Russia (Russian Federation)

Russian economic machine running out of steam

The Russian economy is entering 2026 in a persistently weak state that is even significantly worse than was the case in 2025. Growth will continue to be hampered by the ongoing erosion of oil revenues which fell by 24% over the whole of 2025 due to tougher international sanctions (636 mainly commercial and financial sanctions since the start of the conflict) and Ukrainian strikes that have reduced refining and port loading capacity. The inclusion of Rosneft and Lukoil – the country's two main oil producers – on the list of entities sanctioned by the US in October 2025 has also increased logistics costs by restricting access to maritime services and increasing the use of the shadow fleet, a growing proportion of which operates under flags of convenience or unknown flags. The strategy allows flows to be maintained, but at the cost of higher operational risks and tighter margins. Exports will therefore remain on a downward trend despite the continued massive shift towards Asia (and mainly China), which is expected to remain the main outlet for Russian crude in 2026.

Since 2022, the economy has been operating in war mode, with arms production taking precedence over other sectors, particularly the extractive sector, which has been penalised by the lack of Western technology. While this effort will continue to support industrial activity, particularly heavy industry, it remains insufficient to offset the weakening of the rest of the productive fabric. Construction, which had already been slowing down in 2025, will suffer further from the removal of mortgage subsidies in 2024. Agriculture (10% of export earnings in 2025) will continue to make a significant contribution to the economy, but its potential remains limited by dependence on weather conditions and the decline in labour from Central Asia.

Private consumption will continue to be one of the weak links in economic activity, hampered by stubbornly high inflation (5.6% in December 2025), despite a decline, and by key interest rates locked in at a very restrictive level (16% at the time of writing). Public investment will remain focused on military priorities and the reconstruction of strategic infrastructure, with limited impact on civilian sectors. On the private side, companies will continue to reduce or postpone their expansion plans due to more difficult access to imported equipment, supply delays and an unstable regulatory environment. These limitations will be exacerbated by the persistently tight labour market. The reduction in the available workforce due to military recruitment, declining immigration and demographic ageing is creating persistent shortages that are driving up labour costs and weighing on productivity. Last, despite the ruble's sizeable appreciation in 2025 (from 115 to 91 RUB/EUR between January and December), currency volatility will remain high and will be fuelled by declining foreign exchange inflows and the growing use of alternative payment systems for exports.

Public finances will continue to deteriorate

The budget will stay in deficit in 2026 in a context where military and security priorities are absorbing an increased share of spending (40% in 2025) and hindering any possibility of adjustment. Despite the fiscal tightening that has been under way since 2025—an increase in VAT from 20% to 22% (except for essential goods), an increase in corporate tax to 25% and the introduction of a more progressive income tax—revenue will grow slowly and will not offset the increase in spending, which is being penalised by growing discounts on hydrocarbons and an economy close to stagnation. Financing will continue to be almost exclusively domestic, with access to international markets closed, increased dependence on local banks and higher public debt servicing costs. Public debt remains relatively low, but its profile is becoming riskier due to shorter maturities and a persistently high interest-rate environment. The National Wealth Fund (NWF), which is regularly called upon to absorb deficits, will retain its stabilising role, but its liquid component, which has fallen to around 4.1 trillion rubles, has been cut by more than half since 2022. Foreign exchange reserves are officially high, covering approximately 14 to 15 months of imports, but a significant portion (nearly half) mainly involving assets invested in the European Union, the US and the UK remains frozen, which severely limits their operational use. The situation is continuing to crimp the government’s the National Bank of Russia’s headroom and is making the budget increasingly sensitive to any additional external shocks.

Externally, Russia will maintain its trade surplus in 2026 (around 4% of GDP), but in a less favorable environment. Exports will continue to be dominated by hydrocarbons, metallurgical products, fertilisers, cereals, and certain semi-processed goods, while imports will remain concentrated on machinery, industrial equipment, electronic products, pharmaceuticals, and intermediate consumer goods. The shift towards non-Western markets, particularly India, China, Turkey and the United Arab Emirates, is helping to maintain volumes, but logistical challenges remain, particularly in gas, where the lack of infrastructure geared towards Asia limits adjustment capacity. The current account will remain positive, supported by moderate imports rather than strong export momentum, while external revenues will continue to be disrupted by international financial restrictions. Tensions will increase with the rise of secondary sanctions targeting buyers of Russian hydrocarbons, led in particular by the US, and the continued financial decoupling from the West. While the external position remains robust in the short term thanks to low external debt, the simultaneous erosion of buffers—mobilisable sovereign wealth funds, effectively accessible reserves, declining current account surplus—increases its vulnerability to any additional shock, whether it be tighter sanctions, a prolonged decline in energy prices, or a prolongation of the war.

Power still locked away in a war that dictates everything

The political landscape will remain dominated by Vladimir Putin, whose hold on power until 2030 seems assured given the absence of any organised competition and the complete lockdown of the political system. The regime will continue to rely on a small core of loyalists from the security structures, consolidating a model of governance based on extreme centralisation and the weakening of institutional countervailing powers. The civic space remains strictly controlled: the media is aligned, dissent is criminalised, digital surveillance is reinforced and tighter restrictions are in place on the use of social media. This systemic pressure neutralises any possibility of an organised opposition, but does not rule out widespread discontent in the medium term if economic stagnation sets in.

The war in Ukraine will continue to shape political decisions. Russian forces are maintaining their positions along the front line, and recent gains in certain areas of Donbass (between Pokrovsk and Kostiantynivka) have reduced the risk of open fractures within the military apparatus. However, the human and material losses are considerable, and a localised reversal could undermine the internal balance between the various branches of the security forces. In this context, Moscow will maintain an inflexible diplomatic line: no openness to Western security guarantees for Ukraine, refusal of a NATO troop presence on its territory and a willingness to negotiate only on the basis of territorial gains already acquired.

Payment

Bank transfers in Russia are among the most popular instruments used for non-cash payments, for both international and domestic transactions. This is because they are fast, secure, and supported by a developed banking network. Despite this, cash is still one of the most widespread payment instruments used by individuals.

Debt Collection

Amicable phase

The amicable phase begins with the creditor contacting the debtor, either via written correspondence or phone calls. If an agreement is reached, a payment plan can be offered to the debtor. Charging interest is legally allowed but hard to enforce unless an agreement to pay said interest currently exists between the debtor and the creditor. Any such agreement must be additional to any standing agreement between the parties.

Legal proceedings

The Russian judicial system is comprised of three branches: the regular court system, the arbitration court system (headed by the Supreme Court), and the Constitutional Court (a single body with no courts under it; in Russian constitutional law this function is known as “constitutional control” or “constitutional supervision”, and deals with a certain number of disputes where it has original jurisdiction).

The regular courts have a four-tier hierarchy and are responsible for civil and criminal cases: the Supreme Court of Russia, regional courts, district courts, and magistrate courts.

Arbitration courts review cases dealing with a wide matter of contractual issues, such as rights of ownership, contract changes, performance of obligations, loans, bank accounts and bankruptcy.

The highest court of appeal is the Supreme Court of the Russian Federation.

Fast-track proceedings

Russian law provides for simplified proceedings for certain types of cases, in which the creditor seeks to recover no more than RUB 500,000 from a legal entity or RUB 250,000 from an individual entrepreneur. Under Russian law, judges are to consider cases through simplified proceedings within a maximum of two months form the day when the Arbitrazh (arbitrage) court receives the statement of claim or application. Once the deadline for submissions of evidence has passed, cases are reviewed on their merits by judges, without the parties being called to appear.

Ordinary proceedings

Proceedings are initiated when a creditor files a statement of claim with the competent Arbitrazh court. The court must decide within five working days whether to accept the statement, and subsequently schedule a preliminary hearing. Debtors are usually notified of claims when they are served with a copy of the statement of claim, which includes the data of the initial hearing. There is no specific time frame during which defendants must submit their defense, but it must generally be done before the hearing on the merits). The court can set a deadline for submitting a statement of defense – if this is not submitted, the court will consider the case on the basis of the available materials. The preliminary preparation period ensures that the case can be resolved on its own merits during one court hearing. Cases must generally be resolved on their merits within three months after the respective statement of claim is received by the court. More complex commercial disputes can take considerably longer. The courts will normally award remedies in the form of compensatory damages or injunctions but punitive damages are not available.

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Enforcement of a Legal Decision

A judgment is enforceable for three years provided that is has become final. If the debtor fails to satisfy the judgment, the creditor can request compulsory enforcement of the judgment from the court’s bailiff services. Foreign judgments must be recognized as a domestic decision by the Arbitrazh Court through the Russian exequatur procedure. Although Russia has signed a small number of reciprocal recognition and enforcement agreements with foreign countries, domestic courts are reluctant to recognize foreign jurisdiction clauses.

Insolvency Proceedings

SUPERVISION

Commercial Courts initiate the supervision process to evaluate the debtor’s financial situation and to secure the debtor’s property. After examining a filed insolvency claim, the court initiates the supervision process. The debtor can autonomously request a court to initiate supervision if settling some creditors’ claims would make it impossible for the debtor to fulfil other obligations, if execution on the debtor’s property means the debtor’s business has to cease, or if the debtor’s business is insolvent. A receiver is appointed, known as a temporary manager, who must approve certain transactions during the supervision, such buying or selling more than five percent of the accounting value of the debtor’s property.

FINANCIAL REHABILITATION

The aim is to carry out any necessary measures to restore debtors’ solvency and settle their debts. The court and the creditors control the process. The application must include a rehabilitation plan that ensures the debtor’s obligations will be met. The court appoints a receiver to be the administrative manager, who supervises and controls the debtor’s affairs during the period of the financial rehabilitation. The administrative manager examines the debt repayment schedule and monitors any financial restructuring plans.

At least one month before the period of financial rehabilitation expires, the debtor must provide the administrative manager with a report on the results of the financial rehabilitation. Once the report has been examined, the manager must prepare an opinion on the extent to which debts have been paid and the financial restructuring plan has been achieved. The opinion is submitted to the court, which examines the results and either ends the proceedings, orders external administrator to manage the company, or declares the debtor bankrupt.

EXTERNAL ADMINISTRATION

The objective is to restore the debtor’s solvency by applying special measures under an external administration plan, and to replace the debtor’s chief executive officer (CEO) with an independent external manager. Once the procedure begins, the court appoints a receiver known as the external manager, who must draft an external administration plan setting out the measures necessary to restore the debtor’s solvency within the period of the external administration procedure. At the end of the period, the manager prepares and submits a report to the creditor’s meeting, together with a proposal of one of the following four options: end judicial proceedings, if all creditors have been settled; extend the period; end external administrator, as the debtor is now solvent; enter administration and file for bankruptcy.

AMICABLE ARRANGEMENT

Debtors and creditors may make an amicable arrangement to adjust debtors’ liabilities on negotiated terms during any rescue procedures. Generally, an amicable arrangement ends the powers of court-appointed receivers. If a debtor fails to comply with terms of an amicable arrangement, creditors are entitled to ask for a bailiff to execute the agreement.

INSOLVENCY

The purpose of insolvency is to sell the debtor’s property and use the proceeds to pay creditors’ claim in proportionate amounts. The court may initiate the process during supervision, financial rehabilitation, or external administration. It appoints a receiver (insolvency manager) to replace the debtor’s CEO. The court and the creditors control the activity of the insolvency manager, who must provide progress reports. At the end of the proceedings, the court reviews the list of satisfied and unsatisfied claims. If they are fully satisfied, the court rules the proceedings complete and the debtor is liquidated. If they are not satisfied, proceedings are terminated, the debtor company is dissolved, and unsatisfied creditor’s claims are to be written off.

Last updated: February 2026