Russia's budget deficit was higher than officially stated

The information was released on March 4 by Germany’s Federal Intelligence Service (BND). It is suggested that Russia “is attempting to conceal the true costs of its war of aggression against Ukraine by manipulating statistical data.” According to the agency’s findings, the real budget deficit amounts to just over 8 trillion rubles (around €89 billion).

Russia’s budgetary problems stem from the prolonged war and Western sanctions. The war has now lasted five years, and the economy is unable to function efficiently under the current level of wartime spending. The BND notes that further sanctions—such as those targeting third countries supporting Russia or the so-called “shadow fleet”—and their effective enforcement would further weaken the Russian war effort.

The Russian Federation is also misrepresenting its actual military expenditures. In February, the BND reported that in recent years these expenditures were up to 66 percent higher than the official figures. The Kremlin is believed to have shifted part of these costs into other budget categories. Changing all those numbers in the budget could present Russia as a more favourable trade partner than it really is. That is if they were not exposed.

However, it should not be assumed that Russia’s weak economic situation will lead to an end of the war in Ukraine in the near future. Russian society remains resilient in the face of worsening economic conditions. There are no signs of mass protests in Russia, and the current regime continues to enjoy sufficient support. The war in the Middle East is not expected to significantly affect Russia’s combat capabilities either. A substantial portion of the Shahed drones, previously imported from Iran, are now being produced domestically in Russia. Moreover, Russia is still expected to receive Chinese equipment. Naturally, neither Iran nor China has ever officially confirmed their cooperation with the aggressor.