Russia faces $28B shortfall in war funding despite rising oil prices – FT

Russia's spending on the war against Ukraine is expected to exceed its budget allocations by at least 2 trillion rubles ($28 billion) this year.

That is according to a letter from Russian Finance Minister Anton Siluanov obtained by the Financial Times, Ukrinform reports.

The letter indicates that in February, Russia's Finance Ministry estimated that war-related overspending of 2 trillion rubles could rise to as much as 4 trillion rubles under a "negative scenario" this year. It also projects additional overruns of 4 trillion rubles in both 2027 and 2028.

The letter calls on the government to freeze 2.9 trillion rubles in planned non-military spending for this year, 5.4 trillion rubles for 2027, and 7.1 trillion rubles for 2028 in order to cover rising war costs.

According to the Financial Times, this request highlights Russia's growing difficulty in financing the war despite allocating 16.84 trillion rubles ($238 billion), nearly 40% of its 2026 budget, to defense and security.

The Kremlin has planned a budget deficit of 3.8 trillion rubles for 2026. However, in the first four months of this year alone, the deficit has already reached 5.9 trillion rubles, or 2.5% of GDP, marking the largest shortfall since the start of the full-scale invasion in 2022.

War spending is expected to further deepen the fiscal gap unless cuts are made in other areas.

Since Siluanov's letter, Russia's budget has seen additional inflows due to a spike in oil prices above $100 per barrel amid the Iran conflict. However, these gains are unlikely to fully offset the rapidly rising costs of the war in Ukraine.

The positive impact of higher oil and gas prices has also been offset by government subsidies to Russian oil companies to cap domestic fuel prices, as well as a strong ruble, which has recently traded near its highest level against the U.S. dollar over the past three years.

Rising war expenditures are further worsening Russia's already weakening economic outlook. This month, Russia's Ministry of Economic Development downgraded its 2026 growth forecast to 0.4%, lowering expected GDP growth to 1.4% next year and 1.9% in 2028, significantly below previous projections.