Russia Chartbook by KSE Institute: Stalled Domestic Borrowing Poses Threat to Budget Financing; Energy Windfall Fades as Oil Prices Moderate

KSE Institute has published the July edition of its Russia Chartbook, “Stalled Domestic Borrowing Poses Threat to Budget Financing; Energy Windfall Fades as Oil Prices Moderate.” The latest data show that Russia’s ability to finance its budget deficit is increasingly constrained. At the same time, oil export earnings fell sharply in June as Russian export prices declined.

OFZ issuance fell to its lowest level since January 2026 in June, driven by repeated auction cancellations and postponements. Fearing the need to borrow on excessively costly terms, the Ministry of Finance has suspended OFZ auctions for now. The last such suspension occurred in 2020, at the height of the pandemic.

This reflects severe instability in Russia’s domestic financial market. Ten-year government bond yields have surged to their highest levels, while the Russian stock market has fallen to its lowest point since the beginning of the full-scale invasion. Federal domestic debt has doubled since February 2022, reaching 32.7 trillion rubles, or roughly 15% of GDP, as of June 2026. Russia’s problem, however, is one of cash flows rather than the overall debt stock.

A small surplus in June narrowed the cumulative federal budget deficit to 5.7 trillion rubles in January-June. However, this does not signal a fundamental fiscal improvement. The surplus was largely driven by a spike in non-oil and gas revenues, which rose by 33% compared to May and by the same amount compared to the January-April 2026 average. Spending in June, meanwhile, was 20