What are we going to do about this? Print money? Like in 1992?
Finance ministry and central bank officials warned Putin that current defense spending threatens dangerous budget deficits and proposed new cuts. Russia's economy faces structural challenges with GDP growth forecast at 0.4% for 2026, down from 1.3%, despite recent oil price gains.
- Finance and central bank officials warned Putin that Ukraine war spending is unsustainable
- Russia's GDP growth forecast cut to 0.4% for 2026, down from 1.3%
- Budget deficit reached 2.5% of GDP in first four months, 50% above budget
- Defense sector growth expected to slow to 4-5% in 2026 from roughly 30% in recent years
Russian officials warn Putin that Ukraine war spending is on an unsustainable trajectory, risking dangerous budget deficits. The Kremlin faces pressure to cut spending elsewhere as defense demands additional funding.
Inside the Kremlin, a quiet crisis is taking shape. Vladimir Putin has been told by his own finance officials and central bank advisors that the war in Ukraine is consuming money at a rate Russia's budget cannot sustain. According to Bloomberg News, which reviewed internal documents and spoke with people close to the matter, these officials have warned that current defense spending threatens to push the government's budget deficit to dangerous levels. They have proposed cutting military expenditures. Putin's response was to ask his finance ministry to find savings elsewhere in the budget—anywhere but defense.
This reveals a fundamental tension at the heart of Russian governance. The Defense Ministry and some Kremlin officials are pushing back hard, insisting that military spending must be protected. Their argument is straightforward: thousands of companies depend on defense contracts for survival, and cutting those contracts means cutting jobs. The result is a standoff, with no resolution in sight and the burden of decision falling entirely on Putin.
The numbers tell a stark story. Russia's economy is slowing dramatically. In May, the government downgraded its growth forecast for 2026 from 1.3 percent to just 0.4 percent—a collapse that puts the country on the edge of recession. The first quarter of this year saw the economy actually contract, the first time that has happened in three years. Even the defense sector, which has been the engine of growth, is expected to expand only 4 to 5 percent in 2026, a sharp deceleration from the roughly 30 percent growth it has enjoyed in recent years thanks to military orders.
Oil prices have provided some relief. A spike in petroleum costs following the conflict in the Middle East has boosted government revenues. But Bloomberg's analysis suggests that oil would need to stay above $100 per barrel for at least a year for the economy to improve meaningfully—and even that would not solve the deeper problems. Inflation is rising. The banking sector is under strain. International sanctions have left the economy weakened and brittle.
The budget deficit has become impossible to ignore. In just the first four months of 2026, the shortfall reached 2.5 percent of GDP—roughly 50 percent higher than what was budgeted for the entire year. To cover the gap, the government has already raised some taxes and is considering new levies on commodity producers and banks. The pressure is mounting.
Last week, a veteran member of Russia's lower house of parliament, Valery Gartung, broke ranks and voiced what many must be thinking. He invoked the specter of the 1990s, when the Soviet Union collapsed and hyperinflation took hold. Prices were rising 30 percent every week. "What are we going to do about this?" he asked. "Print money? Like in 1992?" He answered his own question: "We know that's not the solution."
The question now is whether Putin will heed the warnings from his own officials or continue to prioritize military spending at the cost of economic stability. Five years into the invasion of Ukraine, Russia faces a choice it cannot avoid much longer. The war machine is consuming the state's resources faster than the state can replenish them. Something has to give.
Notable Quotes
What are we going to do about this? Print money? Like in 1992, when prices were rising 30 percent every week? We know that's not the solution.— Valery Gartung, Russian parliamentarian
The Hearth Conversation Another angle on the story
Why would Putin ask the finance ministry to cut spending elsewhere instead of just reducing military costs?
Because the Defense Ministry and its allies in the Kremlin have made a political case that's hard to counter—that military contracts keep factories running and people employed. Cutting defense spending means laying off workers in a system that depends on those jobs for stability.
But if the budget deficit keeps growing, won't that eventually force his hand anyway?
Almost certainly. You can only hide a problem like this for so long. The deficit is already 50 percent over budget just four months in. At some point, the math becomes undeniable.
What's the real danger here—is it just recession, or something worse?
A parliamentarian actually said it out loud last week: the memory of 1992, when the Soviet Union fell and prices tripled every week. That's the ghost in the room. If the government starts printing money to cover the deficit, inflation could spiral out of control.
So Putin is trapped between two bad choices.
Exactly. Cut military spending and face pressure from the defense establishment and the companies that depend on those contracts. Or keep spending and risk economic collapse. There's no easy way out.
And oil prices are the only thing keeping this from falling apart right now?
For now, yes. But oil above $100 a barrel is fragile. It's not a solution to the structural problems—the sanctions, the inflation, the weak banking system. It's just buying time.