Russia faced a challenge in its war effort in 2025: the country is temporarily short of money and monetary reserves could run out before the end of the year, a European economist estimates.
Anders Åslund, a Swedish economist who is former member of the Atlantic Council, said the liquid reserves of the National Heritage Fund for Russia can be exhausted during this year’s fall.
Those dangers disrupt the country’s military’s efforts in 2025, he said, given how much Russia has relied on its wealth fund in years.
The liquid reserves of the wealth fund fell from 117 billion dollars in 2021 to 31 billion dollars at the end of November, said Åslund.
Yet, according to its 2025 budget, Russia is on track to spend a record $130.5 billion on defense this year.
“The most critical shortage, however, is budget financing, as Russia’s last liquid reserves are likely to run out in the fall of 2025,” Åslund wrote in an op-ed for Project Syndicate that was published Tuesday. “Budget cuts will then become necessary. In the meantime, the war economy might also require price controls and rationing — the old Soviet sins. As the risk of a financial crash rises, Russia’s imperiled economy is about to pose serious constraints on Putin’s war.”
The immediate decline in Russian wealth is partly due to Western sanctions, which have prevented Russia from borrowing from other countries. The country’s overall external debt has plummeted over the past decade, with external borrowing falling from $729 billion in 2023 to around $293 billion in September 2024, Åslund noted.
Russia’s limited ability to finance the war also spells bad news for the health of its economy, which is plagued by a myriad of other issues.
Åslund pointed to soaring inflation, the declining value of Russia’s currency, and a severe shortage of workers in the nation, all factors that economists have warned could crimp Russia’s long-run growth prospects.
Russian President Vladimir Putin boasts of the strength of his country’s economy and says that Western sanctions are becoming more powerful (although at the same time they are not easy to lift). In fact, “stagflation” (inflation combined with minimal expansion) is coming to Russia,” Åslund said.
Other Mavens have also issued gloomy forecasts for the Russian economy, with some noting that economic weakness may interfere with Russia’s ability to continue its war. Renaud Foucart, another European economist, said last year that Moscow did not seem to be able to win or lose the war.
The Atlantic Council recently said that Russia’s economic turmoil may end its clash with Ukraine by 2025.
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