Bloomberg: Putin's window of opportunity in talks shrinks as budget deficit grows

Dictator Vladimir Putin is facing a shrinking window of opportunity to reach a peace agreement, as Moscow faces a growing budget deficit to finance its war against Ukraine, writes the Bloomberg agency, citing informed sources.

According to them, while January 31 in Miami is scheduled to be negotiations between Putin's special representative Kirill Dmitriev and U.S. officials, Russian officials are concerned that budget spending for 2026 will again exceed the planned figures. They are trying to find new sources of revenue of 1.2 trillion rubles ($16 billion) to balance the key budget figure.

This amount is equivalent to an additional 0.5% of gross domestic product over and above the 1.6% GDP deficit planned for this year, amid lower energy revenues and the impact of unexpected strong ruble exchange rate, the sources said.

Economic difficulties are growing as Russia and the United States negotiate ways to stop a full-scale invasion of Ukraine. However, the Russian dictator has shown no signs of abandoning his maximalist demands for Ukrainian territories in the east, even as officials in Washington and Kyiv express optimism about progress in the talks.

Bloomberg's interlocutors noted that Moscow sees little chance of a breakthrough in the talks. They emphasized that although the military delegations of Ukraine and Russia are clarifying the technical details of a potential ceasefire, however disagreements over the issue of territory require political decisions at the level of the country's leadership.

Media reports indicate that Russia's budget situation may deteriorate further as U.S. sanctions force oil producers to offer discounts on already low prices for this resource. The aggressor country's budget for 2026 envisages oil and gas revenues of 8.9 trillion rubles at an Urals oil price of $59 per barrel and an exchange rate of 92.2 rubles to the dollar.

However, Urals is currently trading at $55, and the exchange rate is about 75 rubles to the dollar. If these figures persist, Moscow's oil and gas revenues will amount to 6.75 trillion rubles, which, according to Bloomberg, will lead to a deficit of almost 2.2 trillion (~$29.3 billion).

The agency acknowledged that Russia's planned budget deficit for this year is low by international standards, but recalled that the Russian government radically revised its 2025 deficit target from 0.5% to 2.6% of GDP – and was forced to sharply cut spending in December to meet that goal. It covered the deficit by issuing a record amount of increasingly expensive debt in the form of Federal Loan Bonds.

• Bloomberg's sources said the EU is considering a proposal to replace its price cap on Russian oil with a ban on maritime services as part of the new sanctions package of the bloc.