Hello! This week we cover the exiled Russians being locked out of their bank accounts, and why it could fuel hostility towards the West among the liberal, anti-war, anti-Kremlin crowd.

Anti-Putin Russians in Europe caught up by latest sanctions

Since the EU introduced its latest packet of sanctions on Moscow last month, Russians living in the bloc have faced a new problem. Revolut, one of the most popular online banks, has started freezing the accounts of Russians that don’t have full permanent residence permits. Thousands of people have been affected, including those who have been waiting months for residence decisions and others who cannot get full status due to local immigration policies. The cases are red meat to Russian populists at home, who feast on the grievances of the mostly liberal, anti-Kremlin Russians who fled the motherland.

Hello! Welcome to your weekly guide to the Russian economy, written by Alexandra Prokopenko and Alexander Kolyandr and brought to you by The Bell. This week we look at how Russia is abusing the West’s financial infrastructure and compliance checks to crack down on Kremlin opponents who have fled the country.

Russia weaponizes global compliance rules to reach exiled dissidents

Almost four years into its war on Ukraine, the Russian authorities continue to ramp up repression against critics of the invasion and the Kremlin. Moscow has started routinely adding dissidents to its “terrorists and extremists” blacklist, maintained by the Rosfinmonitoring financial intelligence watchdog. Since the agency works with its counterparts around the world, adding opponents to the list is one of the few ways Russia can hit dissidents that have fled to the West, ensuring they face big problems with their banks and in accessing other financial services.

As we predicted, the Central Bank is not eager to slash interest rates. On Friday, it reduced its base rate by just 50 basis points to 16.5%. This sent a clear signal that its monetary policy will continue to be very cautious, while leaving it some room for maneuver at the final rate-setting meeting of the year in December.

• In its statement, the Bank said that the economy is still returning towards a balanced growth trajectory, but lending growth accelerated in recent months and inflation expectations remain high. The bank pledged to maintain a tight policy “which is essential to return inflation to target levels.”
• In its updated forecast, the Central Bank said that the average base rate in 2026 would be 13-15%, compared with 12-13% in its previous forecast. This means strict monetary policy will have to remain in place for longer.
• The regulator stated that it sees inflationary risks in the ongoing overheating of the labor market, the impact of VAT rises and also from deteriorating foreign trade conditions. It also blamed, albeit softly, its higher inflation forecast on Moscow’s current budget plans, which it feels were less anti-inflationary than previously expected. The key factors in any future fall in inflation will be an economic slowdown and reduced demand.
• On growth, it still sees signs that the economy is continuing to slow. Though it showed positive growth in Q3, the revised 2025 forecast sees the possibility of a 0.5% fall in the final three months of the year, or, at best, an increase of no more than 0.5% on an annualized basis. The inflation forecast for the year end is between 6.5-7%, while the prediction for 2026 was also nudged higher, to 4-5%. Russia officially targets an inflation rate of 4%.

Why the world should care

Budget spending, domestic economic problems, Western sanctions and weak oil prices are all creating an economic slowdown amid relatively high inflation. Interest rates will remain higher for longer than expected. Stagflation is becoming reality.

Hello! This week we dig into the myth Russia tells itself about Western sanctions — that they don’t work — highlighting where Moscow has got it wrong.

Russia says it isn’t bothered by sanctions. The data says otherwise

“Sanctions aren’t working.” That’s been one of the key narratives that Russia’s authorities have peddled since invading Ukraine. The Kremlin is now trying to convince Donald Trump of the same message as it seeks to normalize relations with the United States. But a recent study by a group of economists has shown that sanctions have had a very real impact on the Russian economy.

Hello! Welcome to your weekly guide to the Russian economy, written by Alexander Kolyandr and Alexandra Prokopenko and brought to you by The Bell. This week we analyze the possible impact of Donald Trump’s sanctions on Russian oil majors, Rosneft and Lukoil. We also cover the central bank’s cautious rate-cut and stagflationary forecasts.

For the first time since his return to the White House, U.S. President Donald Trump imposed new sanctions on Russia. In a serious move that significantly increases the cost of Russia’s refusal to end the war, Washington hit Rosneft and Lukoil with sanctions — a move that even his predecessor Joe Biden had refrained from. However, it’s still unlikely to force Vladimir Putin to the negotiating table right away. How much Putin can be swayed will likely be determined by how effectively the sanctions are enforced, how quickly Russia can find work-arounds, and whether Washington can intimidate Moscow’s allies enough to distance themselves from the Kremlin.

Why did Trump U-turn?

It emerged in Transatlantic talks on Tuesday that all may not be rosy in the Trump-Putin relationship, following the pair’s surprise announcement of an upcoming summit in Budapest. A day later, Trump publicly canceled it, only for the US Treasury to follow by adding Rosneft, Lukoil, and 34 of their subsidiaries to its sanctions list.

Europe and the US are still moving in different directions over sanctions. This week Britain greatly expanded its sanctions list to include major Russian oil companies. But the practical effect may be limited unless other countries join in. Meanwhile, after speaking with Putin over the phone, President Donald Trump said that tightening sanctions right now would be ill-advised.

• Britain on Wednesday expanded its Russia sanctions, hitting the Mir national payment system along with several manufacturers and distributors of microelectronics from China, Singapore and Turkey. In addition, sanctions were imposed against the so-called shadow fleet and several small banks. But the biggest development was the imposition of measures on Rosneft and Lukoil. While Rosneft was previously on the EU sanctions list, Lukoil had not previously featured on either a European or American blacklist. The EU is currently discussing its own sanctions against Lukoil.
• However, Lukoil’s most significant overseas projects will not be affected. London permitted the company’s operations with the Caspian Pipeline Consortium, with Tengizchevroil at the Karachaganak field in Kazakhstan and the Shah Deniz field in the Caspian, with the South Caucasus pipeline and its partnership with the Azerbaijan Gas Supply Company. Rosneft has fewer exemptions. Following the EU’s July decision, Britain imposed sanctions on India’s Nayara Energy, in which the Russian company holds an almost 50% stake.
• By themselves, the new British sanctions don’t change very much. According to traders, Russia's oil giants are unlikely to have direct operations with Britain, or use its banks and insurers. Sanctions against Rosneft’s Indian company merely add to the European ban. The restrictions on Lukoil would only be a serious problem if the EU joins, which is uncertain.
• The main thing now is that Trump, who recently promised sanctions against buyers of Russian oil, once again changed his mind after talking with Putin. Speaking to journalists Thursday after what he called a “very productive” call with the Russian leader, Trump said that Washington would not impose new sanctions on Moscow now. “I’m not opposed to anything. I’m just saying that maybe this isn’t the best time,” though he stressed further sanctions “remain a possibility” and “could happen in a week or two.” 

Why the world should care

Sanctions are inherently unpredictable and have become even more so under Trump. He continues to threaten new measures, but so far he has not introduced any serious sanctions on Moscow since his return to the White House. Europe and Britain meanwhile continue to ramp up pressure, but as long as the US remains on the sidelines, the threat to the Russian economy is limited. For now, this means one of the crucial underlying assumptions of Russia’s financial planning—no new major economic restrictions—is still holding.

Hello! This week we cover the surprise announcement of a second summit between Donald Trump and Vladimir Putin, asking why now and what kind of agreement they might reach.

Putin-Trump 2.0: Hungary calling

The saga of the Putin-Trump talks is entering its second cycle. After yet another round of Trump expressing his disappointment with the Russian leader, a series of threats from the White House, and as Washington and Kyiv edged closer together than at any point since Trump returned to power, a surprise summit between the pair was announced. Putin is sticking to his maximalist demands, but it’s still possible that ceasefire talks could, this time, make progress.

Hello! Welcome to your weekly guide to the Russian economy, written by Alexander Kolyandr and Alexandra Prokopenko and brought to you by The Bell. Our focus this week is on how the Central Bank will have to keep higher interest rates in place for longer, raising the prospects of stagflation. We also cover diverging sanctions policies between Europe and the United States.

Russia’s Central Bank—between a rock and a hard place

Next week the Central Bank will make its penultimate interest rate decision of the year. The latest data and rhetoric both suggest that even an anticipated cut of 100 basis points—which would take the key rate to 16%—might not be on the table anymore. The Bank is caught between an ever-more-obvious structural slowdown in the economy (which requires lower rates to stimulate borrowing and demand) and stubbornly high inflation, which makes cutting rates difficult. An extra element this time around is rising fuel costs due to Ukrainian strikes on refineries.

Russia bucks global trend of stronger forecasts

Russia’s high borrowing costs—imposed to fight still-high inflation (running at 7.98% in annual terms in September, or 0.34% over the month)—is one of the main reasons for the economic slowdown. The government itself has recognized how close Russia is to stagnation, with the Economic Development Ministry this month cutting its GDP growth expectations to 1% this year (down from 2.5%) and 1.3% next year (down from 2.4%) We already explained our doubts about the reliability of even those predictions, which are based on stable oil prices and the absence of significant sanctions. 

The EU has taken another technical step towards completely phasing out Russian oil and gas by 2028, with EU ambassadors formally submitting the proposal to member states for consideration, Reuters reported. The details should be resolved at a ministerial meeting before the Oct. 20 vote.

• The big news is that the EU has overcome the so-called “gas dissidents.” Hungary and Slovakia, both dependent on Russian oil, objected to the ban. However, the proposal requires only a qualified majority of EU members, so their position has no impact.
• Technical details must be agreed by Oct. 20. One question is how the EU can verify that gas, especially LNG, is not of Russian origin. The proposal to do that is a double-guarantee mechanism: preliminary approval of the shipment, and then customs examination on arrival in port. France and Italy are proposing one or the other, until the system is up and running.
• The document will oblige all countries to cease short-term oil and gas imports by June 2026 and end long-term agreements by Jan. 2028. The latter applies specifically to Hungary and Slovakia.
• A decision to end long-term LNG imports by Jan. 2027, taken with one eye on the United States, will be formalized separately.

Why this matters

The decision to accelerate the timeline for ditching Russian gas is significant in its own right. But the switch from getting unanimous approval from the EU’s 27 members to relying instead on a qualified majority — at least 55%, or 15 countries, representing at least 60% of the bloc’s population — is even more important. It was possible to go down this route because the matter was classified as a trade issue, not a foreign policy one. That means Hungary and Slovakia cannot exercise their veto, as they have repeatedly done in votes on sanctions against Russia (which are regarded as a foreign policy matter).

The EU leadership and largest countries have long argued for changes in the voting process over sanctions. Commission President Ursula von der Leyen advocated most recently for change in her keynote speech in September. To applause from some in the Strasbourg audience, she called for breaking the “shackles of unanimity” on foreign policy questions.

Officially the EU has a mechanism to switch to using qualified majority voting — the so-called passerelle clauses. However, they have never been invoked since the EU’s treaties were last amended with the Treaty of Lisbon, which came into force in 2009. According to Article 48 (7) of the EU Treaty, changes to the way the bloc takes decisions can be made without formally amending its founding treaties (an arduous and highly political process that Brussels does not want). 

However, it requires unanimous approval in the first place to make the switch. That means any country concerned that switching to qualified majority voting would nullify the power of its veto could simply block that change. Moreover, national parliaments, not just leaders, have six months in which they can veto any change. In short, that means stripping Hungary of its blocking power will be extremely difficult. At the moment, that means it keeps its ability to thwart all political, security and foreign policy decisions taken by the bloc — including almost all sanctions on Russia and Ukraine’s future accession to the EU.

Why the world should care

Russian gas still represents 12% of the EU’s imports. Gas continues to flow through the Turkstream pipeline, and since the invasion of Ukraine, LNG trade has soared. France, Spain, Belgium and the Netherlands are main buyers, including for onward trade to Italy. The EU calculated that in 2024 member states spent more on buying Russian gas than on financial (but not military or humanitarian) aid to Ukraine: some 22 billion euros against 19 billion euros.

Adopting a decision that runs counter to the positions of Hungary and Slovakia shows that the EU is prepared to look for ways to dodge these countries’ tactical vetoes and reduce their ability to block important decisions. This cuts down the chances of a situation developing in which a country votes against extending sanctions at each six-month review, a move that could completely annul them. Officially, this possibility is still on the table, but the EU leadership is demonstrating its willingness to counter it. If Russian politicians are relying on a veto from Hungary, Slovakia or some other country to unfreeze the Central Bank’s assets, such optimism is deeply unfounded.

Hello! This week we look at how a hike in car import fees is becoming one of the government’s most unpopular domestic policies in years, and prompted predictions that decades-old Western cars could soon be lining Russian roads.

Planned hike in cost of foreign cars triggers rare public backlash

Russia is set to increase the tax payable on most vehicles brought into the country. The planned hike in the so-called “recycling fee” has quickly become a much maligned move, with the fees for some models of imported cars set to jump hundreds of times over when the new system comes into force on November 1.

Hello! Welcome to your weekly guide to the Russian economy, written by Alexander Kolyandr and Alexandra Prokopenko and brought to you by The Bell. This week we discuss the government’s tax crackdown on small businesses, its possible effects and what could be motivating it. We also look at the EU accelerating its plans to cut off Russian gas imports.

Amid budget woes, Russia tightens taxes on small firms

In search of additional budget revenues and a general tightening of the screws on tax collection, the Kremlin is taking a hardline approach to small businesses. At the end of September, the government announced plans to make small businesses pay VAT, and it is now starting to consider the removal of another key tax break — the reduced tax rate for the self-employed. Around 13 million Russians currently enjoy that system, allowing microbusinesses to pay 4-6% income tax with exemptions from pension and health insurance contributions.

What’s the current system?

For many years the Russian authorities have sought to promote small businesses, hoping to use them as additional economic support outside of the mammoth oil and gas sector and to nurture prosperity and loyalty among a broader middle class. In a 2012 campaign article, shortly after the mass protests on Moscow’s Bolotnaya Square (an anti-government movement seen as stemming from the urban creative classes), Vladimir Putin powerfully called to boost Russia’s small businesses. He said he wanted to see “an economy where small business represents at least half of the jobs.” Moreover, he added that by 2020 a significant chunk of them should be working in the intellectual and creative sectors, exporting products and services to the global market.

To top up the budget, the government decided not only to hike VAT and taxes on small and medium businesses. For the first time, it is trimming its system of support for the IT industry, one of the few sectors regarded as strategically important and that has long enjoyed a special tax regime.

• Alongside other tax changes, the finance ministry has proposed increasing the tax burden on tech firms in two key ways.
• First, it suggested increasing the insurance premium rate for IT companies from 7.6% to 15%. According to Finance Minister Anton Siluanov, the discount “has fulfilled its purpose.” The industry is highly profitable, and salaries are 2.5 to 3 times higher than the national average. The ministry calculates that this reform would generate about 400 billion rubles ($4.9 billion) over three years.
• In addition, the government plans to cancel the current zero VAT rate on the commercialization of software developed in Russia. The digital ministry assured that this will not have a “significant influence” on company revenues and that other tax breaks and social benefits would remain.
• IT companies, of course, are unhappy. The initiatives were not discussed with market players, said Renat Lashin, executive director of the Domestic Software Association. According to him, the abolition of the zero VAT rate combined with other changes would have a “very negative” impact on the sector.
• Digital Development Minister Maksut Shadayev urged IT companies to “flexibly adapt” to the new circumstances, noting that insurance premiums will still be half those in other sectors. He added that benefits on income tax, mortgages and immunity from the draft for employees will stay in place.

Why the world should care

The IT sector, long viewed as a sacred cow of the Russian economy, is facing its first large-scale revision of tax breaks. For the budget, this means hundreds of billions in additional revenue. For Russian businesses, it’s a signal that even the most sheltered sectors cannot expect to remain untouchable.

Hello! This week we report on how businesses loyal to the Kremlin are winning out as mass internet blackouts become a feature of daily life for millions of Russians.

On again, off again: How the authorities keep their friends online after switching off the internet

With Russia having got used to switching off the internet in a bid to thwart Ukrainian drones, the country is fast setting new records for the precedence of the shutdowns. There are now more internet outages in Russia every month than there were in the entire world last year. To restore at least some online order to life in Russia’s cities, the authorities last month introduced a whitelist — a set of online services that must remain accessible even during mobile internet shutdowns. As The Bell discovered, the list was initially driven by businesses, but soon became a way for the Kremlin to reward loyal internet companies by getting them a coveted spot.

‘Digital detox’

“It feels like we are just living without mobile internet. I no longer expect notifications when I’m outside, I always carry cash and I don’t even look at apps anymore,” a source in one Russian region told The Bell. Over the summer, shutting down mobile internet became so commonplace that it is now hard to believe that any outage used to be seen as a rare emergency. For comparison: in April there were two mobile internet shutdowns in the whole of Russia, in May that leapt to 69 and by August there were 2,129, the Na Svyazi project calculated.

The first official warnings of mobile internet outages for people in Moscow and Central Russia came in the build-up to May 9, with authorities, including the Kremlin, citing the importance of protecting “events in honor of the 80th anniversary of Victory Day” that would see the arrival of “many foreign delegations” to the Russian capital. Experts attributed the shutdowns to increased Ukrainian drone activity, which often use modems equipped with Russian SIM cards to connect to local base stations for their tracking while in flight.

At the time, pro-Kremlin media unanimously dubbed it a “digital detox” and advised people to simply relax and enjoy the holiday without online distraction. Since then, shutdowns have become widespread, even constant in several cities. For instance, in the defense industry hub of Dzerzhinsk and several districts of Nizhny Novgorod, with its million-plus population, mobile internet basically no longer works.

As they became commonplace, the authorities started trying to “correct” the heavy-handedness of blanket blackouts back in September. The shutdowns were not subject to more regulation, nor was the decision-making process any more transparent. Instead, a whitelist of “in-demand” internet services that should remain always online was drawn up.

Hello! Welcome to your weekly guide to the Russian economy, written by Alexander Kolyandr and Alexandra Prokopenko and brought to you by The Bell. This week we continue our analysis of next year’s budget, digging into how economic reality could upset its overly optimistic assumptions.

Russia overlooks sanctions and oil threats in public finance plan

Last week we highlighted how the 2026 budget is the child of a grand compromise between Russia’s generals and accountants. The first demanded no let-up in military spending, but the latter insisted it was paid for by tax hikes on individuals and small businesses, so as not to trigger more inflation. This week we look at what the plan’s underlying forecasts tell us about the immediate future of the Russian economy, its ability to withstand stress and how it could be knocked off course.

As Russia is drafting its budget for the next year, and the Central Bank is trying to balance inflation and growth, we examine the current state of Putinomics and discuss its future.

Join us for a timely discussion as our experts dive into the details of Russia’s 2026 budget and share their diagnosis of the health of the Russian economy going forward.

During the webinar, we discussed the following topics:

• Is the Russian economy already in crisis?
• Would Putin have enough money to continue the war and keep the population fed?
• How bad is the fiscal deficit?

We discussed these and many other timely questions about the state of the Russian economy with our experts:

Alexandra Prokopenko

One of Russia’s leading independent economic analysts. Alexandra worked as an advisor at Russia’s Central Bank and Moscow’s Higher School of Economics. Today, Alexandra works as a researcher at the Carnegie Endowment for International Peace in Berlin. She holds an MA in Sociology from the University of Manchester.

Alexander Kolyandr

A financial analyst, a non-resident senior scholar at the Center for European Policy Analysis (CEPA), a former Vice President of Credit Suisse, and a former reporter at The Wall Street Journal and BBC.

Peter Mironenko

Co-founder of The Bell. Peter has 20 years' editing experience at Russia's largest business dailies – Kommersant and RBC. In 2017, he founded The Bell together with Elizaveta Osetinskaya and Irina Malkova.

Watch the full webinar below: