Russia held another “electoral spectacle” on 18−20 September. Interest in the event was driven not by expectations of any change in the composition of the State Duma, but by the widespread belief that, after the elections, the authorities might take another series of unpopular steps. These were generally said to include mobilization, the introduction of exit visas on the Soviet model, higher taxes, intensified nationalization efforts, a freeze on bank deposits and much else besides—even the imposition of martial law. The sources of these fears are highly varied: mobilization has been discussed mainly by Western experts and Ukrainian politicians; the possibility of freezing deposits and introducing war bonds by Russian economic commentators; and the closure of borders and abolition of the last remaining elements of “freedom” by international think tanks.
None of this, however, appears inevitable. To reach that conclusion, it is worth taking a brief look at the trajectory of the past four years—primarily at developments since autumn 2022, since the first six months of the full-scale war were atypical because of fluctuations in export revenues and the exchange rate, the wave of sanctions, mobilization and hopes for a rapid return to normality. This trajectory suggests that the Kremlin has sought to avoid abrupt changes in economic policy and has based its approach on the concept of a “special military operation”—one that should not be perceived by society as a war.
We cannot fully trust official statistics when assessing inflation or GDP growth. At the same time, there is little reason to doubt easily observable processes and trends: changes in the ruble exchange rate, asset and property prices, taxation, wage dynamics and, accordingly, aggregate budget indicators, which are directly affected by all of the above. It must be acknowledged that the authorities have refrained from many measures one might expect in wartime. They have not banned cross-border transfers, frozen citizens’ deposits, introduced compulsory borrowing, fixed the ruble exchange rate or imposed price controls.
Tax policy has changed, but only marginally. In 2022, laws were passed raising the mineral extraction tax on oil and gas. Gazprom was also subjected to an additional one-off levy through the mineral extraction tax—416 billion rubles between September and December 2022—which subsequently became a permanent surcharge of approximately 50 billion rubles per month through 2026. In 2023, a “one-off” tax was introduced for large companies, amounting to 10 per cent of their excess profits—their profits in 2021−2022 above the average recorded in 2018−2019. It could be paid by the end of 2023 with a 50 per cent discount. In 2025, the top personal income-tax rate rose from 15 to 22 per cent, while corporate income tax increased from 20 to 25 per cent. Small businesses operating under the simplified tax regime were required to pay VAT once annual turnover exceeded 60 million rubles. From 2026, VAT rose from 20 to 22 per cent, while the annual turnover threshold for the simplified taxation regime for small and medium-sized enterprises was reduced to 20 million rubles.
Throughout the period of the full-scale war, the authorities have gradually intensified their nationalization efforts. The total value of seized assets has already reached 7.6 trillion rubles. Outside the turbulent year of 2022, the ruble’s largest deviations from its period average of 81.9 rubles to the dollar amounted to 33.6 per cent on the upside and 17.5 per cent on the downside—hardly catastrophic by current standards. The federal budget deficit rose from 3.3 trillion rubles in 2022 to an estimated 5.8−6.5 trillion in 2026, even as military spending increased from 4−5 trillion to 15−17 trillion rubles. In other words, it is still premature to speak of the economy being “put on a war footing”—a prospect that many members of the Russian elite understandably fear.
All this stands in sharp contrast to developments in Russian public life, where, between 2022 and 2026, all independent media were destroyed and almost all legal protest activity was brought to an end. The number of “foreign agents” increased from 111 to more than 1,250 while the number of cases involving alleged treason, sabotage or espionage reached 500−700 a year. Prison sentences of ten years or more for donating a thousand rubles ($ 51) to an “extremist” organization, arrests for filming Ukrainian strikes on infrastructure or the burial sites of “special military operation heroes” have become routine. The authorities are far more willing to intensify political pressure on citizens than to dismantle the market economy—even though their actions often harm it more than any sanctions, while officials readily discuss their desire to restore a planned economic system.
So, what might the Kremlin do after the State Duma elections? Let us begin with a caveat: forecasting beyond a one-year horizon would be unjustified.
Taxes and the budget
Let us start with tax and budget policy, especially since the draft budget will be among the first documents submitted to the new legislature, more precisely, passed to it for information. It is highly likely that the ministry headed by Anton Siluanov will once again seek to produce a more balanced financial plan for 2027, with revenues approximately 10 per cent above the most probable result for this year—around 39.5 trillion rubles. Expenditure will probably be capped at this year’s final level, approximately 46 trillion rubles. The planned deficit would then amount to between 2.5 and 3.5 trillion rubles.
The deficit may again exceed the target next year, but preparing such a budget would not require tax increases in 2027. The main taxes—VAT, corporate income tax and personal income tax—were already raised in 2025−2026, making a pause logical. Even the planned tightening of taxation for small and medium-sized businesses, which the authorities had intended to continue in 2027, has been put on hold, as has a proposed change to the tax regime for the self-employed.
The authorities are likely to return to tax policy in the autumn of next year if there is still no ceasefire with Ukraine. Two circumstances support this assumption. First, oil prices are high and are unlikely to fall substantially before the end of the year, helping to fill the budget when the new budget is being adopted. Second, the authorities are moving towards the regular issuance of “emission-financed” federal loan bonds, purchased by banks with funds obtained through repurchase agreements with the Central Bank. In addition, the sharp increase in VAT receipts suggests that the economy is gradually adjusting to higher taxes, making it unnecessary to accelerate the process artificially. Finally, the effect of devaluation should not be discounted: it will raise oil and gas revenues and increase tax receipts from import transactions in 2027 and thereafter.
This does not mean, however, that Russian businesses will find life easier. The tax authorities already have a new priority: the so-called “whitening of the economy”, a concept Vladimir Putin has been discussing since late 2025. The unified tax account has been in operation since 2023. Companies displaying “suspicious” characteristics—such as a shared warehouse or the same transport provider being used by formally unrelated legal entities—are already beginning to have their accounts blocked or to be denied banking services.
A system for confirming the expected arrival of imported goods has just been introduced. It currently applies to road transport but is intended eventually to cover all forms of importation. VAT is also being introduced on cross-border e-commerce: 7 per cent from 2027, rising to 22 per cent by 2029.
All of this, however, pales beside the year’s principal trend: the campaign against so-called “paper VAT” and the associated practice of cashing out funds. Beginning with the well-known Osin case, the campaign has acquired the highest-level political backing. During the first half of the year, roughly 5,000 intermediary firms were closed at the initiative of the Federal Tax Service. These companies charged 2−3 per cent of the transaction value to issue fictitious invoices, waybills and completion certificates, enabling businesses unlawfully to claim VAT deductions and reduce their profit-tax liabilities.
In August and September, such companies were liquidated on an industrial scale—20,000 or more per week. This is opening the way for mass tax audits. They typically begin six to twelve months after an intermediary has been closed and fictitious transactions identified. Additional VAT assessments under Article 54.1 of the Tax Code, which concerns unjustified tax benefits, together with fines and penalties, could bring the budget at least 2 trillion rubles in arrears alone. If intermediary schemes are effectively dismantled, they could generate an additional 1 trillion rubles or more annually from 2027 onwards. Since 1 September 2026, comprehensive monitoring of transfers made through payment cards has also been introduced. In parallel, the authorities are pursuing the “whitening” of wages, particularly in the services sector.
Nationalization and regional austerity
There is little reason to doubt that the authorities will continue to thin the ranks of disloyal owners. This is not about “dekulakising” political émigrés, but about acquiring control over genuinely valuable assets. Property nationalized since 2022 is generally estimated at 7.6 trillion rubles, while the combined wealth of Russia’s billionaires is approaching $ 700 billion, or 62 trillion rubles.
A moderate reduction in their number—one that, as the reaction to date suggests, does not even provoke outrage from the Russian Union of Industrialists and Entrepreneurs, let alone from medium-sized businesses or ordinary Russians—will remain a source of budget revenue. The same applies to the campaign against official corruption, which intensified markedly in 2025−2026 precisely because the authorities discovered the financial potential of confiscation. In some cases, the value of assets confiscated from judges and regional deputies amounted to tens of billions of rubles.
The Kremlin will also continue gradually to reduce support for the regions and social program. The 2026 budget cut funding for 18 of 51 state programs by more than 207 billion rubles. The affected programs included healthcare development, which lost 31.7 billion rubles, and rural development, which lost 34.3 billion. This process will intensify. Regional budget deficits, which have become considerably more visible this year, may be covered through bank loans rather than budget loans, producing further savings for the federal government.
The central question, however, is what hopes will guide the Kremlin in pursuing this policy.
The geopolitical bet
Putin may not be certain that the Russian army will ultimately break the resistance of Ukraine’s armed forces, but he appears to be relying on two assumptions: that Russia can inflict unacceptable civilian damage on Ukraine, and that the current pressure on Kyiv can be sustained until its Western allies begin to reduce their financial support.
In recent months, we have seen a substantial increase in the Russian army’s ability to strike Ukrainian cities. The use of jet-powered drones alone has increased almost eightfold, while experts have described Moscow’s ballistic-missile production capacity as approaching excess capacity.
There are also signs of growing disagreement within the European Union over sanctions policy, as well as mounting anxiety over the success of right-wing forces in European politics. A potential victory for Marine Le Pen in France’s presidential election in May 2027 is likely to appear to the Russian leadership as a geopolitical turning point comparable to Donald Trump’s re-election, which was long regarded in Moscow as a potentially transformative event.
We cannot know whether Ukraine’s armed forces will lose combat capacity next year—at present, they are still inflicting significant local defeats on the Russian army—or whether EU policy will shift noticeably in Russia’s favor. But Moscow treats this as its preferred scenario and therefore as a plausible one. It is in the hope of another “geopolitical stroke of luck” that Putin will shape his military strategy. The task of the economic bloc will be to preserve stability long enough to reach that desired future.
For this reason, the remainder of the current year and most of the next are unlikely to mark an era of radical change in the Kremlin’s economic policy.
