Canada joins EU and UK to lower the Russian oil price cap to $47.60 in a move aimed at cutting Kremlin revenues while avoiding shocks to global markets. The change, due in early September, leaves Japan and the US as the only G7 members not adopting the reduced limit.

Canada aligns with European allies on oil sanctions

On 8 August, the Department of Finance of Canada confirmed Ottawa will match the European Union and United Kingdom in reducing the price cap on seaborne Russian-origin crude oil from $60 to $47.60 per barrel. The measure is part of the G7-led sanctions mechanism introduced in December 2022 to restrict Moscow’s war funding. The coalition also includes Australia and New Zealand.

Finance Minister François-Philippe Champagne said the cut would increase economic pressure on Russia and limit a crucial source of funding for its war in Ukraine. Foreign Minister Anita Anand stressed Canada’s commitment to applying sustained pressure on Moscow. Kyiv has pressed for an even lower $30 limit.

Japan and US not joining the cut

Most G7 members will introduce the lower cap in September. Japan and the US have not signed on, but Canada remains part of the Price Cap Coalition and may follow future reductions agreed within the group.

According to preliminary data from the Finance Ministry cited by The Moscow Times, the deficit increased by 1.2 trillion rubles ($15 billion) in July alone, and expenditures jumped to 3.9 trillion rubles ($49 billion).

This data shows Russia’s war machine consuming the state itself. Unlike previous conflicts, Moscow can’t fund this war indefinitely — and Western allies now have concrete proof that sustained pressure works.

Russia’s budget meltdown by the numbers

The new figures reveal a grim picture of stagnation, overspending, and war-at-all-costs priorities. According to Reuters, government spending rose more than 20% in the first seven months of 2025, while revenues grew just 2.8%. That gap is mainly driven by ballooning military costs.

So far this year, Russia has spent 25.2 trillion rubles ($320 billion) — a staggering increase from pre-war spending levels when the annual federal budget totaled around $220 billion in 2021.

Why do civilian sectors collapse first?

As Bloomberg reports, signs of crisis are now visible across different sectors, as coal mining companies suffer losses, oil, gas, and metallurgy companies see a decline in profits. The automotive industry significantly cuts production due to weak demand.

Productivity in civilian sectors is falling fast. The Moscow Times reported in July that Russian car makers have all shifted to a four-day work week to preserve existing jobs due to diminishing demand, high interest rates, and a lack of affordable financing tools for buyers.

Russia’s aviation industry, once a symbol of national pride, has delivered just one of 15 promised passenger aircraft this year.

Sanctions, oil price caps, and labor shortages are eroding Russia’s economic foundation — yet Moscow shows no intention of scaling back its invasion. A recession with consequences far beyond Russia’s borders now looms.

What this means for Ukraine’s war strategy

The signs are clear: Western sanctions, shifting energy markets, and export controls are having an impact. But they’re not enough on their own. The Kremlin is willing to sacrifice every civilian sector to keep the war machine running.

That’s why Ukraine’s battlefield resilience — and sustained Western support — remain essential. Economic pressure may hurt Russia, but it won’t stop the war on its own.

For Western policymakers, these numbers prove that economic pressure is working, but they also show why military aid remains crucial to finish what sanctions started. Russia’s budget crisis gives Ukraine a strategic window, but only if allies simultaneously maintain economic and military pressure.

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The Kremlin’s financial foundation for war is cracking. According to Ukraine’s Foreign Intelligence Service, Russia’s federal budget revenues from oil and gas dropped by 19% in January–July 2025 compared to the same period in 2024, down to $69.2 billion. 

The drop in energy revenues underscores Russia’s growing vulnerability to external pressure, the agency emphasizes.

A double blow to the Kremlin

The average price for Urals crude fell by 18.4%, to $60.37 per barrel. At the same time, the ruble was artificially strengthened by 45%, from 113.71 to 81.25 per USD, undermining export earnings in foreign currency.

Gas exports to the EU plummeted by 50% to just 9.93 billion cubic meters, continuing Russia’s steady loss of energy foothold in Europe.

Ministry of Finance in panic

The Russian government has already revised its oil and gas income forecast for 2025, now expecting only $104.4 billion instead of the previous $137.3 billion, which is a 24% drop from earlier projections.

To partially offset the shortfall, the Kremlin is cutting fuel subsidies under the “fuel damper” mechanism and tapping into the National Welfare Fund.

Russian propagandists are actively fueling schisms within the Trump administration ahead of the 8 August sanctions deadline. Meanwhile, Russian officials continue projecting the image of a strong and resilient economy, despite falling oil revenues and slowing household consumption, ISW says.

Kremlin exploits schisms within the Trump team to weaken sanctions push

The Institute for the Study of War (ISW) reported on 6 August that Kremlin-linked voices are working to divide the Trump administration as part of a wider strategy to avoid new US sanctions. With Trump’s peace ultimatum deadline approaching, Russian state media has intensified efforts to portray chaos inside the White House.

Recent messaging casts Trump as unstable while elevating his envoy, Witkoff, as a more rational figure. On 4 August, State Duma Deputy Grigory Karasin said he hoped the outcome of Witkoff’s talks with Putin would be “specific, not emotional, like Trump’s latest statements.” That remark was widely amplified across Russian state media.

On 6 August, Deputy Alexei Chepa claimed Trump had sent Witkoff to calm tensions after issuing a series of ultimatums demanding Russia end the war or face new sanctions. Kremlin-affiliated milblogger Alexander “Sasha” Kots mocked Trump’s repeated threats, suggesting Witkoff would return with a proposal the president could spin as a win.

ISW noted that Russia has long used such tactics to sow distrust between Ukraine and its partners. Now, the same methods are being applied to exploit schisms within the Trump administration in hopes of extracting concessions or weakening Washington’s negotiating position without meeting Trump’s preconditions for peace.

Russia downplays economic strain as sanctions loom

At the same time, Moscow continues projecting confidence in its economy despite mounting signs of trouble, ISW reports. Oil revenues have dropped, growth has missed targets, and consumer demand is slipping. Yet Russian officials insist sanctions will have no real impact and describe the economy as fully prepared.

The Russia bans gasoline exports measure will start on 29 July and, for the first time, apply to fuel producers as well. Interfax reports that the Kremlin announced the full restriction to stabilize the domestic fuel market amid peak summer demand. Liga notes that the ban could also be prolonged into September if the situation does not improve.

Russia bans gasoline exports as prices hit record highs

Interfax said the Russian government signed a decree on 28 July expanding the existing export restrictions on gasoline. Until now, the limits only applied to companies that do not produce fuel. Starting 29 July, the rule will include fuel producers, closing the export channel completely until 31 August 2025.

Previously, such export restrictions applied only to companies that do not produce gasoline. The Russian government stated that the goal is to protect internal supplies during high seasonal consumption and active agricultural work.

Liga explains that Deputy Prime Minister Aleksandr Novak, who oversees the energy sector, previously confirmed that a total ban had been under discussion for one to two months.

Record prices trigger the drastic move

Kommersant reported that the ban aims to “cool an overheated fuel market,” where prices have been rising sharply. Late last week, wholesale prices for A-95 gasoline on the Saint Petersburg exchange hit an all-time high, climbing for eight consecutive trading sessions.

Rosneft-linked oil payment rules changed after EU sanctions, Bloomberg reports. Mumbai-based Nayara Energy, the Indian refinery part-owned by Rosneft, now demands upfront payment or documentary letters of credit from buyers, showing how far-reaching the latest EU sanctions package is.

Nayara tightens oil deal terms after new EU measures

Nayara Energy Ltd., a key Indian refinery partially owned by Russia’s Rosneft, is now requiring advance payments or documentary letters of credit for upcoming oil shipments. According to Bloomberg, the shift was revealed in a revised tender document for a naphtha cargo scheduled for next month. The previous version of the tender included no such financial requirements. Naphtha is a fraction of crude oil, used for further petrochemical production.

Kpler analyst Zameer Yusof told Bloomberg the move “underscores how far-reaching the latest tranche of EU sanctions are.” He said the advance payment condition likely reflects fears that buyers may back out of deals or that banks could refuse to clear transactions involving sanctioned entities. 

In a weekend statement, Rosneft claimed that the EU’s new measures as “unjustified and illegal.” Meanwhile, Nayara insisted that operations remain normal and said it is “exploring all legal and appropriate avenues” to respond to the situation.

India’s role in Russian crude trade under pressure

India has become one of the largest importers of Russian crude since Moscow launched its full-scale invasion of Ukraine in 2022. As Western buyers turned away, Indian refiners stepped in to process Russian oil, including into diesel and other products that were then exported globally. Until now, Nayara had continued those operations without direct interference from sanctions.

A Ukrainian cyberattack on Gazprom systems has reportedly crippled the Russian state gas monopoly’s digital infrastructure, Suspilne reports, citing a source in Ukraine’s Defense Intelligence (HUR). The hackers wiped data from physical servers, cloud platforms, and all backups, targeting critical control systems that manage Russia’s gas flows, finances, and internal operations.

Gazprom’s entire infrastructure breached before data wipe

Suspilne reported earlier that the attack took place on 17 July. Now, Suspilne’s HUR source said Ukraine’s intelligence operatives obtained full access to all of Gazprom’s information systems, reaching a depth of penetration that the source described as “unprecedented.” The access reportedly included internal analytics, core servers, digital platforms, and user credentials from across Gazprom’s operational hierarchy.

According to Suspilne’s reporting, the operation began with full infiltration and ended with a coordinated deletion of all available data — including security systems, server control modules, and support networks that kept Gazprom’s infrastructure running.

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390+ Gazprom subsidiaries compromised, SCADA and GIS systems destroyed

Suspilne reports that more than 390 subsidiaries and branches were affected, including Gazprom Teplo Energo, Gazprom Obl Energo, and Gazprom Energosbyt. The breach extended into Gazprom’s SCADA and GIS systems, which control gas and oil pressure, distribution flows, well data, and infrastructure networks.

The HUR source also claimed that Gazprom’s financial records, tax data, contract logs, and legal documents were destroyed. Among the deleted systems were modules managing supply schedules, customer volumes, tariffs, payments, licensing, and regulatory files.

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System collapse may impact gas supply, contracts, and bank stability

The scale of the operation, Suspilne’s source stated, could lead to a partial or total collapse in Gazprom’s ability to function. Without operational systems, the state corporation may be unable to sign new contracts, manage its gas supply network, or maintain stable financial operations.

The source further suggested that the consequences could include regional disruptions to gas transport and delivery, a potential default on corporate obligations, and sharp devaluation of Gazprom’s stock, possibly triggering instability in banks that finance the energy conglomerate.

HUR source says hackers deleted all backup data using custom tools, Suspilne reports

Using custom-developed software, Ukrainian cyber operatives reportedly deleted all data stored on Gazprom’s physical servers and cloud infrastructure, including backup copies.

As the EU ramps up economic pressure, the Kremlin scrambles to downplay sanctions by pushing claims of immunity and resilience. But behind the bravado, top Russian officials are quietly conceding the growing toll on the country’s economy, according to the think tank Institute for the Study of War (ISW).

Russian officials claim immunity while signs of economic damage emerge

ISW reported on 18 July that Russian officials are continuing to falsely claim that the European Union’s newest sanctions have no significant impact on the Russian economy. Kremlin Spokesperson Dmitry Peskov alleged for no reason that the EU’s sanctions are illegal, and insisted Russia had already adapted to life under restrictive measures. He stated that the Kremlin would analyze the effects of the latest sanctions package and minimize their impact. Peskov also stated that the sanctions ostensibly ultimately harm those who imposed them.

Russian Security Council Deputy Chairperson Dmitry Medvedev responded to the EU’s newest package by asserting that Russia’s stance remains unchanged and that the country’s economy will endure. He went further, threatening to increase strikes on Kyiv and other Ukrainian cities — which has already been happening for years. Medvedev declared that Russia must learn to “hate” the EU and what he described as its “Russophobia” as much as its ancestors did. 

Kirill Dmitriev, CEO of the Russian Direct Investment Fund (RDIF) and Putin’s Special Representative for Investment and Economic Cooperation with Foreign Countries, echoed similar showy defiance. He claimed that the sanctions hurt Europe more than Russia by closing Russian markets to European businesses and disrupting the continent’s energy supply. Meanwhile, Head of the Russian State Duma Committee on Financial Markets Anatoly Aksakov dismissed the new financial sanctions as insignificant, calling them “just a fluctuation in the air,” since Russian banks were already operating under EU restrictions.

Top Russian ministers admit critical sanctions impact

Despite these bold public statements, ISW highlighted that some senior Russian officials are now quietly admitting that sanctions are taking a toll on the economy. The Moscow Times reported on 17 July that Russian Energy Minister Sergei Tsivilev recently told the Russian Federation Council that Western sanctions are making it difficult for Russian oil companies to obtain parts needed to repair refineries.

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Russian Central Bank Chairperson Elvira Nabiullina openly stated on 19 June that Russia has “exhausted many of its free resources” since the start of the full-scale invasion and must now search for a new growth model. Minister of Economic Development Maxim Reshetnikov also acknowledged during SPIEF that the Russian economy stands “on the brink of recession.”

Kremlin relies on evasive schemes to soften sanctions blow

ISW underscored that sanctions evasion through the People’s Republic of China and other third-party networks is now a key pillar of Moscow’s strategy. The Kremlin has built a network of actors designed to bypass Western restrictions, and has started reconfiguring its economic policies and business models to survive sanctions in the long run. However, ISW wrote, hinting on Washington’s hesitation to adopt news sanctions against Russia:

“The EU’s newest sanctions are a positive step, but wider Western compliance and enforcement are necessary to inflict maximum economic pressure on Russia.“

EU’s latest sanctions package delivers economic strike

The EU’s 18th sanctions package, approved on 18 July by the European Council, sharply undercuts Russian oil revenues. It slashes the oil price cap to $47.60 per barrel, bans Nord Stream pipeline transactions, and blacklists 105 more shadow fleet tankers—bringing the total to 444. It also targets entities tied to Rosneft and ends Czechia’s exemption for Russian oil.

Refined products from Russian crude are banned unless processed in select Western countries. Though the Kremlin budgeted for losses, these sanctions are expected to cut far deeper—threatening the third of federal revenue tied to oil.

Russia's economy, which defied initial sanctions and saw growth propelled by massive military spending and robust oil exports, is now showing significant signs of a downturn.

Recent economic indicators are flashing red, with manufacturing activity declining, consumer spending tightening, and inflation remaining stubbornly high, straining the national budget, the Wall Street Journal (WSJ) reported on July 4.

Russian officials are openly acknowledging the risks of a recession. Economy Minister Maxim Reshetnikov warned last month that Russia was on the "verge of a recession," while Finance Minister Anton Siluanov described the situation as a "perfect storm." Companies, from agricultural machinery producers to furniture makers, are reducing output. The central bank announced on July 3 it would debate cutting its benchmark interest rate later this month, following a reduction in June.

While analysts suggest this economic sputtering is unlikely to immediately alter President Vladimir Putin’s war objectives—as his focus on "neutering Ukraine" overrides broader economic concerns—it exposes the limits of his war economy.

The slowdown indicates that Western sanctions, though not a knockout blow, are increasingly taking a toll. If sanctions intensify further or global oil prices fall, Russia’s economy could face more severe instability. This downturn undermines Putin's strategic bet that Russia can financially outlast Ukraine and its Western allies, suggesting Moscow may struggle to finance the war indefinitely.

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The Kyiv IndependentTim Zadorozhnyy

Experts warn that Russia's economic growth model, overly reliant on military spending, is unsustainable and necessitates a contraction of civilian economic capacities to free up workers for the war machine, which is not a viable long-term strategy. Putin recently dismissed suggestions that the war is stifling the economy, echoing Mark Twain by stating reports of its death "are greatly exaggerated." However, he also cautioned that a recession or stagflation "should not be allowed under any circumstances."

After a brief recession in 2022, military spending, which accounts for over 6% of gross domestic product this year (the highest since Soviet times) and approximately 40% of total government spending, had propped up Russia’s economy and blunted the impact of Western sanctions. Russia’s ability to reroute oil exports to China and Beijing’s support with electronics and machinery provided additional economic stimulus. This created an economic paradox: the most sanctioned major economy was, for a period, growing faster than many advanced economies.

However, this military spending "sugar rush" fueled runaway inflation, compelling the central bank to raise interest rates to a record 21% to try and tame it. Higher interest rates increased borrowing costs for businesses, curbing investment, expansion plans, and squeezing profits. The economic comedown has already begun.

Official data shows Russian GDP growth slowed to 1.4% in the first quarter compared to a year earlier, down significantly from 4.5% in the fourth quarter of 2024. S&P Global’s purchasing managers’ index indicated Russia’s manufacturing sector contracted at its sharpest rate in over three years in June, and new car sales dropped nearly 30% year-over-year in June.

Businesses across Russia are feeling the effects, according to the WSJ. Rostselmash, the country’s largest producer of agricultural machinery, announced in May it would cut production and investment, and pull forward mandatory annual leave for its 15,000 employees due to a lack of demand. In Siberia, electricity grid operator Rosseti Sibir stated it was on the verge of bankruptcy due to high debt, halting investments and proposing tariff hikes for industrial users.

While some analysts argue the Russian banking system remains stable, others warn of increasing instability. A recent report by the Washington, D.C.-based Center for Strategic and International Studies (CSIS) highlighted risks from a government decision to control war-related lending at major Russian banks. The state could direct banks to offer preferential loans, potentially forcing the government to absorb losses if high interest rates prevent companies from meeting obligations.

The Moscow-based Center for Macroeconomic Analysis and Short-Term Forecasting also assessed in May that the risk of a protracted systemic banking crisis in 2026 was "moderate" and growing.

These economic challenges intensify pressure on the Kremlin by reducing its financial capacity to fund its war in Ukraine. The government has operated with a budget deficit throughout the war and projects this will continue for at least two more years. This fiscal strain could provide an opening for Western nations to implement more powerful sanctions.

Falling oil prices present another significant risk for Russia, as energy sales account for about a third of its budget revenues. The price of Russian crude has consistently remained below the level assumed in this year’s budget, and Russia’s oil-and-gas revenue in June fell to its lowest level since January 2023, according to Finance Ministry data.

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Iran is reportedly preparing to mine the Strait of Hormuz, a move that would spike global oil prices and give a significant boost to the Russian economy and its war machine in Ukraine.

Reuters reported on July 1 that Iran loaded naval mines onto vessels in the Persian Gulf last month, citing two U.S. officials, who said the preparations had been detected after Israel launched its "preemptive" attack against Iran on June 13.

Amid the conflict with Israel which has currently settled into an uneasy ceasefire, Iran has repeatedly threatened to block the Strait of Hormuz as a means of deterrence.

If the Strait were mined, Iran could block one-fifth of global oil demand and spike world energy prices — a boon for Russia's oil-dependent economy.

"Any disruption to Gulf supplies would push up global crude prices. Prices for Russian crude would rise in line," John Gawthrop, Argus Eurasia Energy editor, told the Kyiv Independent.

Russia’s energy sector made up 35-40% of its budget revenues pre-full-scale invasion and is powering its war machine.

Western sanctions on Russian energy and the G7’s Russian oil price cap of $60 per barrel have hampered its profits, with Russia losing more than $150 billion over the last three years, but have yet to deal a crippling blow.

The conflict between Israel and Iran caused a spike in prices — Brent crude, the global benchmark, on June 13 jumped from $69.36 to $75 per barrel, a surge that looked like it could grant Russia's economy a reprieve.

Until the Israeli attacks, the future for Russian crude wasn’t looking so bright. Europe was planning its 18th sanctions package targeting Russia's energy sector, and the G7 was pushing for a $45 price cap. Hungary and Slovakia have since blocked the sanctions package.

Prices have since settled along with the conflict and on July 2 Brent crude was $67.50, but if Iran does go ahead with mining the Strait of Hormuz, blocking one-fifth of global oil demand, another surge would follow.

This would also mean Iran blocks its own oil exports too, so it would only be a last resort from Tehran, David Fyfe, chief economist at Argus Media, a market analyst group, told the Kyiv Independent last month.

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The Kyiv IndependentTim Zadorozhnyy

President Vladimir Putin claimed on June 20 that Russia's economy is strong despite war and sanctions, brushing off mounting warnings from his own officials about stagnation and looming recession.

Speaking at the St. Petersburg International Economic Forum, Putin was asked about reports that the ongoing war in Ukraine was "killing" the Russian economy.

"Rumors of my death are greatly exaggerated," he replied, quoting American writer Mark Twain.

The president claimed that Russia has outpaced global economic growth over the past two years, allegedly expanding by over 4% annually.

"Our most important task is to ensure the economy's transition to a balanced growth trajectory," Putin said. "At the same time, some specialists and experts point to the risks of stagnation and even recession. This should not be allowed under any circumstances."

The statement came just a day after Central Bank Governor Elvira Nabiullina warned on that Russia's wartime economic momentum is fading fast. She said the economy is approaching the limits of its growth potential, adding that previously effective tools are now exhausted.

Economy Minister Maxim Reshetnikov echoed the concerns, telling a separate forum audience on June 19 that Russia is "on the verge of a transition to recession." He emphasized that recession is not inevitable and that "everything depends on our decisions."

Moscow has experienced rapid inflation and historically high interest rates amid its full-scale invasion of Ukraine. The central bank raised rates repeatedly to combat inflation, but on June 6, it made its first cut in nearly two years, from 21% to 20%.

Putin has criticized the central bank's tight monetary policy for choking off private investment, especially in non-defense sectors.

Despite Putin's optimistic rhetoric, analysts attribute Russia's economic slowdown to sustained international sanctions, falling oil prices, rising wartime spending, and supply disruptions.

Russia's ever-mounting losses on the battlefield which recently passed the 1 million mark are also likely contrbuting to the economic turmoil as the Kremlin is having to pay people to sign up to fight rather than introduce what would be a hugely unpopular mass mobilization.

According to an analysis by economist Janis Kluge, Russia's daily bill just for sign-up bonuses is $24 million.

The ballooning bills come at a time when Russia's economy is already under huge strain from Western sanctions and falling oil and gas revenues.

"The implications for Russia are grave," energy security analyst Wojciech Jakobik wrote in an op-ed for the Kyiv Independent this week.

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The Kyiv IndependentKateryna Hodunova

Editor's note: This story was updated to include Russian President Vladimir Putin's remarks at the St. Petersburg International Economic Forum.

Russia's wartime economic momentum is fading fast, with key resources nearly exhausted, Russian Central Bank Governor Elvira Nabiullina said, warning that the country can no longer rely on the same tools that sustained growth in the first two years of the full-scale war against Ukraine, the Moscow Times reported on June 19.

Speaking at the St. Petersburg International Economic Forum, Nabiullina said that the Russian economy had been expanding on the back of "free resources," including labor, industrial capacity, bank capital reserves, and liquid assets from the National Wealth Fund (NWF) — all of which are now reportedly nearing depletion.

"We grew for two years at a fairly high pace because free resources were activated," she said. "We need to understand that many of those resources have truly been exhausted."

Speaking at the same forum, Russian President Vladimir Putin ordered officials "not to allow stagnation or recession" in the Russian economy under any circumstances.

"We must consistently change the structure of our economy," he said.

The comments come after Russia's ambassador to the U.K., Andrei Kelin, claimed in an interview with CNN this week that Russia is spending "only 5–7%" of its federal budget on the war. Kelin claimed that Russia can continue waging its war, saying Moscow "is winning."

According to the state statistics agency Rosstat, Russia's unemployment rate has dropped to a historic low of 2.3%. At the same time, mass emigration and large-scale wartime recruitment have created a labor shortage estimated at 2 million people. Industrial capacity utilization has surged beyond 80%, the highest in modern Russian history.

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Russia's economy is now "on the verge of a transition to recession," Russian Economy Minister Maxim Reshetnikov said at the same forum. Official data show that GDP growth slowed from 4.1% in late 2023 to just 1.4% in the first quarter of 2024, with the economy contracting quarter-on-quarter for the first time since 2022.

Business profits in March fell by one-third overall and dropped by half in the critical oil and gas sector. Industrial growth stagnated at 1.2% year-over-year between January and April, while civilian sectors of the economy began shrinking. Retail turnover growth slowed from 7.2% in December to just 2.4% in April.

An anonymous Russian analyst told Novaya Gazeta Europe that government technocrats are effectively telling Putin it's time to choose between "war or economy."

During its invasion of Ukraine, Russia has faced rising inflation due to record military spending, pushing the central bank to maintain high interest rates. Under government pressure, the bank cut the rate slightly from 21% to 20% earlier in June, despite concerns about weakened private investment.

Officials have scaled back key development projects and reduced shipments of metals and oil products. Early hopes for recovery in 2025, driven by talks with the U.S., have faded as inflation and sanctions weigh heavily on growth.

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The Kyiv IndependentChris York

The Russian economy appears to be "on the verge of a transition to recession," Russian Economy Minister Maxim Reshetnikov said on June 19, adding that the next step will be decisive.

The comments underscore Russia's mounting economic challenges as it continues its all-out war against Ukraine.

"According to figures, we have a cooling stage (in the economy). But all our numbers are like a rearview mirror," Reshetnikov said at the St. Petersburg International Economic Forum when asked about Russia's economic situation.

"According to current business perceptions, we are already, it seems, on the verge of a transition to a recession," the minister added. Reshetnikov clarified that recession is not inevitable and that "everything depends on our decisions."

Russia has faced soaring inflation during its invasion of Ukraine, driven by record wartime spending. This forced the central bank to set one of the highest key interest rates in decades, hurting private investments in non-defense-related sectors.

Facing government pressure, the central bank slashed the interest rate from 21% to 20% earlier this month.

Reshetnikov himself urged the central bank to cut rates in order to boost growth, aiming to achieve a 3% growth target set by Russian President Vladimir Putin.

Russia has been forced to slash key projects across various sectors in the face of an economic slowdown, brought on in part by plummeting oil prices. Major Russian exporters have also cut down on rail shipments of metals and oil products, even beyond earlier projected reductions.

After some positive signals earlier in 2025 due to U.S. President Donald Trump's outreach to Moscow and hopes for a ceasefire, more recent reports again indicate a sharp slowdown in Russia's economic growth.

Analysts have connected this development to the central bank policies, sanctions, low oil prices, supply difficulties, and high inflation.

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The Kyiv IndependentOlena Goncharova