By John Q. Hosedrinker 
The Finance Ministry is implementing tax increases and expanding the tax base to finance defense and security, including lowering the revenue threshold for reporting for small and medium-sized businesses and introducing taxes on gambling. These measures come as the economy cools and revenue from oil and gas sales decline. Facing economic challenges and previously aiming to replenish the National Welfare Fund, the Ministry now plans to adjust oil-related tax flows. The Ministry’s proposals were made shortly before the formal 2026 budget proposal is to be presented.
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Putin forced to raise taxes again as Ukraine war drains finances – that’s where we are. It’s not really a matter of if, but when, the full financial impact of this conflict crashes down on Russia. And let’s be honest, “forced” feels like an understatement. It’s more like a desperate scramble to find funds as the war in Ukraine continues to bleed the country dry.
The situation is stark: Russia’s “special military operation,” as they call it, has become an incredibly expensive undertaking. We’re not just talking about the direct costs of weapons, supplies, and salaries for the troops. It’s the broader impact on the economy, the loss of international trade, and the sheer scale of the devastation. All of this adds up to a massive financial drain, forcing the Kremlin to resort to unpopular measures like tax increases.
Now, this isn’t some quick fix. Raising taxes isn’t a magic bullet. It’s a signal that the war is taking its toll and that the government is struggling to make ends meet. It is also a sign that Putin’s gamble is failing; he is in a catch 22 situation, he cannot back down or he loses his rule and possibly his life and he cannot win this war, and any attempt at success requires more and more money that the economy just cannot sustain. This will lead to negative outcomes for the everyday people who may or may not support Putin, the war, or what he is doing.
The implications of all this are quite extensive. There are murmurs of a shift towards a full-blown war economy, which means prioritizing military production over other sectors. This could lead to shortages of consumer goods, price increases, and further economic hardship for ordinary Russians. The demobilization after the war will be incredibly rough as war production gets switched back to consumer goods production. This is not an easy task.
The truth is, this war has put Putin in a terrible position. He can’t afford to lose, but the longer the war goes on, the worse things get. He cannot afford to leave Ukraine with nothing to show for it, especially after it drained everything he had. And this raises a chilling question: If the war doesn’t go as planned, could Putin face serious consequences, even threats to his own position? History has a way of repeating itself, and leaders who stumble into disastrous wars often find themselves in very precarious situations. The oligarchs also seem to be in an equally dangerous position, as their assets are being seized for funding.
All of this is playing out against a backdrop of international pressure and sanctions. The EU and the USA are firmly backing Ukraine, and the financial pressure on Russia will likely continue to intensify. With international relations damaged, any hope for a quick economic recovery is severely limited, even if the war were to end tomorrow.
It’s hard to predict exactly what will happen next, but one thing is clear: Russia’s economic future is looking incredibly uncertain. The war in Ukraine has exposed deep vulnerabilities in the Russian economy, and the consequences of this conflict will be felt for years to come. The Russian people will be the ones who suffer the most.
It’s a grim outlook, regardless of who is winning. Russia has already lost much, and the longer the war continues, the more they stand to lose. The only way out for Russia is for Putin to admit defeat, but it is too late.