KSE Institute has released the September issue of the Russia Chartbook: “Russia Increases Domestic Borrowing After Two-Month Break; Budget Pressure Persists Despite Higher Oil Prices.” In August, higher oil prices boosted Russia’s export revenues, even as physical supply volumes fell to their lowest level since the start of the full-scale invasion. The federal budget deficit narrowed seasonally but remains significantly above the annual plan; meanwhile, the Ministry of Finance returned to domestic borrowing in September. Signs of a slowdown are becoming increasingly apparent in the real sector. In August, Russia’s oil export revenues rose to $13.9 billion, up from $13.5 billion in July, driven by higher prices. The average export price of Russian oil rose from $59.5 to $68.4 per barrel, while the discount to global prices narrowed from $23.9 to $22.3. At the same time, total exports of oil and petroleum products decreased from 6.8 to 6.5 million barrels per day—the lowest level since the start of the full-scale invasion. Crude oil shipments fell from 5.5 to 5.2 million barrels per day due to temporary shutdowns at the port of Novorossiysk, while petroleum product exports remained at record lows due to strikes on Russian infrastructure and export restrictions. The shadow fleet’s share in seaborne oil exports rose from 57% to 62%. Amid ongoing energy supply disruptions in the Middle East, KSE Institute expects Russia’s export revenue from oil and petroleum products to rise to $193 billion in 2026 and decline to $158 billion in 2027. For the January-August period, the federal budget deficit narrowed to 5.8 trillion rubles, consistent with the seasonal dynamics of previous years. The August surplus is primarily explained by a 23% drop in spending compared to July and a 31% increase in non-oil and gas revenues. However, over the eight-month period, the deficit is still 48% larger than last year and already exceeds the Ministry of Finance’s revised annual plan of 4.8 trillion rubles by 21%. For January-August, oil and gas revenues were 17% lower than in the same period last year, while other revenues grew by 18% and expenditures by 15%. Covering the deficit is becoming increasingly difficult. In January-August, net OFZ bond issuance and the use of National Welfare Fund resources failed to cover budget needs by 3.0 trillion rubles ($39 billion), causing Treasury balances to decrease by 3.7 trillion rubles since December. After a two-month break, the Ministry of Finance returned to the domestic market and, by September 23, raised 1.3 trillion rubles—the highest amount since November 2025. As a result, 75% of the domestic borrowing plan for 2026 has already been fulfilled. Russian banks remain the only major buyers of OFZ bonds, and the Central Bank’s repo operations near auction days exceeded 6 trillion rubles. Domestic federal debt reached 32.6 trillion rubles in August—double the level of February 2022, or about 15% of GDP. As of July, the National Welfare Fund’s liquid assets have shrunk by 60% since the start of 2022, accounting for only 30% of its assets compared to 75% then. Despite additional oil revenues, economic activity remains weak. In the second quarter of 2026, real GDP grew by 1.3% year-on-year after a 0.2% contraction in the first quarter; however, international institutions expect growth of approximately 1% or less in 2026-2027. In August, industrial production contracted by 0.6% year-on-year following 0.4% growth in July, and growth rates in all military sectors tracked by the Russia Chartbook slowed in August, while the production of military vehicles fell by 3.0%. Annual inflation in July stood at 6.3%, still well above the Central Bank’s 4% target, and business loans remain historically expensive. Higher oil prices ease short-term pressure but do not eliminate the structural constraints of the Russian economy.