Russian regions enter 2026 with a deepening financial crisis
Russian regions are starting 2026 amid a deepening financial crisis that is increasingly exposing the structural weakness of their budgets. The combined pressure of sanctions, the loss of foreign markets and the deterioration of the global economic environment have led to a situation where even meeting basic social obligations is becoming problematic. This is reported by the Foreign Intelligence Service of Ukraine.
The most vulnerable are traditionally subsidised subjects, in particular Kalmykia, Mari El and Pskov region. For decades, they have relied on federal transfers for their survival, but these revenues are now declining and access to credit is narrowing. Chronic debt and a lack of investor interest create the risk of a full-blown budget crisis with no obvious way out.
Problems are rapidly spreading to industrial regions. Coal mining areas, including the Kemerovo region, could become one of the main sources of budget losses in 2026. The fall in global coal prices, sanctions pressure and the eventual loss of the European market are leading to a projected 4.1 per cent decline in gross regional product and a budget deficit of around 44 billion rubles. In Khakassia, the situation is exacerbated by a combination of unprofitable mines, dependence on non-ferrous metal prices and limited hydropower capacity.
Metallurgical regions are also losing financial stability. In the Irkutsk Region, falling aluminium and coal prices are creating a projected budget deficit of around RUB 40 billion, while the protracted crisis at Rusal's enterprises leaves the local authorities with no room for manoeuvre. In the Vologda Oblast, the economic situation is exacerbated by the conflict between the regional authorities and the owner of Severstal, which has effectively blocked the update of economic growth forecasts.
Additional pressure is created by regions with specific risks. The Astrakhan region expects a 2.1 per cent decline in gross regional product, with negative dynamics continuing until at least 2028 due to the depletion of oil and gas fields. Kursk and Belgorod regions, which used to benefit from cross-border trade with Ukraine, have become frontline territories and are completely dependent on subsidies.
The general trend for the regions of Russia is becoming increasingly tougher. The federal centre, which has limited resources, is concentrating its funding on the war against Ukraine, while domestic demand and investment activity are not growing. In such circumstances, the regions are left face to face with budgetary problems, without real support and without clear economic prospects.
