BERLIN, Feb 19 (Reuters Breakingviews) - When the money is short, tap the punters. Russia is discovering an old recipe of impoverished governments gasping for air and desperate for new sources of revenue. Finance minister Anton Siluanov has sent a letter to President Vladimir Putin suggesting the legalisation of online casinos, the Kremlin-compatible newspaper Kommersant reported, opens new tab on January 27. In another sign of the government’s fiscal anguish, last month it sold Moscow’s Domodedovo airport for around $860 million. Russia still has ample means to keep funding its invasion of Ukraine. But the ways it tries to keep the government afloat imply remedies that will cripple the economy over the long term and pave the way for years of stagnation.

The latest tricks to shore up revenue shrunk by weaker oil prices and Western sanctions follow serious spending cuts ordered by Siluanov in December to keep the 2025 budget deficit within his 2.6% of GDP target. Russia’s fiscal situation would not be dramatic if the country was at peace and its economy open to the world. Government gross debt stood at only 23% of GDP last year, according to the International Monetary Fund. But the economy slowed to a standstill last year, growing only 0.6% in spite of running at full capacity.

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Putin’s government now seems to have exhausted the methods it used in the first years of the war, after being cut off from global bond markets. It has slapped taxes on the country’s largest companies, and increased VAT rates in January. The liquid resources of the National Wealth Fund — a rainy-day instrument funded by oil and gas revenue — shrank from more than $130 billion before the war to around $50 billion at the beginning of 2025, according, opens new tab to the Ministry of Finance. Last year nearly all the deficit was financed by government bonds forced on the country’s banks.

Attempts to sell some $35 billion of assets seized in the last few years from either foreign investors or Russian owners who have fallen out of the Kremlin’s favour haven’t provided a major source of funding so far. The Domodedovo airport sale is a case in point — the government having accepted half the price it had demanded two weeks earlier. And the asset was finally acquired by Russia’s largest airport, Sheremetyevo, whose last known controlling owner is Putin’s former judo partner.

While revenue shrinks, spending is pushed up by the war and demands exerted on the state budget by the ailing economy. Russian firms from the private as well as the public sectors are begging for state aid or tax delays the government can’t afford. The national railway company, saddled with a $51 billion debt load, is asking for a lifeline of less than $1 billion but is obliged to sell assets first.

Financial repression, shrinking competition, cronyism and government intervention have become the three pillars of economic policy in Russia at war. That is the opposite of the reforms its economy has long needed. The price of war may be manageable for now. The damage it inflicts on the economy will last much longer.

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Context News

• Russia’s public deficit could balloon to almost triple the official target by end-2026 as a fall in Indian purchases of oil and growing oil trade discounts eat into revenues while spending may be higher than expected, Reuters said on February 4, quoting a source close to the Kremlin.
• The source cited calculations by economists from a government-linked think tank, which are not planned for publication. They are the latest sign of growing strains on a Russian economy facing sanctions, high interest rates and labour shortages.

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Editing by George Hay; Production by Streisand Neto

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Pierre Briancon

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Pierre Briancon is a Breakingviews columnist, writing on European business and economics. He was previously a writer or editor at Barron’s, Politico, and Breakingviews for a first stint as Paris correspondent and European editor. For the first part of his career he was a foreign correspondent and editor at Libération, the French newspaper. He was also an economics columnist for Le Monde and for French public radio.

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