Russia's economy is projected to grow just 0.4% in 2026 as the US moves forward with legislation to sanction buyers of Russian oil, uranium and natural gas. The Russian economy is still worth about $2.6 trillion, but it is shrinking each quarter, leaving less room for higher war spending.
Vladmir Putin was reportedly told this year that the war was already at least $28 billion over budget, and Russia was projected to overspend by another $54 billion in 2027 and 2028. That bill sits on top of this year's defense budget, which needs more than $158.5 billion, far above the roughly $47 billion a year Russia spent on national defense between 2019 and 2021.
US Pressure on Buyers
The legislation targets the buyers, not just the cargo. If the measure becomes law, it would raise the cost of dealing in Russian energy and nuclear fuel by threatening secondary exposure for firms that keep purchasing those exports. Russia earns 734 million euros a day from fossil fuel exports, so even small changes in buyer behavior would feed quickly into state revenues.
Russia's budget revenues from oil and gas halved in January 2026, compounding the squeeze from slower growth. The country grew by only 1% in 2025 after 4.1% growth in 2023, according to the World Bank, a slowdown that shows how quickly wartime spending and export dependence can collide.
Putin's Budget Squeeze
In 2022, Russia's economy initially contracted when sanctions first hit, then rebounded in 2023 before losing momentum again. David Henderson, a Stanford researcher, estimates the conflict is reaching over $2.5 trillion, a figure that captures how military outlays can keep rising even when top-line growth fades.
The friction is simple: Russia's economy remains large enough to absorb shocks, but not large enough to avoid them indefinitely at this pace. A 0.4% expansion leaves little buffer if energy receipts keep weakening and defense demands keep climbing.
The next move is the legislation itself. If the US finishes it in the form now moving through Washington, the immediate question is how much Russian fossil fuel export revenue it can still pull down from buyers willing to keep paying for supply.
