Russia's 2026 budget reveals economic strain caused by the war in Ukraine. To address a growing deficit nearing $50 billion, the government plans tax hikes, including a VAT increase to 22%, reversing a prior pledge. Non-defense spending cuts are also anticipated, impacting social programs. While military spending remains high, experts debate the effectiveness of sanctions and the potential for a peace deal driven by economic pressures. Falling oil revenues, coupled with successful Ukrainian attacks on Russian energy infrastructure, exacerbate the situation, prompting calls for stronger sanctions from figures like Donald Trump.

Prepared by Christopher Adams and reviewed by editorial team.