Russia: Russian Oil And Gas Can No Longer Support Military Spending, Is A Crisis Looming?

Russia is at a major economic turning point, burdened by soaring military spending and a growing energy crisis. As financial resources dwindle, the cost of the conflict in Ukraine becomes unbearable. In 2025, the increase in military spending and the drop in energy revenues put the country face to face with an unprecedented economic challenge.

An explosion in military spending and a rapidly growing deficit

Since the beginning of the conflict in 2022, Russia has concentrated its economic resources on its military spending, fundamentally altering the structure of its economy. The absolute priority given to military spending has had direct consequences on state finances. Here are the key elements that summarize this turnaround:

• An explosion in military spending: in three years, defense spending has jumped by 90%. It went from 3.58% of GDP in 2021 to 6.68% in 2024.
• Insufficient oil revenues: in 2025, for the first time, revenues from oil and gas (10,900 billion rubles) will no longer be enough to finance military spending (13,600 billion rubles), thus representing a historic imbalance in the state budget.
• The impact of international sanctions: economic sanctions and the reduction of foreign investment in the Russian energy sector have reduced the country’s capacity to fully exploit its natural resources.
• A hidden debt: to mask this financial gap, Russia has accumulated hidden debt, estimated between 207 and 249 billion dollars since the summer of 2022, by manipulating certain economic indicators to maintain the resilient image of its economy.

This financial imbalance illustrates the growing impossibility of sustaining a prolonged war and seeking to maintain economic stability in the face of external pressures.

The effect of sanctions and the erosion of energy revenues

Russia, historically dependent on its hydrocarbon exports to finance its economy, today sees its energy revenues significantly eroded, a direct consequence of international sanctions and falling oil and gas prices.

Currently, oil and gas exports no longer suffice to cover the extent of military expenditures, creating unprecedented pressure on Russian finances.

This situation highlights the fragility of the Kremlin’s economic model, which relies heavily on revenues from an energy sector whose profitability is now undermined by external constraints.

The decline in exports and stagnation in global commodity prices put Russia in a delicate position, where economic diversification becomes increasingly urgent yet difficult to achieve, given the intensification of military conflict.

The repercussions of this economic crisis are deep and multifaceted. Experts stress that without a return to stability on the geopolitical front or a swift resolution of the conflict, Russia could find itself in a spiral of hyperinflation, leading to a deterioration in the quality of life for its citizens and a potential collapse of the domestic economy. The tightening of sanctions and the growing fragility of the energy market threaten to prolong this period of stagnation, with possible consequences for social cohesion and government legitimacy.