Researchers warn Russia's war financing is approaching a critical breaking point
A new study by the Kyiv School of Economics says Russia's ability to fund its war is becoming increasingly strained as cash reserves shrink and borrowing costs rise.
According to research from the Kyiv School of Economics, Russia's war economy is operating on a thin financial cushion that is eroding fast. The state relies on three pillars - the national welfare (oil) fund, the federal cash treasury and the domestic bond market - all of which have been depleted to varying degrees. Monthly outlays are climbing, while the cash treasury's balance has contracted markedly since the start of 2025.
The oil fund, used to plug budget gaps, has seen its liquid holdings fall from pre-war levels to a fraction of their former size, reducing its role as a buffer. Domestic banks continue to purchase most of the new government bonds, but a growing share of corporate loans are being classified as problematic, hinting at deeper financial stress. The central bank is increasingly intervening with liquidity operations to keep the banking system functional, but the overall picture points to rising fiscal and monetary pressures that could jeopardize Russia's war financing beyond 2028.
Why it matters
Russia's dwindling war financing could affect the conflict's duration and global economic stability.
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