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Russia  ·  Chronicles · Klaus Dormann

"Fuel Crisis" Holds Back Growth and Drives Up Inflation in Russia

July 21, 2026  ·  18 min read  ·  By Klaus Dormann  ·  Original (German)
"Fuel Crisis" Holds Back Growth and Drives Up Inflation in Russia

Author: Klaus Dormann

The impact of the severe damage to Russian refineries caused by Ukrainian attacks is now becoming increasingly evident in the trend of Russian economic data. The results of the analyst survey conducted by the Russian Central Bank about two weeks before its next key interest rate decision on July 24 also appear to be heavily influenced by the consequences of the “fuel crisis.” In light of production losses in the oil refining sector, analysts have further lowered their forecasts for Russia’s economic growth this year. On average, they now expect real gross domestic product to grow by only 0.6 percent in 2026.

Higher inflation forecasts and a slower decline in interest rates

Despite the even weaker growth, however, analysts do not anticipate a faster decline in inflation. On the contrary, they expect significantly higher inflation rates at the end of 2026 and as an annual average than in the last survey in June. Analysts no longer expect the annual average increase in consumer prices to fall from 8.7% to 5.4% in 2026, but rather to 6.0%. The main reason for this is likely the sharp rise in fuel prices recorded in June due to a decline in refinery production.

Due to the higher inflation forecasts, analysts estimate that the key interest rate will also be lowered more gradually than previously expected.

Results of the Central Bank survey conducted July 10–14, 2026
(results from the June survey in parentheses)

Bank of Russia: Macroeconomic Survey of the Bank of Russia, July 15, 26

On July 24, the Central Bank is expected to keep the key interest rate at 14.25%

According to Gazeta.ru, President Vladimir Putin stated on July 14 that an interest rate cut was “absolutely necessary and will prove to be a natural process in light of the macroeconomic indicators and economic stability.” At the same time, however, the president emphasized that the Central Bank of Russia would make the decision on its own.

Despite the president’s statement, however, a survey by the business newspaper Vedomosti found that 14 out of 20 participants expected the Central Bank to keep its key interest rate at 14.25 percent next Friday rather than cutting it further. None of the participants anticipated a rate hike.

Analysts at SberCIB Investment Research also do not expect another key interest rate cut on July 24. In a detailed analysis, they assume that the Central Bank will keep the key interest rate unchanged at 14.25% and will send “a neutral signal” regarding its future monetary policy. SberCIB Investment Research cites the acceleration of inflation in Russia, the rapid growth of the money supply, and the renewed escalation of the war in the Middle East as reasons for this.

Analysts at SberCIB Investment Research even expect that rising inflation, the “imbalances” in the domestic fuel market, and uncertainty regarding the state budget could prompt the Central Bank to keep the key interest rate at 14.25% at its September meeting as well. They estimate that the Central Bank will not resume cutting the key interest rate by 25 basis points until the October–December period, as fuel prices are expected to stabilize and credit growth is expected to slow by then.

Sharp Rise in Inflation Due to Higher Fuel Prices in June

According to the Federal State Statistics Service (Rosstat), the year-over-year increase in consumer prices rose to 6.0 percent in June. Compared to June 2025, gasoline prices rose by 19.9 percent and diesel prices by 18.1 percent (RBC Ukraine).

Compared to the previous month of May, the rise in consumer prices accelerated to a total of 0.9 percent in June (see the figure below). Gasoline prices in June were 6.9 percent higher than in May, and diesel prices were 7.1 percent higher (Ukrinform).

Consumer
Price Index: Month-over-Month Change in Percent

Trading Economics: Russia Inflation Rate, Month-over-Month Change in Percent, July 10, 2026

According to the Central Bank, the seasonally adjusted inflation rate, extrapolated to an annual rate, accelerated to 10.6% in June. In May, it had stood at just 2.0% (see the gray bars in the following figure from the Central Bank).

Seasonally Adjusted Change in Consumer Prices;
Year-on-Year Change from the Previous Month in %

Russian Central Bank; Press Release: “What Do the Trends Say?”, Acceleration of Consumer Price Growth Driven by Temporary Factors, July 15, 26

According to SberCIB, the main reason for this surge in inflation in June was the rise in fuel prices. At 0.3 percentage points in June, they accounted for about one-third of the monthly inflation rate of 0.9%.

Deputy Central Bank President Alexey Zabotkin stated on the Central Bank’s Telegram channel on July 14 that the rise in inflation in June was mainly due to “one-time” factors, primarily the increase in fuel prices. The Central Bank will closely monitor the rise in fuel prices and its impact on inflation expectations when setting the key interest rate. He added that a one-time price spike is more likely to be followed by a slowdown rather than a further acceleration in price increases. As an example, he pointed out that following the much sharper rise in inflation in March/April 2022—which was significantly stronger than the current price surge—month-over-month price increases had been close to zero in the six months that followed (Vedomosti, russland.capital, Finanzmarktwelt.de). This is also illustrated by the central bank’s chart above.

The forecast for GDP growth in 2026 fell even further in the analyst survey

After the Russian government lowered its growth forecast for 2026 to just 0.4 percent in mid-May, an increasing number of analysts now also expect similarly weak growth in aggregate economic output. In the central bank’s June survey, the median of their forecasts for this year’s real gross domestic product growth had already fallen from 1.0 to 0.7 percent.

Now, the average growth forecast has fallen slightly further to just 0.6 percent. The range of forecasts for 2026 extends from a mild recession (-0.2%) to a slight acceleration in the annual growth rate to +1.2% (2025: +1.0%). For next year, survey participants expect, on average, the growth in aggregate economic output to accelerate to 1.3% (June forecast: +1.5%).

Real Gross Domestic Product
: Year-over-Year Change in Percent

Bank of Russia: Macroeconomic Survey of the Bank of Russia, July 15, 2026

Inflation is falling much more slowly than previously expected

According to analysts’ estimates, the annual average increase in consumer prices will decline from 8.7% in 2025 to 6.0% in 2026. The expected weaker economic growth is likely to contribute to this. In June, survey participants had expected a notably lower annual average inflation rate of 5.4% for 2026. The current sharp rise in fuel prices has likely contributed to the increase in inflation expectations for 2026.

For December 2026, analysts now expect an inflation rate of 6.2%—nearly one percentage point higher than in the June survey (5.3%).

The central bank’s medium-term forecast, which will be updated at the next policy rate decision, however, still anticipates a decline in the inflation rate to between 4.5% and 5.5% by the end of 2026.

Results of the central bank survey conducted July 10–14, 2026
(results from the June survey in parentheses)

Bank of Russia: Macroeconomic Survey of the Bank of Russia, July 15, 2026

The key interest rate will not fall below 10 percent until 2029

Given the slow decline in the inflation rate, analysts expect the central bank to lower the key interest rate even more gradually than previously anticipated. They project that the key interest rate will still average 14.5 percent in 2026; in June, they had expected a sharper decline to 14.1 percent.

According to analysts’ estimates, the key interest rate will be lowered by only a little over 2 percentage points on average each year over the next two years. As a result, it will still be in the double digits in 2028, at 10.0 percent. From the analysts’ perspective, calls from business associations and banks for a faster reduction in borrowing costs to stimulate production will apparently fall on deaf ears.

Key interest rate in percent per year (annual average)

Bank of Russia: Macroeconomic Survey of the Bank of Russia, July 15, 26

The inflation target will not be reached until 2029

The following chart from the central bank shows how the inflation rate is expected to develop by year-end, according to the analyst survey. According to the survey, consumer prices will still rise by 6.2 percent year-over-year in December 2026. Even by the end of 2027, the inflation target will not yet be reached, with prices expected to rise by 4.6 percent, according to the survey.

Consumer
Price Index: Year-over-year increase in December compared to December of the previous year (in %)

Bank of Russia: Macroeconomic Survey of the Bank of Russia, July 15, 2026

The central bank’s target inflation rate of 4.0 percent will not be reached until the end of 2029, based on the average of survey participants’ estimates (dark red line).

The government budget deficit is declining more slowly than previously expected

Russia’s consolidated government budget deficit more than doubled in 2025, rising to 3.9 percent of gross domestic product. In June, analysts still expected the deficit to be reduced to 2.6 percent of GDP by 2026. Now they anticipate it will decline to only 3.2 percent of GDP this year.

Consolidated budget balance as a percentage of GDP

Bank of Russia: Macroeconomic Survey of the Bank of Russia, July 15, 2026

The oil price used for tax purposes will rise less sharply in 2026 than previously expected

In 2025, the oil price for tax purposes had fallen to an annual average of $56 per barrel. In light of the blockade of the Strait of Hormuz, analysts in the June survey had forecast a 25 percent increase to $70 for 2026. In the new survey, they expect the annual average oil price for tax purposes to rise by only half as much in 2026, to $63.

Oil price for tax purposes,
U.S. dollars per barrel, annual average

Bank of Russia: Macroeconomic Survey of the Bank of Russia, July 15, 26

Recommended reading:

German-Russian Chamber of Foreign Trade:

Podcasts, Videos:

  • “Die Presse” Podcast: Russia—Gas, Sanctions, Oligarchs: “Will Ukrainian Drones Be the Downfall of Putin?” Former Colonel Wolfgang Richter and economist Vasily Astrov (WIIW) discuss with Eduard Steiner how advanced Ukraine’s weapons technology is, the risk of escalation the West is currently sliding into with Russia, and how much of the Russian oil industry has already been destroyed (min. 18–34); 49 min., July 15, 2026
  • Michael Thumann, *Die Zeit* correspondent in Moscow, in conversation with Daniel Retschitzegger on the *Der Standard* podcast: Is the Putin system crumbling? Is opposition to Vladimir Putin growing in Russia? … 03:43 – Economic consequences: Fuel shortages and everyday worries; 06:16 – Inflation: The embellished statistics vs. reality…,  23:15 – Putin’s economic vision: The failure of import substitution; 26:59 – The China shock: Russia’s dependence on the East; 57 min., July 14, 2026
  • Silke Bigalke, the SZ’s Russia correspondent, on the SZ podcast “Auf den Punkt”: Gasoline Crisis in Russia: Frustration, Propaganda—and No Revolution Because Ukraine has been stepping up its attacks on the Russian oil industry—the heart of the Russian economy—for some time now, the Kremlin is now considering purchasing gasoline from abroad. Silke Bigalke explains why the dissatisfaction among Russians will not lead to a revolution despite this, July 3, 2026  

Economic Forecasts:

Current Economic Trends; Overall Economic Situation

Fuel Supply, Energy Sector

Price Trends

Monetary Policy: Preliminary Reports on the Key Interest Rate Decision on July 24

Warnings of a banking crisis and high corporate debt

Fiscal Policy; National Budget and Oil Prices

Political Environment; Nord Stream 2; Miscellaneous

Translated from the German original published on ostwirtschaft.de, July 21, 2026.