The Russian government is considering a possible 10% cut to all “non-sensitive” spending in this year’s budget, depending on how stable the rise in oil prices is due to the war in Iran. As the conflict in Ukraine continues, Russia is experiencing a decline in budget revenues from energy sales and an economic slowdown, which is reducing tax income from other sectors.
To address this, the government plans to channel more money into the budget reserve fund to protect it from depletion. As a result, spending cuts may be necessary. Sources indicate that the Finance Ministry has informed agencies about the need for budget reductions, prompting discussions about what to cut. However, the cuts will not be uniform and will exclude politically-sensitive military spending and essential social expenses like public sector salaries and welfare payments. Instead, less essential projects such as construction and road repairs may be postponed.
While ordinary Russians are facing rising inflation, the impacts of the economic slowdown, fueled by high interest rates, are not yet fully felt, and government spending cuts have not led to widespread layoffs. The situation is exacerbated by Western sanctions affecting Russia’s energy sales. In early 2026, budget energy revenues halved, leading to an overall revenue decline of 11%.
The surge in oil prices following U. S. and Israeli attacks on Iran has increased demand for Russian oil, with discussions about potentially lifting sanctions against Russia. Despite this, sources caution that the rise in oil prices may not last and cuts are necessary regardless of short-term fluctuations. Decisions on the extent of spending cuts are pending, as the government awaits further changes in oil prices. President Putin held a lengthy meeting regarding the budget situation, and the Finance Minister indicated plans to adjust the oil “cut-off” price in line with current market realities.
With information from Reuters
