Russia’s economy is facing mounting pressure as a disastrous harvest coincides with plunging energy revenues, creating fresh challenges for Vladimir Putin’s war machine.
The Russian president recently bought himself more time on the global stage after meeting with President Donald Trump in Alaska. The summit temporarily delayed additional U.S. sanctions and set off a flurry of diplomatic maneuvering as European allies push for new security guarantees for Ukraine. But economists warn that Moscow’s economic stability is slipping fast.
Tatiana Orlova, lead economist for emerging markets at Oxford Economics, cautioned in a note Monday that “it’s too early to adopt a more optimistic view on the Russian economy, which we think is teetering on the brink of a recession.”
She projects Russia’s GDP growth will plummet to just 1.2% this year, down sharply from 4.3% in 2024. Growth is expected to fall below 1% in both 2026 and 2027, raising the risk of a full recession.
Warnings have also come from inside Russia. Economy Minister Maxim Reshetnikov admitted in June that the country was “on the brink” of recession. Meanwhile, Russian banks are increasingly concerned about a debt crisis as soaring interest rates make it harder for borrowers to repay loans.
The central bank has tried to stem the slowdown by cutting rates by 200 basis points after previously hiking them to combat war-driven inflation.
A Harvest in Crisis
On top of financial strains, Russia is suffering its worst harvest in nearly two decades. The country’s grain and fertilizer exports—long spared from sanctions because of global food security—have historically been a vital revenue source. But July saw the weakest grain exports for that month since 2008, according to Peter Frankopan, associate fellow at the International Institute for Strategic Studies.
Climate volatility has devastated crops this year. Unseasonable spring frosts, followed by record summer heat and drought, have cut grain output to 130 million metric tons—an 18% drop from the 2022 peak.
“Russia’s bad 2025 harvest is more than a weather event: it reveals the structural fragility of Russia’s war economy,” Frankopan wrote.
Energy Revenues Collapse
The Kremlin’s main lifeline—oil and gas—has also weakened. Energy revenues fell 27% in July compared to a year ago, dropping to 787.3 billion rubles (about $9.8 billion). With military spending surging, Russia has been forced to raid its National Wealth Fund. Once valued at $135 billion in January 2022, it had dwindled to just $35 billion by May 2025.
“Russia’s economy is fast approaching a fiscal crunch that will encumber its war effort,” economist Anders Åslund argued in a Project Syndicate op-ed. “Though that may not be enough to compel Putin to seek peace, it does suggest that the walls are closing in on him.”
