For citation:
Bochner, R. (2025). Fiscal Sustainability under Sanction Regimes: Evidence from Russia’s Post-2022 Policy Adjustments. AlterEconomics, 22(4), 624–649. https://doi.org/10.31063/AlterEconomics/2025.22-4.4
Abstract:
This study analyses the fiscal sustainability of the Russian Federation following the 2022 military operations in Ukraine and the imposition of comprehensive international sanctions. Using debt dynamics modelling and fiscal reaction function analysis, we assess the viability of Russia’s government fiscal framework amid military operations from 2022 to 2025. Although the “Fortress Russia” framework established after 2014 initially provided fiscal resilience, our empirical findings show the three key areas where major sustainability concerns are most pronounced. First, hydrocarbon revenues have deteriorated structurally, falling more than 19 percent year over year. Second, defence spending has risen to 40 percent of consolidated government expenditures. Third, sovereign wealth buffers are declining quickly, with liquid assets of the National Wealth Fund expected to be depleted within 12 to 18 months unless policy adjustments are made. Using a modified intertemporal budget constraint framework tailored to commodity-dependent economies under financial isolation, we find that Russia’s primary balance requirements exceed sustainable thresholds by 2.8 to 3.4 percentage points of GDP under baseline oil price scenarios. The analysis provides new insights into fiscal sustainability assessment for sanctioned economies with limited access to external financing, highlighting the critical trade-offs between short-term macroeconomic stabilization and medium-term solvency.
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