Russia’s regions can no longer count on federal support amid sanctions, an industrial downturn and the war against Ukraine.
A combination of sanctions, the loss of external markets and a worsening global environment has exposed the structural weakness of Russia’s regional budgets, which are no longer able to meet even basic obligations, Ukraine’s Foreign Intelligence Service said.
The worst strain is in traditionally depressed areas - Kalmykia, Mari El and Pskov region. Their survival model rested for decades on federal transfers, but those flows are shrinking and access to credit is rapidly narrowing.
Industrial regions are adding to the pressure. Coal-mining territories, particularly Kemerovo region, are set to become some of the biggest drags on Russia’s budget this year. Falling global coal prices, sanctions and the loss of the European market are driving a projected 4.1% drop in gross regional product (GRP) and a budget shortfall of about 44 billion rubles. Khakassia faces a similar trap: unprofitable mines combined with dependence on nonferrous metal prices and limited hydropower capacity, where state-owned RusHydro is squeezed between tariff regulation and lobbying by metallurgical companies.
Metallurgical regions are also losing their footing. In Irkutsk region, falling aluminum and coal prices point to a projected budget deficit of 40 billion rubles, while the prolonged crisis at Rusal plants leaves local authorities little room for optimism. In Vologda region, tensions between Governor Georgy Filimonov and Severstal owner Alexei Mordashov have further aggravated the situation - to the point that economists have effectively stopped updating GRP forecasts since 2024.
Regions with “specific risks” are adding separate pressure to the federal budget. Astrakhan region expects a 2.1% GRP decline, with negative dynamics likely through 2028 due to depleted oil and gas fields and a lack of resources to launch new ones.
“Kursk and Belgorod regions, which previously benefited from cross-border trade with Ukraine, have turned into front-line territories fully dependent on subsidies,” the agency added.
Ukraine’s Foreign Intelligence Service noted that Russia’s regions can no longer rely on the center. The resource-constrained federal budget is focused on the war against Ukraine. Domestic demand is not growing, and households and investors have no more money. For Russia’s regions, that means one thing - survival without support and without prospects.
Earlier, reports said the likelihood of recession in Russia’s economy is rising rapidly, according to the pro-Kremlin think tank TsMAKP. A signal of high recession risk appeared in June statistics and has strengthened each month since.
