The World Economy Is In Chaos, So Why Is Russia Humming Along?

-Analysis-

WARSAW — The world economy now appears to be hanging on the verge of a major crisis. Between Donald Trump‘s policy of raising tariffs and “cutting off” the U.S. from the outside world, to protectionist retaliation from China, many world economies are in danger of coming to a standstill or plunging into the unknown.

Yet during Trump’s memorable April 2 “Liberation Day,” announcement of tariffs against more than 180 countries, Russia was not among the “punished” ones. This shakeup of the world economy seems to be working on Moscow’s favor. 

Still, the situation is more complex than it may seem. 

On the one hand, Trump is showing sympathy to Vladimir Putin and is putting pressure on Ukraine, seeking to conclude peace on the Kremlin‘s terms. And this has caused a sudden explosion of enthusiasm in Russia, including in the economic sphere. 

On the other hand, the White House‘s course could lead to a serious recession in the United States and around the world. This is already reducing the prices of raw materials, Russia’s main export and a source of budget revenue. So the impact of the new U.S. course turns out to be multifaceted, with far-reaching impacts. 

But this is still an incomplete and simplified picture. 

Clear Signal To Putin

The Russian economy entered the year 2025 on quite stable ground. Economists and government officials did not expect either a major acceleration of economic growth or serious problems. Expenditures on the war were growing, but the tax system could guarantee the Kremlin resources to continue military operations with the same intensity. The changes brought about by Trump’s policies have not so much harmed the Russian economy as thrown it into a state of nervous uncertainty. 

Yet what has turned into the most important factor influencing the economic situation turned out to be the change in the U.S. foreign policy line towards Ukraine.

Russian stock exchanges rose sharply immediately after Trump’s telephone conversation with Putin on February 12. The ruble began to strengthen, and at such a pace that for the next two months it turned out to be the fastest-growing currency in the world. Powerful Russian businessmen began to plan to increase investments with the money they had been accumulating in recent years, when the country achieved record high incomes. The level of deposits in bank savings accounts increased as well, and foreign buyers returned to the market for state securities. Inflation fears began to subside. Business optimism indices went up. 

This process is still ongoing, even if today there is as little faith as ever in imminent peace. 

It can be said that Trump can both lead the Russian economy out of crisis and sink it solely by changing his geopolitical stance. Russian business has sent a clear signal to the government that the economy wants peace. And now the most important question is whether it will be achieved. 

Oil prices aren’t everything 

At the same time, the U.S. trade war, right now primarily focused on China, has led to changes in the market conditions, which is currently attracting attention, but should not be considered an unequivocally negative phenomenon. 

Yes, there is fear in the Russian government offices caused by falling oil prices. The country’s budget was based on the average annual price of $69.7 per barrel of oil, and on April 9, for example, it fell below $50. This could bring the budget deficit to 4-5 trillion rubles at a time when the reserves of the National Welfare Fund (the “piggy bank” in which Putin has been ordering funds to be accumulated for a rainy day) that can be cashed are worth no more than 3.4 trillion rubles ($41.3 billion). 

Losing $10 billion on oil and gaining four times more on gold is not so bad

The Ministry of Economy has just changed the baseline scenario for the current year, admitting that exports could be 8% lower than last year (in my opinion, it could be worse). Revenues from exports of energy resources in the first quarter of 2025 were $10 billion lower than a year earlier. 

At the same time, it must be remembered that not all the effects of Trump’s economic policy are bad for Russia. Here’s an example. In the last two months alone, gold, its main financial asset, has gone up in price by 22.4%. And since its share in the Bank of Russia’s reserves is over a third, over $44 billion has been added to the treasury since the beginning of the year.

Losing $10 billion on oil and gaining four times more on gold is not so bad in the current situation, especially since even the most pessimistic forecasts do not assume that the country may have a negative foreign trade balance in the coming years. 

Therefore, I would not say that the prospects look bad. They are just as vague as possible.  

So to be clear, the Russian economy is not currently in crisis.

The dynamics of the budget deficit, for example, repeat the trends of previous years. If in January-February it reached a crazy level of 3.84 trillion rubles, then in the entire first quarter it fell to 2.17 trillion. Prices in March rose by 0.65%, which is 2.5 times less than in November. Prices for most non-food goods have stabilized, and imported electronics have fallen by 8-15%, primarily due to the depreciation of the dollar and difficulties in obtaining loans. 

In the blink of an eye

However, everything can change in the blink of an eye. This can happen, for example, in the event of a global recession, which will result in a 20% drop in oil prices. Or, if a ceasefire is achieved in Ukraine and military spending decreases by up to 25%. No one knows today what the results of the Trump course in geopolitics will be. And it is precisely this uncertainty that is stifling the Russian economy. 

I would say that everything depends on the prospect of war in Ukraine and on the tariff confrontation between the U.S. and China. The two main factors are the price of oil and budget spending. 

If oil prices remain at their current level or continue to fall due to the global recession, the budget will not receive trillions of rubles in revenue and huge loans will be needed to continue the war. However, if the war in Ukraine ends, this amount can be saved by reducing military spending. At the same time, investments and domestic demand will grow. 

The only significant threat to the Russian economy is therefore the simultaneous continuation of both Putin’s “hot” and Trump’s “cold” wars. How realistic this is, we will find out in the coming weeks.