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- Russian President Putin is eyeing the wealthy elite to bankroll the Ukraine war as energy revenues shrink.
- Weak oil prices and Western sanctions are straining Moscow’s wartime finances.
- The Kremlin also plans to revive a budget rule to counter low oil prices.
Russian President Vladimir Putin is eyeing Russia’s wealthy elite to bankroll the war in Ukraine as shrinking energy revenues hit the Kremlin’s finances.
On Thursday, he told leaders of Russia’s parliamentary factions that higher taxes on luxury goods or stock dividends could be “reasonable” during wartime.
“The important thing here is not to overdo it,” Putin added.
Putin said such moves align with wartime precedent abroad.
“In the United States, I don’t want to politicize this, during the Vietnam War and the Korean War, that’s exactly what they did. They raised taxes specifically on people with high incomes,” he said.
During the Vietnam War, Congress passed the Revenue and Expenditure Control Act of 1968, which imposed a temporary 10% income tax surcharge on both individuals and corporations. In the Korean War era, the US reinstated an excess-profits tax, raised excise taxes, and increased both personal and corporate income taxes.
Moscow has increased income tax rates on top earners this year. As Forbes Russia reported in July, Russia’s richest individuals took home record dividends in 2024, making them an obvious target for new levies.
But even with the possibility of higher taxes on the wealthy, Russia’s fiscal troubles run deep.
Russia’s war chest under siege
The Kremlin’s finances are being squeezed from several directions.
In July, the European Union unveiled its 18th sanctions package against Russia since Moscow’s full-scale invasion of Ukraine in February 2022. It replaced the fixed $60-per-barrel cap on Russian oil with a more flexible mechanism, which cuts into Moscow’s take from every exported barrel.
Sanctions are only part of the story. Oil prices have slumped this year on ample supply and weak demand.
As a result, oil and gas sales — the backbone of Russia’s budget — could fall by about 23% in September from a year earlier, according to Reuters calculations published on Thursday.
The energy slump is colliding with a sharp slowdown in growth. In July, Russia’s central bank said it expects the economy to expand just 1% to 2% this year, down from 4.3% in 2024.
The US is looking to tighten the squeeze on Moscow by going after its oil trade.
On Thursday, US President Donald Trump said that targeting Russia’s oil trade is the key to ending the conflict.
“Very simply, if the price of oil comes down, Putin is going to drop out,” Trump said. “He’s going to have no choice. He’s going to drop out of that war.”
Moscow plans countermeasures
To shore up its finances, the Russian government is looking to restore its so-called “budget rule,” a mechanism designed to insulate the economy from volatile commodity markets.
Under the system, oil revenues above a set cut-off price are saved in a fiscal reserve fund, which can be tapped when prices fall below that level.
On Thursday, Finance Minister Anton Siluanov said the revised rule will gradually lower the cut-off from $60 a barrel now to $55 by 2030, a shift he said would make the budget less dependent on energy.
“We are saying that we must make the budget more muscular, one that would respond to any restrictions we face,” Siluanov said.
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