Russia's economy contracted 0.3% between January and March 2026 — its first quarterly shrinkage since early 2023. The public deficit reached $60 billion in the same period. Inflation is running at close to 6% under a 14.5% central bank interest rate. The structural pressures building since the invasion of Ukraine are starting to show up in hard numbers.
The budget picture is stark. In January 2026, the federal deficit hit 1.7 trillion roubles — the largest January shortfall on record. Oil and gas revenues dropped to a four-year low of 393 billion roubles. Regional budgets recorded a combined deficit of roughly 1.5 trillion roubles in the same month, a sign that the fiscal burden of the war is being pushed progressively further down the state apparatus.
One of the stranger dynamics in Russia's wartime economy is the role of a relatively stable rouble. Currency stability, which might appear to signal resilience, is in fact compounding the budget problem. When the rouble is strong, oil and gas export revenues — earned in dollars and euros — translate into fewer roubles when they reach the federal budget. The Ministry of Finance has been forced to draw down the National Wealth Fund's gold reserves to cover the shortfall. A stable currency and a deteriorating fiscal position can coexist — because in a capital-controlled, war-mobilised economy, the headline exchange rate can be managed while structural damage accumulates beneath.
The EU adopted its 20th package of sanctions against Russia on 23 April 2026, adding 120 individual listings and targeting energy revenues, financial services, trade networks and the military-industrial complex. Russia's access to global capital markets is effectively closed. The banking sector has de-dollarised. Access to high-technology goods remains restricted. Tracking by the Kyiv School of Economics Institute shows measurable deterioration across Russia's revenue indicators. The question for EU policymakers is not whether sanctions are working, but whether the rate of pressure is sufficient to alter Russian strategic calculations before Ukraine's defensive position deteriorates further.
Russia's economy is not in freefall — the Kremlin retains significant tools to manage the surface picture. But the underlying strain is genuine and compounding. Record budget deficits, declining energy revenues, a war-inflated defence burden and restricted access to external financing are not sustainable indefinitely. For the EU, the data makes a clear case that the sanctions architecture is producing effects. What it cannot resolve is the core strategic question: whether the economic damage accumulates fast enough to matter for the outcome in Ukraine.
