Russia officially admitted the inability of oil to sustain the budget and is preparing for massive spending cuts

The Foreign Intelligence Service of Ukraine reported that the Ministry of Finance of the Russian Federation is preparing a fundamental revision of the budget rule for 2026-2030. The Russian authorities are forced to lower the so-called "cut-off price" to 45-50 dollars per barrel, which is effectively an admission of the inability of oil rents to keep the federal treasury afloat. This is reported by UNN.

Details

For decades, the budget rule allowed Moscow to accumulate surpluses in the National Wealth Fund (NWF), but now this mechanism is collapsing. If in 2024 oil and gas revenues accounted for 30% of the budget, by 2026 they are projected to fall below 20%. Every dollar reduction in the barrel price costs the Russian treasury about 1.7 billion dollars, which automatically triggers the sequestration process – a massive cut in funding for social items and state programs.

Inflationary spiral and liquidity deficit in banks

The revision of budget parameters will have a direct negative impact on the stability of the Russian currency and the banking sector:

• Rubles fall: A reduction in daily currency interventions by up to $80 million could lead to a 4-7% drop in the ruble.

• High rates: The Central Bank of the Russian Federation will be forced to maintain a record key rate, having no room to ease policy due to inflationary pressure.

• Banking crisis: The dependence of commercial banks on short-term Central Bank loans (REPO auctions) is growing, which is a clear signal of the exhaustion of free liquidity in the system.

Official recognition of fiscal shock

The reduction of the "cut-off price" means that the oil shock absorber, which for years saved Russia from economic turmoil, is no longer working.

The aggressor's budget is entering a mode of strict austerity, which significantly limits Moscow's ability to finance both domestic needs and military adventures in the long term.

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