Russia’s budget deficit has surged. But economists say Moscow won’t drain its war chest any time soon
Men wearing military uniform walk along Red Square in front of St. Basil’s Cathedral in central Moscow on February 13, 2023.
Alexander Nemenov | Afp | Getty Images
The coming months will be critical in figuring out how Russia’s economy is holding up in the face of a new suite of sanctions, and for how long it can continue pouring money into its military assault on Ukraine.
Russia’s budget deficit hit a record 1.8 trillion Russian rubles ($24.4 million) in January, with spending growing by 58% from the previous year while revenues fell by more than a third.
Industrial production and retail sales in December fell to their worst year-on-year contractions since the onset of the Covid-19 pandemic in early 2020, with retail sales dropping by 10.5% year-on-year while industrial production shrank by 4.3%, compared to a 1.8% contraction in November.
Russia has yet to report its GDP growth figures for December, which are expected to be incorporated into full-year 2022 data slated for this Friday.
According to the World Bank, the International Monetary Fund and the OECD, Russian GDP dropped by at least 2.2% in a best-case scenario in 2022 and by up to 3.9%, and is widely expected to contract again in 2023.
However, both the Russian finance ministry and the central bank maintain that all of this is within their models.
Several unique circumstances and accounting technicalities go some way to explaining the scale of the January deficit figure, according to Chris Weafer, CEO of Moscow-based Macro Advisory.
The big drop in tax revenue was mostly accounted for by changes in the tax regime that kicked in at the beginning of January, the finance ministry claimed. Companies previously paid taxes twice per month, but now make one consolidated payment on the 28th of each month.
The finance ministry suggested most of the January tax payments had not yet been accounted for by Jan. 31 and will instead feed into the February and March figures.
Weafer also highlighted a change in the Russian oil tax maneuver that came into force in January and is expected to iron out in the coming months, while the nature of Russian public spending allocation means it is heavily concentrated at the end of the year, widening the fiscal deficit.
Christopher Granville, managing director of global political research at TS Lombard, noted two further factors distorting the most recent deficit figures.
Firstly, this was the first print since the sanctioning states’ embargo on Russian crude imports went into force on Dec. 5.
“Before that date, Europe had been loading up with Urals crude, then straight to zero, so the Russian seaborne export trade had to be re-routed overnight,” Granville told CNBC.
“Obviously a lot of preparations for that re-routing had been made (Russia buying up tankers, getting more access to the ‘shadow’ or ‘dark’ fleet etc), but the transition was bound to be bumpy.”
The actual Urals price dived as a result, averaging just $46.8 per barrel during the period from mid-December to mid-January, according to the Russian finance ministry. This was the tax base for much of January’s oil and gas-related federal budget revenues, which also suffered from the fading of a revenue windfall in the fourth quarter from a hike to the natural gas royalty tax.
The finance ministry also flagged massive advance payments for state procurement in January, which totaled five times those of January 2022.
“Although they don’t say what this is, the answer is perfectly obvious: pre-payment to the military industrial complex for weapons production for the war,” Granville said.
How long can the reserves last?
For the month of January as a whole, the average Urals price edged back up to $50 a barrel, and both Granville and Weafer said it would be important to gauge the impact on Urals price and Russian exports as the full impact of the latest round of sanctions becomes clearer.
Sanctioning countries extended bans to bar vessels from carrying Russian-originated petroleum products from Feb. 5, and the International Energy Agency expects Russian exports to plummet as it struggles to find alternative trading partners.
The export price for Russian crude is seen as a central determinant for how quickly Russia’s National Wealth Fund will be drawn down, most notably its key reserve buffer of 310 billion Chinese yuan ($45.5 billion), as of Jan. 1.
Russia has ramped up its sales of Chinese yuan as energy revenues have declined, and plans to sell a further 160.2 billion rubles’ worth of foreign currency between Feb. 7 and Mar. 6, almost three times its FX sales from the previous month.
However, Russia still has plenty in the tank, and Granville said the Kremlin would stop depleting its yuan reserves well before they were fully exhausted, instead resorting to other expedients.
“A flavour of this is the idea floated by MinFin to benchmark oil taxation on Brent rather than Urals (i.e. a material hike in the tax burden on the Russian oil industry, which would then be expected to offset the blow by investing in logistics to narrow the deficit to Brent) or the proposal from First Deputy Prime Minister Andrey Belousov that major companies flush with 2022 profits should make a ‘voluntary contribution’ to the federal budget (mooted scale: Rb200-250bn),” Granville said.
Several reports last year suggested Moscow could invest in another wave of yuan and other “friendly” currency reserves if oil and gas revenues allow. Yet given the current fiscal situation, it may be unable to replenish its FX reserves for some time, according to Agathe Demarais, global forecasting director at the Economist Intelligence Unit.
“Statistics are state secrets these days in Russia especially regarding the reserves of the sovereign wealth funds — it’s very, very hard to know when this is going to happen, but everything that we’re seeing from the fiscal stance is that things are not going very well, and so it is clear that Russia must draw down from its reserves,” she told CNBC.
“Also, it has plans to issue debt, but this can only be done domestically so it’s like a closed circuit — Russian banks buying debt from the Russian state, etcetera etcetera. That’s not exactly the most efficient way to finance itself, and obviously if something falls down then the whole system falls down.”
Early rounds of sanctions following the invasion of Ukraine set out to ostracize Russia from the global financial system and freeze assets held in Western currencies, while barring investment into the country.
Sanctions not about ‘collapse’ of Russian economy
The unique makeup of the Russian economy — in particular the substantial portion of GDP that is generated by state-owned enterprises — is a key reason why Russian domestic life and the war effort appear, at least at face value, to be relatively unaffected by sanctions, according to Weafer.
“What that means is that, in times of difficulty, the state is able to put money into the state sectors, create stability and subsidies and keep those industries and services going,” he said.
“That provides a stabilizing factor for the economy, but equally, of course, in good times or in recovery times, that acts as an anchor.”
In the private sector, Weafer noted, there is far greater volatility, as evidenced by a recent plunge in activity in the Russian auto manufacturing sector.
However, he suggested that the government’s ability to subsidize key industries in the state sector has kept unemployment low, while parallel trading markets through countries such as India and Turkey have meant the lifestyles of Russian citizens have not been substantially impacted as yet.
“I think it’s increasingly dependent on how much money the government has to spend. If it has enough money to spend providing social supports and key industry supports, that situation can last for a very, very long time,” Weafer said.
“On the other hand, if the budget comes under strain and we know that the government can’t borrow money, that they’re going to have to start making cuts and making choices between military expenditure, key industry supports, social supports, and that’s what situation may change, but right now, they have enough money for the military, for key industry supports, for job subsidies and for social programs.”
As such, he suggested that there is little pressure on the Kremlin from the domestic economy or the population to change course in Ukraine for the time being.
Diminished technology access
Demarais, author of a book on the global impact of U.S. sanctions, reiterated that the most significant long-term damage will come from Russia’s receding access to technology and expertise, in turn causing a gradual attrition of its main economic cash cow — the energy sector.
The aim of the sanctions onslaught, she explained, was not a much-touted “collapse of the Russian economy” or regime change, but the slow and gradual attrition of Russia’s ability to wage war in Ukraine from a financial and technological perspective.
“The technology gap, those sectors of the economy that rely on accessing Western technology in particular, or Western expertise, in many areas are definitely going to degrade and the gap between them and the rest of the world is going to widen,” Weafer said.
The Russian government has begun a program of localization and import substitution alongside companies in so-called friendly countries, with a view to eventually creating a new technological infrastructure over the next several years.
“Even the optimists say that’s probably the end of the decade before that can be done, it’s not a quick fix,” Weafer explained.
“I think even government ministers are saying by the time you put everything in place with training and education, facilities etc., it’s a minimum five-year program and it’s probably more like seven or eight years before you can start to deliver engagement, if you get it right.”
A spokesperson for the Russian finance ministry was not immediately available for comment when contacted by CNBC.
Kandi has become fairly well known in the US for its electric golf carts and work-focused UTVs, but the company has teamed up with Lowe’s and the NFL on something more playful: the Kandi 4P electric golf cart. Sold through Lowe’s with official NFL team liveries, this four-seat neighborhood cruiser is aimed less at the fairway and more at cul-de-sacs, grocery runs, and game-day tailgates. I spent time with a Miami Dolphins–themed 4P in South Florida to see what it can really do.
Kandi 4P NFL-edition golf cart video review
Want to see it in action? Or want to see my family decked out in head-to-toe Miami Dolphins gear?
Check out our family testing video below!
Specs, power, and hardware
Despite the “golf cart” label, the Kandi 4P is built more like a small road-going NEV. Power comes from a 5 kW motor and a big 48V 150 Ah lithium iron phosphate battery (around 7.2 kWh), giving it plenty of grunt for neighborhood speeds of around 20 mph and a lot more range than you’d expect from something this size. In practical terms, it just sips energy; I did multiple days of errands and joyrides before even thinking about plugging it in.
Charging is refreshingly straightforward. The cart uses a J1772 inlet, so you can plug into a normal 120V wall outlet with the included cord or use a typical home EV charger if you already have one. It’s overkill for a golf cart, but in a good way.
Underneath, you’ll find single wishbone suspension in the front, rack-and-pinion steering, and four-wheel hydraulic disc brakes. There’s even a 2-inch receiver tow-hitch rated for 500 pounds of trailer weight and a mounting spot up front if you really want to bolt on a winch.
Features and practicality
Inside, the Kandi 4P feels more like a small EV than a basic cart. There’s a very large touchscreen display with multiple info pages for speed, battery, and system status (and also displays the backup camera). An NFC fob handles “key” duties, and you get proper controls for forward, neutral, and reverse, plus hazards, lighting, and a tilt-adjustable steering column with stalk-mounted turn signals and horn.
The seats are nicely upholstered and genuinely comfortable, with DOT seat belts front and rear, cup holders everywhere, grab bars for passengers, and a built-in Bluetooth speaker for rolling playlists or tailgate anthems. A flip-up windshield can be cracked for a bit of breeze or propped fully open on gas struts, and the hard roof extends enough to keep you fairly dry in the rain. I should know – I had it out driving in multiple rain storms!
Storage is better than you’d expect: a small glove box, a rear trunk, and even a front “frunk.” Between those and the flat floor, we were able to pull off a full grocery run – though we probably should have planned our bag strategy a bit better. We ended up buckling a week’s worth of grocery bags into the back seats, but a tub in the back would make a better storage area for those types of large store runs.
Is it worth it?
At $9,999 through Lowe’s with whichever NFL team’s colors you prefer, the Kandi 4P isn’t cheap in absolute terms, but it’s very much in the mix for modern, nicely equipped neighborhood carts. High-end golf carts can easily run $14,000–$15,000 these days, and they don’t always bring a 7+ kWh LiFePO4 pack, disc brakes all around, J1772 charging, and all the street-legal bits in one package. Add in official NFL team colors and logos and you’ve basically got a rolling fan-mobile that doubles as a genuine second car replacement for many households.
No, it’s not as safe as a full-size car – there are no airbags or crumple zones here. But it does have real seat belts and lights, and it encourages a more aware, less “invincible” mindset behind the wheel. For people living in communities with 25–30 mph streets, these kinds of carts make a lot of sense: lower cost to buy, dramatically less energy use, no tailpipe emissions, less wear on roads and tires, and far more smiles per mile.
Compared to an e-bike, the Kandi 4P wins on weather protection and passenger capacity. Compared to a second car, it wins on cost, efficiency, and fun. And if you’re the type of person who wants to show up to the grocery store or the stadium in a full team-liveried electric cart, this thing absolutely nails the assignment.
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In a bid to get it above the $1.00/share NASDAQ-required minimum, fledgling EV brand Polestar ($PSNY) is rumored to be considering a 1:30 reverse stock split that could see the per-share price rocket up to nearly $16.
Geely-owned Volvo spinoff Polestar is working as hard as Tesla to prove that stock prices have little or nothing to do with traditional business fundamentals in 2025.
That’s because Polestar posted a 36.5% increase in retail sales and a heady 48.8% increase in revenue (to $2.17 billion) over the year before, Polestar’s share price has plummeted more than 35% in a matter of a few weeks – culminating in an unwelcome nastygram from NASDAQ threatening to delist the company’s shares from the NASDAQ if they didn’t climb back up above $1.
It looks bad
To goose the share price, CarScoops is reporting that Polestar aims to move forward with the reverse stock split before the end of 2025. The expected 1:30 reverse split would boost the PSNY price to an estimated $15.90 per share at current prices, keeping the brand well out of risk of a delisting.
In a reverse stock split, each share of the company is converted into a fraction of a share – so, if a company announces a one for ten reverse stock split (1:10), every ten shares that you own will be converted into a single share. In a 1:30 reverse split like the one rumored here, every thirty shares in Polestar would become a single share.
The reverse split increases share price, but it’s not without risk:
A company may declare a reverse stock split in an effort to increase the trading price of its shares – for example, when it believes the trading price is too low to attract investors to purchase shares, or in an attempt to regain compliance with minimum bid price requirements of an exchange on which its shares trade … investors may lose money as a result of fluctuations in trading prices following reverse stock splits.
That’s especially relevant because, despite the increased sales and revenue, the company is also posting increased losses. Through September, the brand posted a $1.56 billion net loss compared to an $867 million loss in the first nine months of 2024. The company is also getting hit hard by Trump-imposed tariffs in the US and increased downward pressure on pricing coming from aggressive post-tax credit discounts from rival brands like BMW and Kia.
If the split does happen, here’s hoping Polestar can make the most of their borrowed time and they don’t end up like Lordstown Motors or Faraday Future – two brands that have pulled similar reverse stock splits with dubious results.
Electrek’s Take
Product-wise, at least, Polestar’s future appears to be bright. The new 3 crossover is a viable competitor to the industry-leading Tesla Model Y, and the upcoming Polestar 4 and 5 models seem like winners, too. To drive that point home, Polestar is promoting up to $18,000 in lease incentives to lure Tesla buyers into their showrooms.
You can find out more about Polestar’s killer EV deals on the full range of Polestar models, from the 2 to the 4, below, then let us know what you think of the three-pointed star’s latest discount dash in the comments section at the bottom of the page.
SOURCE: CarScoops; images via Polestar.
If you’re considering going solar, it’s always a good idea to get quotes from a few installers. To make sure you find a trusted, reliable solar installer near you that offers competitive pricing, check out EnergySage, a free service that makes it easy for you to go solar. It has hundreds of pre-vetted solar installers competing for your business, ensuring you get high-quality solutions and save 20-30% compared to going it alone. Plus, it’s free to use, and you won’t get sales calls until you select an installer and share your phone number with them.
Your personalized solar quotes are easy to compare online and you’ll get access to unbiased Energy Advisors to help you every step of the way. Get started here.
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With its sleek, uncluttered styling and more than 100 miles of battery-electric range before the extended range electric sedan’s gas engine kicks on, maybe the new Nissan N6 really should have been the next Maxima!
Struggling Japanese carmaker Nissan is dealing with an aging lineup and a brand identity driven more by subprime financing than any suggestion of reliability or sportiness here in the US – but overseas? The brand is rolling out hit after hit, and the latest Nissan N6 plug-in sedan promises exactly the sort of entry-level panache that could change its American fortunes.
“Under our Re:Nissan plan, we are redefining what Nissan delivers today and beyond,” explains Nissan President and CEO Ivan Espinosa. “It’s about strengthening our core, reigniting Nissan’s heartbeat, and creating products that inspire excitement and trust. It is about a sharper, more focused product strategy, a stronger brand, and a renewed commitment to our customers. Integral to this transformation is China — an essential market whose speed, technological leadership, and customer insights are setting the pace for the global auto industry.”
Developed by the Nissan Dongfeng JV in China, the new N6 is more compact that the well-received N7 BEV. In fact, the new Nissan N6, at 190.1″ long, compares nicely to the 192.8″ length of the most recent (and largest-ever) US Maxima, discontinued in 2023. Like the Maxima, the top-shelf version features modern, near-luxe features like soft, leather-like surfaces, LED mood lighting, multi-way adjustable seats, and mimosas or something.
Mimosas or something
The four or five passengers inside the N6 are propelled down the road exclusively by the car’s 208 hp electric motor, which is efficient enough to take you 112 miles on a full charge of its 21.1 kWh LFP battery. Once that charge is depleted, a 1.5L gas engine kicks on as a high-efficiency generator to keep the good times rolling.
Nissan says the N6′ exterior design, “features a V-Motion signature grille and expressive LED lighting at the front and rear.” And says that the car’s crisp lines give it, “a confident, dynamic presence.”
All of which sounds good on its own, but sounds absolutely miraculous when you consider the car’s Chinese price: ¥106,900 – or about $15,000 US for the base Nissan N6 180 Pro, as I type this.
Even with a nearly 100% markup to give it a $29,990 price tag in the US, I think the N6 would be a huge hit in the North American market. And – good news! – thanks to Canada’s apparent willingness to give Chinese carmakers a shot, we might find out if I’m right somewhat sooner than later.
Check out the Nissan N6 image gallery, below, then let us know what you think of the car’s US and Canadian appeal in the comments.
Nissan N6 gallery
SOURCE | IMAGES: Nissan.
If you’re considering going solar, it’s always a good idea to get quotes from a few installers. To make sure you find a trusted, reliable solar installer near you that offers competitive pricing, check out EnergySage, a free service that makes it easy for you to go solar. It has hundreds of pre-vetted solar installers competing for your business, ensuring you get high-quality solutions and save 20-30% compared to going it alone. Plus, it’s free to use, and you won’t get sales calls until you select an installer and share your phone number with them.
Your personalized solar quotes are easy to compare online and you’ll get access to unbiased Energy Advisors to help you every step of the way. Get started here.
FTC: We use income earning auto affiliate links. More.
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