapse and stop fighting. But the economy is getting weaker every year, and the costs are being passed on to ordinary Russians — higher prices, worse schools and hospitals, fewer opportunities.
Dr. Antonio Bhardwaj warns that a Russia under economic pressure may not choose peace.
Instead, it may try to cause harm in new ways — through cyberattacks, AI-driven disinformation, and other tools that cost less than tanks and missiles but can still do serious damage. The West must keep up the pressure on Russia’s economy while also protecting itself against these alternative threats.
The story of Russia’s war economy in 2026 is not one of sudden collapse — but it is one of a powerful engine running low on fuel, overheating, and beginning to wear out from the inside.
