Russia enters the "final stage" of its war economy, reserves are nearly exhausted - study
Kyiv • UNN
Russia's reserves have fallen to 1.8% of GDP, and energy revenues have decreased by 45%. The economy has reached its limit due to labor shortages and dependence on China.
Russia's economy is approaching the limit of its capabilities after more than four years of full-scale war against Ukraine. The country's financial reserves are largely exhausted, economic growth has effectively stalled, and dependence on China continues to grow. This is stated in a new Kiel Report study prepared by the Kiel Institute for the World Economy and the Stockholm Institute of Transition Economics, reports UNN.
Reserves are shrinking, and the budget deficit is growing
The authors of the study note that the Russian economy proved to be more resilient than many expected at the start of the war; however, accumulated resources are gradually being depleted.
In the first years of the war against Ukraine, Russia's economy demonstrated greater resilience than expected. However, reserves are now almost exhausted. The foundations of the economy have significantly weakened, financial reserves have been largely utilized, growth has practically stopped, and the country's dependence on China is becoming increasingly palpable,
According to the report, the liquid assets of Russia's National Wealth Fund have shrunk from 6.5% of GDP at the start of the war to just 1.8% of GDP as of April 2026.
Furthermore, already in the first quarter of this year, the federal budget deficit exceeded the target figure that the Russian government had planned for the entirety of 2026. At the same time, oil and gas revenues in January-March fell by 45% compared to the same period last year.
The main problem is not money, but people and technology
Economists emphasize that Russia is currently facing more than just financial difficulties.
The main constraint for Russia today is not access to money, but access to people, technology, and production capacity. The state can mobilize additional financial resources, but due to a record labor shortage and sanctions limiting access to critical imports, additional spending increasingly triggers inflation rather than an increase in military production,
The report also draws attention to the chronic shortage of personnel, which has become one of the consequences of mobilization, the war, and demographic problems.
Dependence on China is intensifying
A separate section of the study is dedicated to Moscow's increasing economic dependence on Beijing.
According to the report's authors, China already accounts for about 35% of Russia's foreign trade. Chinese companies provide the majority of supplies of critical dual-use goods, as well as components that can be used in the military sphere.
Furthermore, about 75% of the growth in imports of sanctioned military components after 2022 was provided specifically by Chinese suppliers.
According to experts, such dependence helps support the Russian war economy in the short term, but at the same time weakens the country's economic independence and its negotiating position in the future.
The West is urged to increase sanctions pressure
The authors of the study believe that the current situation creates an opportunity for Western states to increase economic pressure on the Kremlin.
Monitoring compliance with the price cap on Russian oil should become a central element of sanctions policy. This also involves new steps to restrict the activities of the Russian shadow fleet,
Experts also recommend strengthening export controls, particularly regarding Chinese suppliers, as well as implementing new measures to reduce Russia's revenues from energy exports.
The report emphasizes that oil and gas profits remain one of the key sources of funding for the war against Ukraine.