The Russian economy has endured four years of sanctions since launching its full-scale war in Ukraine, but this endurance is not a sign of strength. One of its two key lifelines, the National Wealth Fund, is now showing serious signs of depletion, in part thanks to the sanctions.
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![Illia_ kabachynskyi]( "Photo of Illia Kabachynskyi")
Two critical pillars sustain the Russian economy: natural resources and the National Wealth Fund (NWF).
Russia’s NWF recorded a historic decline in spring 2025, with its liquid assets reduced to just $35.7 billion. For context: three years earlier, the fund’s value was five times higher. In May 2025 alone, expenditures exceeded $5 billion, with the money used to cover the Russian budget deficit.
The war in Ukraine has become an enormous financial burden for the Kremlin, with official military spending reaching $142 billion. Over the past three years, Russia has suffered more than 1 million killed and wounded. While such losses don’t appear to deter Russian leader Vladimir Putin, the economic pressure is another matter, especially as the system must be kept functioning. Draining the NWF is one of the few practical ways to stop Russia. Sanctions and reduced oil revenues are the most promising means to that end, a point echoed by US President Donald Trump.
What is Russia’s National Wealth Fund?
Russia’s economy is heavily resource-based. Oil and gas account for around 40% of government revenues. These earnings help fund major infrastructure projects and cover budget shortfalls through a dedicated mechanism: the National Wealth Fund.
The fund operates under a specific scheme: when oil prices are high, a portion of the extra revenue is taxed and directed into the NWF. At the time of writing, the fund receives additional tax income from oil sales priced above $60 per barrel. For instance, if Russian oil sells for $75 a barrel, the Kremlin channels the surplus into the fund, which can then be spent or saved for future use.
The fund was worth approximately 13.9 trillion rubles as of December 2021, equivalent to $185 billion and more than 10% of the country’s GDP—a massive sum that could have been invested in domestic development. Instead, it was used to expand the military-industrial complex and fund the war against Ukraine. This is how Russia has built its military budget.
How Russia’s NWF is being drained
Russia initially expected a swift victory in Ukraine—a blitzkrieg, Kyiv in three days. That plan failed, and the war has now dragged on for over 1,000 days. In such prolonged conflict, economic endurance becomes a deciding factor.
Ukraine receives financial support from partners in Europe, the US, Canada, and Japan. Russia relies on oil, gas, and the NWF to prevent an economic collapse. High energy prices helped Moscow maintain budget stability despite nearly two dozen sanctions packages. However, this came at a steep cost, quietly draining the fund’s reserves.
By February 2022, Moscow held over 13 trillion rubles (about $180 billion) in the NWF. The liquid portion—easily converted into cash—stood at 8.9 trillion rubles ($113 billion) as of January 2022.
In the following years, to offset its budget deficit, Russia sold liquid assets such as gold and foreign currency, steadily depleting the fund. By late February 2025, only 3.4 trillion rubles (over $40 billion) in liquid assets remained—a 2.5-fold drop. By the end of May 2025, the figure had fallen further to 2.8 trillion rubles, or just over $35 billion. Since Russia launched its full-scale invasion, the NWF has shrunk by 68%.
Why sanctions against Russia are working
Falling global oil prices and tighter sanctions directly undermine Russia’s ability to refill its financial reserves. Without fresh inflows, the fund loses its ability to cover budget deficits. This is not merely about aiding Ukraine—it’s about limiting Russia’s capacity to finance aggression anywhere.
Russia’s 2025 budget is based on oil priced at $69 per barrel, but for much of the first half of the year, Urals crude traded below that level, even before accounting for special discounts offered to major buyers. Compounding this, Putin keeps the ruble artificially strong for political optics, further reducing Russia’s dollar-denominated income.
Russia is spending far more than it earns and must dip into the NWF to plug the gaps. This gives the West a clear strategic advantage: every dollar shaved from Russia’s oil income is a dollar less available for weapons, disinformation campaigns, or influence operations abroad. The shrinking NWF clearly demonstrates that sanctions against Russia are working.
Policy proposals—like lowering the oil price cap to $45 per barrel or enforcing stricter US-backed restrictions on Russian oil purchases are tools to economically cripple Russia and end the war faster.
Oil is Putin’s last major asset. Sanctions are the means to neutralize it, without deploying troops, without firing a shot. There’s no need to break the whole deck if you can take out the ace.
