Fuel Price Increases and Challenges in the Metallurgical Sector
The Russian government is preparing to raise gasoline and diesel prices to offset losses suffered by oil companies from selling imported fuel. The Ministry of Energy has proposed a retail price increase of 2.1 rubles per liter, which officials from the government and Ministry of Finance believe will provide an additional 12 billion rubles monthly to oil producers. Currently, oil firms face losses estimated between 13 and 18 rubles per liter on imported fuel sales. Projections for 2026 indicate that gasoline prices could climb by 11%, or 7.1 rubles per liter, while diesel prices may rise by 10.7%, equivalent to an 8.2 ruble increase per liter.
Meanwhile, Russia’s metallurgical industry is experiencing a severe financial downturn marked by delayed wage payments and production cuts. Workers at the Chelyabinsk Metallurgical Plant (part of the Mechel group) have reported unpaid salaries for September, prompting a labor inspection at the facility. The SMK-Kulebaki plant has acknowledged wage arrears exceeding 82 million rubles. Domestic demand for metal products declined by approximately 14% in 2025, with production levels falling to their lowest in 15 years. In the first half of 2026, Mechel recorded losses totaling 41.5 billion rubles, and Severstal’s net profit for the first nine months of 2026 dropped by 61%.
Moscow’s Budget Deficit and Inflation Pressures
Moscow is also grappling with significant fiscal shortfalls. The city’s budget plan for 2027-2029 anticipates deficits of 448 billion rubles in 2026 and 651 billion rubles in 2027. Over 90% of Moscow’s revenues come from taxes, but tax income is expected to decrease by 22.5 billion rubles in 2027 to 5,380.5 billion rubles compared to 2026. On a national level, Russia’s federal budget deficit for 2026 is forecast between 6.8 and 7.2 trillion rubles, representing 3 to 3.1% of GDP. Regional budgets outside Moscow face a combined deficit of 26 billion rubles.
The Central Bank of Russia has maintained a key interest rate of 14% due to persistent high inflation, halting a rate-cutting cycle that began in June 2025 and paused in September 2026. Inflation is forecast at 7.6% for 2026, nearly double the 4% target. Price growth accelerated to 8% in Q3 2026, up from 4.8% in Q2. Core inflation reached 6.2% in Q3, while public inflation expectations stood at 13.7% in August 2026.
“The situation remains challenging.”
Elvira Nabiullina, Governor of the Bank of Russia
The annual growth forecast for corporate loan portfolios is between 9% and 12%. In September 2026, cash loans issued amounted to 471.9 billion rubles, a 50% increase compared to September 2025. Taken together, these indicators highlight deepening structural issues within the Russian economy amid the ongoing conflict with Ukraine.
Against the backdrop of economic hardship and rising fuel costs, Russian authorities are seeking ways to support the oil industry, a move that is likely to further drive inflation. The metallurgical sector’s struggles and mounting budget deficits point to worsening financial instability in the country, potentially leading to cuts in social spending and a decline in living standards. These developments underscore the complex economic challenges facing Russia as its leadership strives to maintain economic stability.