{"id":3341,"date":"2025-10-17T11:35:52","date_gmt":"2025-10-17T11:35:52","guid":{"rendered":"https:\/\/pronews.in\/index.php\/2025\/10\/17\/russias-funding-for-ukraine-war-set-to-contract-as-new-sanctions-loom\/"},"modified":"2025-10-17T11:35:52","modified_gmt":"2025-10-17T11:35:52","slug":"russias-funding-for-ukraine-war-set-to-contract-as-new-sanctions-loom","status":"publish","type":"post","link":"https:\/\/pronews.in\/index.php\/2025\/10\/17\/russias-funding-for-ukraine-war-set-to-contract-as-new-sanctions-loom\/","title":{"rendered":"Russia\u2019s funding for Ukraine war set to \u2018contract\u2019 as new sanctions loom"},"content":{"rendered":"<div aria-live=\"polite\" aria-atomic=\"true\">\n<p>Three and a half years of war against Ukraine have weakened Russia\u2019s cash reserves, indicators show, possibly signalling that its economic resilience is beginning to fray.<\/p>\n<p>Russia experts have told Al Jazeera that the country of 143 million people is now almost wholly dependent on export revenue from oil and gas for its cashflow, and a major round of new sanctions could bring it to the negotiating table.<\/p>\n<section>\n<h2>Recommended Stories <\/h2>\n<p><span>list of 4 items<\/span><\/p>\n<ul>\n<li><span>list 1 of 4<\/span><a href=\"http:\/\/www.aljazeera.com\/video\/pinch-point\/2025\/10\/14\/russia-and-nato-face-off\">Russia and NATO face off<\/a><\/li>\n<li><span>list 2 of 4<\/span><a href=\"http:\/\/www.aljazeera.com\/news\/2025\/10\/15\/how-successful-is-ukraines-gas-war-against-russia\">\u2018Fistfights at gas stations\u2019: Ukraine targets Russian energy infrastructure<\/a><\/li>\n<li><span>list 3 of 4<\/span><a href=\"http:\/\/www.aljazeera.com\/news\/2025\/10\/15\/germany-pledges-2bn-in-military-aid-for-ukraine-as-kyiv-seeks-more-funds\">Germany pledges $2bn in military aid for Ukraine as Kyiv seeks more funds<\/a><\/li>\n<li><span>list 4 of 4<\/span><a href=\"http:\/\/www.aljazeera.com\/news\/2025\/10\/15\/trump-says-modi-has-assured-him-india-will-not-buy-russian-oil\">Trump says Modi has assured him India will not buy Russian oil<\/a><\/li>\n<\/ul>\n<p><span>end of list<\/span><\/section>\n<p>On October 14, United States President Donald Trump predicted that the Russian economy is \u201cgoing to collapse\u201d.<\/p>\n<p>Kremlin spokesman Dmitry Peskov responded the following day that the country\u2019s financial system has a sufficient and considerable \u201cmargin of safety to allow the country\u2019s leadership and all of us to implement the plans that we set for ourselves\u201d.<\/p>\n<p>But Peskov was perhaps too optimistic. Last month, the Russian Ministry of Finance said it had run a $51bn budget deficit in the first eight months of the year, surpassing a deficit provision of $47bn for the entire year.<\/p>\n<p>Ministry documents seen by the Reuters news agency have suggested it was planning to cut its 2026 defence budget by $11bn to $154bn, a 7 percent drop.<\/p>\n<p>Craig Kennedy, an expert on Russian energy and economics at Harvard University\u2019s Davis Center for Russian and Eurasian Studies, told Al Jazeera the actual drop in defence spending will be closer to 15 percent relative to 2024, because bank lending to the defence industry has fallen by more than half this year.<\/p>\n<p>\u201cFunding for the war in 2025, including state-directed lending to arms manufacturers, is on track to contract by 15 percent this year,\u201d he said.<\/p>\n<p><img decoding=\"async\" data-recalc-dims=\"1\" loading=\"lazy\" src=\"http:\/\/www.aljazeera.com\/wp-content\/uploads\/2025\/09\/INTERACTIVE-Who-does-Russia-sell-to-the-most-SEPTEMBER-3-2025-1756879448.png?quality=80\" alt=\"INTERACTIVE-Who does Russia sell to the most - SEPTEMBER 3, 2025-1756879448\" data-interactive=\"true\" fetchpriority=\"low\"><\/p>\n<p>Before the budget and lending cuts, Russian forces were advancing at a slow rate. Last year, <a href=\"http:\/\/www.aljazeera.com\/news\/2025\/1\/3\/highest-price-for-war-russia-lost-430000-soldiers-in-2024-says-ukraine\">they seized<\/a> 0.69 percent of Ukraine, while <a href=\"http:\/\/www.aljazeera.com\/news\/2025\/8\/26\/despite-huge-manpower-losses-how-is-russia-replenishing-its-military\">suffering<\/a> a large number of casualties. In the first eight months of this year, they have <a href=\"http:\/\/www.aljazeera.com\/news\/2025\/10\/9\/russia-says-hopes-for-peace-wane-as-ukraine-strangles-its-fuel-supply\">again seized<\/a> less than 1 percent of Ukraine but again, tens of thousands have reportedly been killed in action.<\/p>\n<p>The contracting economy and human attrition rates have led analysts to question the sustainability of the Russian operation.<\/p>\n<h2 id=\"the-civilian-real-economy-is-flat-to-down\">\u2018The civilian real economy is flat to down\u2019<\/h2>\n<p>Russia managed to run its war for three years without contracting its economy, raising taxes or running high deficits\u00a0by tapping oil and gas export revenues and instructing banks to fund the defence industry directly, thus keeping that expenditure off the government balance sheet.<\/p>\n<p>Its economy grew by more than 4 percent in 2023 and 2024 as the money flowed into the defence sector, taxes remained constant, and budget deficits came in below 2 percent of gross domestic product (GDP).<\/p>\n<p>But this has begun to change in the fourth year of the war, as short-term policies designed to maximise cashflow for the war begin to impact the real economy.<\/p>\n<p>The government is planning to raise VAT, a consumer tax, from 20 to 22 percent and apply it to a broader range of companies, generating an extra $14.7bn next year.<\/p>\n<p>The World Bank expects Russia\u2019s economy to grow by 0.9 percent this year and remain stagnant for years.<\/p>\n<p>\u201cThis year, the civilian real economy is flat to down. Many people say it\u2019s in a recession, it\u2019s only the defence sector which is still positive,\u201d Kennedy said.<\/p>\n<p>Russia\u2019s Center for Macroeconomic Analysis and Short-term Forecasting, an independent think tank, agreed, saying all nondefence sectors of the economy had contracted by 5.4 percent so far this year.<\/p>\n<p>The slowdown, said Kennedy, was largely due to the fact that the government has used bank credit and given it to the defence industry.<\/p>\n<p>Russia\u2019s central banker, Elvira Nabiullina, sounded the alarm in June at the St Petersburg International Economic Forum, saying, \u201cWe grew for two years at a fairly high rate because we used available reserves \u2013 labour force, production capacity, capital in the banking system, and funds from the National Welfare Fund, which the government used to patch budget holes and finance trillion-rouble mega-projects. Many of these resources are now truly depleted.\u201d<\/p>\n<p>Liquid assets in the National Welfare Fund have fallen by a third to $34bn, and $10bn of that has been set aside to shore up banks. Experts say this reserve could be fully depleted by 2026.<\/p>\n<p>At the same time, Russia\u2019s banks could now face a credit event, because Russia\u2019s arms manufacturers might not be able to repay much of the $180bn in state-directed bank debt Kennedy estimates they have taken on.<\/p>\n<p>\u201cIt\u2019s all toxicity-prone, it\u2019s dark money, nobody knows how much might go bad,\u201d he said. \u201cIt\u2019s 22.7 percent of the entire Russian corporate rouble loan book. That\u2019s a big problem.\u201d<\/p>\n<p>Some of Russia\u2019s biggest industrial companies are already showing signs of being in trouble: On October 9, Reuters reported that some of them had furloughed their workers to save on their wage bill.<\/p>\n<h2 id=\"death-by-1-000-cuts\">\u2018Death by 1,000 cuts\u2019<\/h2>\n<p>Meanwhile, sanctions are making Russia\u2019s war efforts more expensive.<\/p>\n<p>Olena Yurchenko, director for analytics, research, and investigations at the Economic Security Council of Ukraine (ESCU), a private think tank in Kyiv, estimates that Russia pays above market rates to import materials critical for its war machine, sanctioned in the West.<\/p>\n<p>\u201cYou have to pay to intermediary companies and you have to wait longer,\u201d she said. \u201cPrices on average are higher by at least 30 to 50 percent. When it comes to products with clear military use, sometimes they have to pay more like 70 to 80 percent,\u201d she told Al Jazeera.<\/p>\n<p>These hurdles create an \u201cunbridgeable gap in terms of technological advancement and capacity\u201d of Russia\u2019s defence industry, Yurchenko said.<\/p>\n<figure id=\"attachment_4039420\" aria-describedby=\"caption-attachment-4039420\"><img decoding=\"async\" data-recalc-dims=\"1\" loading=\"lazy\" src=\"http:\/\/www.aljazeera.com\/wp-content\/uploads\/2025\/10\/2025-10-08T105008Z_180257108_RC2A0EANWWF4_RTRMADP_3_RAIFFEISEN-RUSSIA-CEO-1760612729.jpg?w=770&#038;resize=770%2C480&#038;quality=80\" alt=\"FILE PHOTO: A pedestrian walks past a branch of Raiffeisen Bank in Moscow, Russia, April 18, 2025. REUTERS\/Maxim Shemetov\/File Photo\" fetchpriority=\"low\"><figcaption id=\"caption-attachment-4039420\">A pedestrian walks past a branch of Raiffeisen Bank in Moscow, Russia, on April 18, 2025 [Maxim Shemetov\/Reuters]<\/figcaption><\/figure>\n<p>That has immediate effects on the battlefield, she believes.<\/p>\n<p>\u201cIf we could get less tempo, more delays, more failures of the machines in the battlefield, more problems with, let\u2019s say, firing mechanisms, with missile navigation\u201d, Russia\u2019s fighting quality would be materially affected, compounding its economic woes.<\/p>\n<p>\u201cBy a tactic of a thousand cuts, these effects start to build upon one another,\u201d she said. \u201cYou could never predict the exact day where it snaps, but the conducive environment for it is definitely ramping up.\u201d<\/p>\n<h2 id=\"not-at-the-point-of-collapse\">\u2018Not at the point of collapse\u2019<\/h2>\n<p>Sanctions on oil could have an immediate and decisive effect on Russia\u2019s war economy, experts say.<\/p>\n<p>Ukraine\u2019s allies have banned Russian oil imports, depriving Russia of $82bn a year from the European Union alone. But Moscow has replaced some of that revenue by selling more oil to the vast markets of China and <a href=\"http:\/\/www.aljazeera.com\/news\/2025\/10\/15\/trump-says-modi-has-assured-him-india-will-not-buy-russian-oil\">India<\/a>.<\/p>\n<p>\u201cThe Russian economy is not at the point of collapse despite the pressures that it faces because the Kremlin continues to get steady foreign income from oil, and it has actually had more success than challenges in developing long-term new business of late,\u201d said Maximilian Hess, a fellow at the Foreign Policy Research Institute, a Philadelphia-based think tank.<\/p>\n<p>Russia has sold a multiyear supply of oil to China at a steep discount in return for prepayment, which has put money in its coffers for now.<\/p>\n<p>The EU, the United Kingdom, Australia and Canada have responded by capping the price at which their tankers may sell Russian oil to third parties at $47.6 a barrel. But the US has not followed. Nor has it followed through on a threat to punish buyers of Russian oil with secondary sanctions.<\/p>\n<p>Hess blamed \u201cdelays in bringing the US on board to a new lower oil price cap and the lack of moves by the US to continue to close loopholes in the sanctions regime\u201d for Russia\u2019s ongoing cashflow.<\/p>\n<p>Anna Wieslander, director for Northern Europe at the Atlantic Council, a US think tank, said Washington\u2019s strategy is \u201csoft on Russia, and that\u2019s how the Kremlin views it as well\u201d.<\/p>\n<p>\u201cWe can see that through the way Russia conducts its war in Ukraine, hitting civilians, infrastructure to a degree that it has not done before.\u201d<\/p>\n<p>Russia has launched record numbers of missiles and drones against Ukraine\u2019s cities since Trump\u2019s election to the White House last November, data collected by Ukraine\u2019s air force show.<\/p>\n<p>\u201cThe US leadership has changed \u2026 when it comes to addressing Russia as a threat to European security and the future of Ukraine,\u201d Wieslander told Al Jazeera. \u201cEurope will pay a very high price \u2026 for not being tougher now.\u201d<\/p>\n<p>The EU is now considering a 19th package of sanctions that would ban Russian refined petroleum products \u2013 a loophole through which Europe has continued some oil imports \u2013 and restrict the movement of Russia\u2019s fleet of hundreds of tankers that are not subject to the price caps.<\/p>\n<p>If designed effectively, it is believed, these measures could decisively strip the Kremlin of cash.<\/p>\n<p>But the package\u2019s most powerful political message, says Wieslander, is a proposal to use roughly half of almost $300bn in seized Russian central bank reserves held in European institutions to back huge loans for Ukraine\u2019s defence and reconstruction.<\/p>\n<p>Russia has called the notion \u201cdelusional\u201d and has promised \u201ccountermeasures\u201d, but EU members like Germany are shifting position to support the move.<\/p>\n<p>\u201cI think that realisation has kind of kicked in in a range of capitals that there needs to be a shift,\u201d Wieslander said.<\/p>\n<p>\u201cWe now take the risk, whatever that risk is, and confiscate [these assets], because no way should you have that money ever go back to the Russian state.\u201d<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Three and a half years of war against Ukraine have weakened Russia\u2019s cash reserves, indicators show, possibly signalling that its economic resilience is beginning to fray. Russia experts have told Al Jazeera that the country of 143 million people is now almost wholly dependent on export revenue from oil and gas for its cashflow, and &#8230; <a title=\"Russia\u2019s funding for Ukraine war set to \u2018contract\u2019 as new sanctions loom\" class=\"read-more\" href=\"https:\/\/pronews.in\/index.php\/2025\/10\/17\/russias-funding-for-ukraine-war-set-to-contract-as-new-sanctions-loom\/\" aria-label=\"Read more about Russia\u2019s funding for Ukraine war set to \u2018contract\u2019 as new sanctions loom\">Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":3342,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[],"class_list":["post-3341","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-travel"],"_links":{"self":[{"href":"https:\/\/pronews.in\/index.php\/wp-json\/wp\/v2\/posts\/3341","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/pronews.in\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/pronews.in\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/pronews.in\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/pronews.in\/index.php\/wp-json\/wp\/v2\/comments?post=3341"}],"version-history":[{"count":0,"href":"https:\/\/pronews.in\/index.php\/wp-json\/wp\/v2\/posts\/3341\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/pronews.in\/index.php\/wp-json\/wp\/v2\/media\/3342"}],"wp:attachment":[{"href":"https:\/\/pronews.in\/index.php\/wp-json\/wp\/v2\/media?parent=3341"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/pronews.in\/index.php\/wp-json\/wp\/v2\/categories?post=3341"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/pronews.in\/index.php\/wp-json\/wp\/v2\/tags?post=3341"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}