In annexed Crimea, drivers are limited to five gallons of gas at the pump, and all Russians face higher taxes and less social spending as the war drags on.
By Mary Ilyushina and Francesca Ebel
October 2, 2025
The Washington Post
Ukraine’s new strategy of targeting oil refineries is taking its toll on Russia’s economy, dramatically cutting its refining capacity as the government seeks to balance massive military spending with falling revenue. Citing data from Seala, a Russian energy markets analysis agency, the Russian business daily RBC reported that nearly 40 percent of the country’s refining capacity remains idle, mainly due to repairs after attacks. “Attacks by Ukrainian drones are the main cause and account for up to 70 percent of the shutdowns,” Seala’s Vladimir Nikitin said, noting that scheduled maintenance on some facilities has been pushed back in a scramble to keep refineries running.
Russia’s fuel market is facing a shortfall equal to about 20 percent of monthly gasoline demand — roughly 400,000 tons out of the 2 million consumed — the Kommersant business daily reported, and consumers are starting to feel it. Roughly 1 in 50 gas stations have stopped selling gasoline as nationwide production has dropped by about 10 percent.
Russia, an energy-rich nation known for its exports, is suddenly finding it necessary to import refined products like gasoline. Since July, Russia has increased its gasoline purchases from neighboring ally Belarus by 36 percent compared with last year. In September, gasoline imports jumped by 168 percent compared with the previous months, but volumes are still not sufficient to meet demand.
On Wednesday, Russian Energy Minister Alexander Novak reportedly proposed to further boost purchases from Belarus and eliminate import duties on gasoline from China, South Korea and Singapore. In public remarks, Novak also said the ministry is considering using various chemical elements and additives to boost the supply, which Russian media said could suggest ethanol and monomethyl aniline, a harmful substance that was banned a decade ago.
The government has extended its ban on gasoline and diesel exports until year’s end as supply disruptions have affected at least 10 regions. Crimea, which Russia illegally annexed from Ukraine in 2014, has been hit the hardest, forcing the Russia-installed governor to limit gasoline sales to eight gallons per person in late September and then again to five gallons on Wednesday.
“This can lead to an uncontrollable growth of social tension — you can lull people into a state of clam by saying that we will beat everyone in the war on TV or that the shops are full of products,” Russian economist Vyacheslav Shiryaev said. “But it’s different with gasoline when your car just stops after five stations don’t have fuel.”
Ukrainian President Volodymyr Zelensky said recently that Kyiv plans to increase production of long-range drones to continue hitting Russian energy infrastructure. Most Russian refineries are in the western part of the country, making them vulnerable to attacks. “The most effective sanctions — the ones that work the fastest — are the fires at Russia’s oil refineries, its terminals, oil depots. We have significantly restricted Russia’s oil industry, and this significantly restricts the war,” Zelensky said in September.
Despite bullish rhetoric from the Kremlin and steady — if very slow — advances on the battlefield, the war has taken its toll on the Russian economy. For the first time since Russia’s 2022 invasion, it has slightly reduced its defense spending. Analysts say the cut is less a retreat than a tactical adjustment to stabilize war-battered finances through tax hikes.
The budget document published Monday shows that Russia’s budget deficit in 2025 is set to reach 2.6 percent of GDP instead of the 1.7 percent projected in the spring — the largest shortfall since 2020. The gap is driven primarily by shrinking oil and gas revenue, the result of a stronger ruble and falling energy prices due to sanctions.
The draft budget for 2026 proposed the first nominal reduction in defense spending in the three years of war, with a decrease of around 4 percent. “The budget looks more and more like a compromise between the war camp and economists,” said Alexandra Prokopenko, a former adviser to the Russian central bank and now a fellow at the Carnegie Russia Eurasia Center. “The former got their 8 percent of GDP for defense and security, while the latter got the least inflationary way to pay for it.” Still, she added, when spending on security agencies is included, the reduction is slight and expected to go up again in 2027. “War remains the priority.” In addition to the rising gasoline prices, Russians will be footing the bill for war spending directly and indirectly. The most visible move to plug the budget hole is a hike in sales tax from 20 percent to 22 percent, which the government expects to generate an extra $14 billion annually.
The Finance Ministry is also stripping small businesses of long-standing tax-relief options, pushing many into higher tax brackets. Social spending, which traditionally was higher than defense spending before the 2022 invasion, has been eclipsed as defense and security now absorb roughly 1½ times more than what is spent on medicine, education, culture and sports.
A big share of military spending goes toward hefty salaries for soldiers as well as compensation packages for their families in case of death or serious injury. The Kremlin has maintained its manpower on the front line by dangling extraordinary sums: In Moscow, a sign-up bonus can reach about $28,000, followed by a monthly salary starting at $3,200 — plus bonuses for days spent on active front lines and captured Ukrainian equipment.
Pay varies by region, but even the lower tiers often exceed several times the local average wage, turning fighting in Ukraine into one of the few reliable paths to sudden prosperity. “It’s important to consider these two situations together, because gasoline is the blood of the economy,” he said of the fuel crisis against the backdrop of an increased budget gap. “I wouldn’t go as far as saying Putin has no money to fight, but he doesn’t have the money to fight the same way he had in 2024 and the beginning of 2025,” Shiryaev said, adding that if Russia moves to buy more expensive gasoline from China or Singapore, it will have to subsidize domestic sales,
dampening the efforts to balance the budget. President Donald Trump recently labeled Russia as a “paper tiger,” saying on social media that “Putin and Russia are in BIG Economic trouble, and this is the time for Ukraine to act.”
Kremlin spokesman Dmitry Peskov retorted that his metaphor was all wrong, that Russia isn’t a tiger: “It’s more associated with a bear, and there is no such thing as a paper bear,” he told a Russian radio station. He denied Russia was in economic trouble but said there were “points of tension” in some sectors because of sanctions imposed on Russia. The truth, according to Prokopenko, is somewhere in the middle. “It is a large, injured predator on a strict diet after budget steroids: he’s strong, but he moves slowly, he saves money and he eats up his taxpayers and businesses,” she said.
Natalia Abbakumova contributed to this report.
Mary Ilyushina, a reporter on the Foreign Desk of The Washington Post, covers Russia and the region. She began her career in independent Russian media before joining CNN’s Moscow bureau as a field producer in 2017. She has been with The Post since 2021. She speaks Russian, English, Ukrainian and Arabic. Education: Lomonosov Moscow State University.
Francesca Ebel is The Washington’s Post’s Russia correspondent. Before joining The Post in 2022, Ebel was the Associated Press’s Tunis correspondent. Ebel joined AP in 2017 as a multimedia journalist based in Moscow. Recently, she covered Russia’s war with Ukraine and was part of the team on the ground in Kyiv when the invasion began. Ebel has also worked as a freelance reporter from Ukraine, Russia and Tunisia, publishing with the Economist and Politico Europe Magazine, among other publications. She speaks Russian, French and Arabic. Education: Cambridge University, BA in Modern and Medieval Languages (Russian, Ukrainian, French)