Russia is facing serious challenges to its ability to keep funding its brutal war in Ukraine as money quickly runs out.
The Kremlin is grappling with a growing economic crisis, as it continues to pour billions of pounds into its military-industrial complex.
Anders Åslund, a Swedish economist and expert of Russian finances, warned that Russia‘s economy could be about to hit the buffers.
In an article for Project Syndicate, he wrote: “The most critical shortage, however, is budget financing, as Russia’s last liquid reserves are likely to run out in the fall of 2025. Budget cuts will then become necessary.
“In the meantime, the war economy might also require price controls and rationing – the old Soviet sins.
“As the risk of a financial crash rises, Russia’s imperilled economy is about to pose serious constraints on Putin’s war.”
He added: “Major bankruptcies are looming, and the Russian state cannot afford large bailouts.”
For the third year in a row, Russia posted a budget deficit of over three trillion rubles (£27 billion).
Last year, figures show the Kremlin overspent by an eye-watering £31 billion, a three year high in nominal terms and an 8% increase over 2023.
The main reasons for the massive deficit are the Kremlin’s military spending and also its reluctance to make extreme cuts to its social and other programmes.
Spending on the military now accounts for roughly 40% of all Russian federal spending and has increased by over 100% between 2021-2024.
The Kremlin’s profligate spending on defence, combined with its expensive social programmes, means the country’s spending has soared by 62% since 2021.
Russia has dipped into its National Wealth Fund to finance its spending and cover its budget deficits.
The fund was set up in 2008 and has been filled with surplus oil and gas revenues during the boom years of the economy.
However, the liquid assets of the fund have been steadily drained, with the Kremlin having used up 24% of its holdings in 2024 alone.
In total, the fund has been depleted by two-thirds over the three years of war, meaning the Kremlin has less money available to help support its economy.