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Russia’s Money for Ukraine War Won’t Run Out Anytime Soon, Economists Say

February 03, 2023
RM Staff

Despite Russia’s sizeable budget deficit and other impacts of Western sanctions, Moscow will likely have enough money to keep its war against Ukraine going for a few years at least, according to several recent economic analyses. This does not mean the sanctions are useless, only that it would be “naïve to think that sanctions alone could end the war,” in the words of Harvard economist Kenneth Rogoff.

Latest Findings

One of the freshest prognoses comes from economist Alexander Isakov and his colleagues at Bloomberg Economics. By their count, Moscow can comfortably keep the war going for at least three years, assuming the average price of Russia’s benchmark Urals crude doesn’t fall dramatically lower than $50 a barrel, price cap or not. Other than continued oil sales, the Kremlin will be able to draw on the still accessible portion of its foreign reserves, now held mostly in gold and yuan1 (albeit sales of the former outside Russia could prove problematic due to Western sanctions). The Russian government can also raise additional funds by increasing various taxes and duties through its “revenue mobilization” effort.

Bloomberg economists are not alone in thinking it will be years before Russia empties its war chest. Several prominent economists have come to similar conclusions. Sergey Alexashenko, a former Russian deputy finance minister, wrote in December that his analysis of Russia’s budget found that “Moscow will not experience significant economic constraints in the short term that could force it” to halt its war of aggression against Ukraine. Likewise, Moscow State University economics professor Natalia Zubarevich predicted recently that Russia will manage to fund its war “for a long time.” (She pointed out, for instance, that military spending, as a share of the country’s budget, is not much higher now than in 2015, during Russia’s drive to rearm and reorganize its armed forces.)

‘Protected’ Spending

Even if oil prices fall below $50 a barrel, defense spending is unlikely to be cut, according to The Bell, an economics-focused online news outlet. Russia’s budget, The Bell explains, includes certain “protected expenditures”—defense and security among them—which the government must be able to pay for with revenue not linked to the volatile energy sector, covering them instead through taxes, customs duties, excises and the like. Over the past eight years, The Bell notes, even when prices for Russian oil fell below $30 a barrel, the army continued to be fully funded.

Zubarevich also didn’t foresee the military getting short-changed. She half-jokingly predicted that Russia’s economy could gradually be dominated by a bloated military-industrial complex à la the Soviet 1980s—not an implausible scenario based on Russia’s latest industrial-output data.

Certainly, there are factors that could undermine the Russian government’s efforts to bankroll the war—like the health of the banking system, which is unclear—but Vladimir Putin’s “no limits” commitment to funding the military is hardly in doubt.

And in Ukraine, it will be military means, not sanctions, that win the war, Harvard’s Rogoff said at this year’s World Economic Forum in Davos, adding a few days later: “Sanctions won’t change a policy that a country holds very strongly in its political sphere… [C]ountries will sacrifice a lot to achieve their political ends.”


1. Moscow stopped publishing its foreign-reserve and other financial data soon after invading its neighbor, in a move now getting pushback from its own Central Bank. The World Gold Council estimates Russia’s fourth-quarter 2022 gold reserves at 2,298.5 tonnes and Bloomberg estimated its yuan reserves as of Jan. 23 at $45 billion.

Photo shared by 2happy under a CC0 license.