Ukrainian President Volodymyr Zelenskyy announced on 9 November that Ukraine and EU partners are preparing the 20th sanctions package against Russia, expected within a month, as Moscow's oil revenues collapsed 27% year-on-year in October amid existing restrictions and falling crude prices.

The timing connects Ukraine's push for expanded sanctions with mounting evidence that economic pressure is beginning to crack Russia's war financing. Russia collected 888.6 billion rubles ($9.7 billion) in oil and gas taxes in October, down from the same month last year, according to Russia's Finance Ministry.

Ukraine's three-pronged sanctions proposal

Zelenskyy outlined specific targets for the 20th package in his evening address:

• Energy sector entities: Russian legal entities and individuals still profiting from energy resources despite existing restrictions
• Child abduction networks: Updated listings of Russians involved in forcibly deporting Ukrainian children to Russia
• Military supply chains: Companies and countries enabling Russia's weapons production through component exports

"Every Russian missile and every Russian drone contains specific components from other countries, specific countries – without them, there would simply be no Russian weapons," Zelenskyy said, directing Ukraine's Foreign Ministry to intensify work on cutting these supply lines.

Russian war chest shows cracks

The revenue collapse suggests sanctions are gaining traction. Russia's oil and gas revenues totaled 7.5 trillion rubles over the first 10 months of 2025, down 2 trillion from 9.54 trillion a year earlier. The decline accelerated from 14% in the first five months to 21% by October.

Multiple factors drove the drop: Russia's Urals crude averaged just $53.99 per barrel in October, below the government's $70 initial forecast and even its revised $56 target. Meanwhile, late October saw the US sanction Rosneft and Lukoil, Russia's two largest oil companies accounting for half of Russian crude exports—about 2.2 million barrels daily.

Around 70% of Russia's seaborne oil exports now face US restrictions. Analyst Vladimir Chernov of Freedom Finance Global estimates a 5-10% drop in Rosneft and Lukoil exports combined with wider discounts could cost Russia's state budget up to 120 billion rubles ($1.3 billion) monthly.

Moscow's budget scramble

Russia's Finance Ministry expects a 22% shortfall in hydrocarbon revenues for 2025, projecting just 8.6 trillion rubles against an initial 10.94 trillion target. The ministry sees no significant recovery through 2028, with oil and gas revenues projected at 8.9 trillion in 2026, 9 trillion in 2027, and 9.7 trillion in 2028—still 20%, 19%, and 13% below 2024 levels respectively.

To plug widening fiscal gaps expected to reach 5.7 trillion rubles this year and exceed 10 trillion over the next three years, Moscow plans sharp tax increases. Value-added tax rises to 22% starting next year, small business taxes jump significantly, and the Finance Ministry aims to raise 12 trillion rubles through new borrowing.

Ukraine tightens domestic enforcement

Ukraine also introduced new sanctions Saturday targeting Russian government officials, occupation administrators, propagandists, collaborators, and military-industrial complex workers. "Russia continues its war, and in response, there must be our strong pressure with partners – pressure that is truly tangible for Russia, that brings them losses and that is felt politically," Zelenskyy said.

The president emphasized that all Russian attempts to disrupt processes with the United States and Europe would receive sanctions responses, declaring: "Everything gets its own reaction, its own sanctions."

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Ukraine’s government collected $1.3 billion more in revenue than budgeted through October, despite recent findings that 94 business sectors increased earnings while simultaneously cutting tax payments.

While businesses optimized their tax bills, other revenue sources—particularly import taxes and personal income levies—performed slightly better than projected. The modest overperformance provides marginally more fiscal breathing room, though Ukraine remains heavily dependent on external financing to cover its massive budget deficit.

“There are currently no risks regarding the implementation of planned defense expenditures,” Roksolana Pidlasa, who chairs the Verkhovna Rada’s budget committee, wrote on Facebook on 3 November, sharing operational budget data showing total revenue of 1.76 trillion hryvnias ($42.8 billion)—53.3 ($1.27) billion hryvnias above the ten-month target.

How Ukraine collected more while businesses paid less

The revenue contradiction stems from Ukraine’s diversified tax base performing unevenly across sectors. Import VAT generated $10.7 billion—the largest single revenue source and well above targets as wartime consumption patterns shifted toward imported goods.

Corporate profit tax yielded $5.5 billion, also above the ten-month target, even though 94 business sectors reported higher revenues alongside lower tax payments. The gap suggests that while some companies optimized their tax positions, the overall corporate base expanded enough to offset individual reductions, or other companies substantially increased their contributions.

Domestic VAT after refunds added $6.2 billion, and import excise taxes contributed $3.3 billion. Only two categories—import VAT and domestic excise—failed to exceed their adjusted targets, indicating broad-based fiscal resilience rather than dependence on a few revenue streams.

Defense spending dominates domestic resources

Ukraine allocated 2 trillion hryvnias ($48.7 billion) to defense over the ten-month period, representing 63.3% of all general fund expenditures. This figure confirms a critical point for Western policymakers: Ukraine finances its war effort predominantly from domestic revenue, not international aid.

Total general fund expenditures reached 3.2 trillion hryvnias ($77.9 billion)—73.7% of the annual plan. Beyond defense, major spending categories included debt repayment ($10.7 billion), social protection for veterans ($7.8 billion), debt servicing ($6.8 billion), medical guarantees ($3.4 billion), and teachers’ salaries ($2.3 billion).

Ukraine supplemented tax revenue with $11.5 billion from domestic bond placements to finance the budget deficit.

What this means for Western aid calculations

The revenue overperformance arrives as Ukraine faces a projected budget deficit of 25% of GDP in 2025, requiring $51.5 billion in external financing. The 3.1% beat provides slightly more fiscal headroom than budgeted, though the fundamental financing gap remains.

The National Bank of Ukraine estimates the country needs declining external support through 2027—from $51.5 billion this year to $45 billion in 2026 and $39 billion in 2027.

Business optimism holds despite energy attacks

The revenue figures align with Ukrainian businesses maintaining cautiously optimistic outlooks despite intensifying Russian attacks. The National Bank of Ukraine’s business activity expectations index reached 50.3 in October—slightly above the neutral threshold of 50—according to a survey published on 3 November.

Trading companies showed the strongest optimism with an index of 54.3, driven by robust consumer demand and decelerating inflation. Construction firms reached 53.3, boosted by budgetary spending on infrastructure restoration and road construction.

Industrial companies reported more guarded expectations at 48.8, citing ongoing destruction of production facilities, high restoration costs, and power cuts. Services companies registered 48.7, affected by damaged railway infrastructure and persistent labor shortages.

The business activity data explains part of the revenue resilience: companies operating and consumers spending generate tax revenue even when individual sectors optimize their tax bills. The National Bank noted that intensifying Russian attacks on energy infrastructure constrain growth, but haven’t derailed economic activity—explaining how Ukraine exceeded revenue targets despite the tax optimization paradox.