Russia Matters, 1/12/26

Hopes that sanctions and lower oil prices will collapse Putin’s war effort “underestimate how far the Kremlin has rewired its economy,” with oil’s share of state revenue already down from about 50% to 25% and the gap filled by higher taxes on households and firms, according to Phillip Inman, senior economics writer for The Guardian. In his column for this U.K. newspaper, Inman argues that despite near-zero growth, almost 20% interest rates and new tax hikes, Russia’s macro position looks resilient, with public debt just under 20% of GDP and a budget deficit of about 3.5%. Inman quotes Richard Connolly of RUSI as saying that “we are not near the economy being a decisive factor” in the Kremlin’s war decisions, and stresses that Russia can still fund the war “this year and perhaps next.” In addition to low levels of public debt, other recent good news for the Russian economy (or at least for its imports) is that Russia’s ruble outpaced every major currency against the dollar in 2025, according to Bloomberg. The ruble has strengthened 45% since the start of 2025 and is trading near 78 per dollar, within touching distance of levels seen before Russia’s full-scale invasion of Ukraine nearly four years ago. Over the past 12 months, the appreciation has been the strongest since at least 1994, data shows, according to Bloomberg. A stronger ruble makes critical imports cheaper in local currency terms, easing some of the wartime constraints. The Central Bank of Russia’s ability to sustain a tight monetary policy while supporting a strong currency contrasts with warnings that Russia is “running out of money.”*