Russia’s liquid sovereign wealth fund assets stood at 6.5 percent of GDP when the war began. By April 2026 they were down to 1.8 percent. That is one of the central findings of a new report from the Kiel Institute for the World Economy and the Stockholm Institute of Transition Economics, which concludes that Moscow’s fiscal buffers are largely gone.
The report, Endgame: The State of the Russian Economy, is Kiel Report No. 9, published in June 2026. It draws on a group of international experts, and it comes four years after the full-scale invasion of Ukraine.
Revenue and deficit
The numbers for early 2026 are blunt. Russia’s federal budget deficit passed the government’s full-year target within the first three months of the year. Oil and gas revenues fell 45 percent year-on-year in the first quarter.
Moritz Schularick, president of the Kiel Institute and co-author of the overview chapter, said: “In the first years of the war against Ukraine, Russia’s economy has proven more robust than many expected, but now the buffers are depleted.” He added that growth has come to a standstill and that higher oil prices from the war in the Gulf will probably bring only temporary fiscal relief.
The report says the Kremlin has leaned on off-budget financing, fast credit expansion and indirect support through the banking system to pay for military spending. Corporate debt has risen sharply as banks direct money into war-related sectors.
Matthew C. Klein, who wrote the chapter on war financing, argued that money is no longer the binding limit. “The fundamental constraint facing Russia today is not access to money but access to people, technology, and productive capacity,” he said. With labor shortages at record levels and sanctions restricting key imports, he warned, extra spending is more likely to feed inflation than to produce more military output.
Leaning on Beijing
China now accounts for approximately 35 percent of Russia’s total foreign trade, according to the report, and supplies most of the critical dual-use goods and military-relevant components entering the country. It is responsible for roughly three-quarters of the rise in Russian imports of sanctioned critical military components since 2022.
Alicia García-Herrero, a senior fellow at Bruegel and co-author, rejected the “no-limits partnership” label. “Russia has gained an economic lifeline, but China has gained leverage,” she said. In her words, the relationship is “a partnership of dependence rather than one of equals.” The authors describe the pivot east as a necessity, forced by the loss of Western markets, technology and financial infrastructure, and they say it erodes Russia’s autonomy over the long run.
What the authors recommend
The report names oil and gas export revenue as the main support for Russia’s war effort. Torbjörn Becker, director of the Stockholm Institute of Transition Economics, said price cap enforcement “must take center stage in sanctions policy,” including renewed efforts against Russia’s shadow fleet. The authors also want tighter export controls, especially on Chinese suppliers.
One proposal is a “Ukraine Support Tariff” on the trade that still reaches Europe, mainly LNG, chemicals and fertilizers. Such a tariff, the report says, could cut Russian export earnings and fund Ukraine’s defense and reconstruction at once. Schularick said the task for Europe is “to convert Russia’s growing economic vulnerabilities into lasting strategic leverage.”
