Russian economy meltdown as Moscow burns through huge chunk of £74bn fund

Russia has spent nearly half of its sovereign-wealth fund. (Image: Getty)

Russia may not be able to pay its troops for much longer as Moscow hemorrhages money to support its war effort, a bombshell report revealed.

US think tank the Institute for the Study of War (ISW) revealed the Kremlin is facing pressure to increase military salaries, despite not having the funds to do so. Report author Christina Harward explained that volunteers are incentivised by upfront payments that have increased to boost troop numbers. She wrote: "Russia primarily recruits volunteer soldiers through large individual payments and has had to increase payments significantly to sustain recruitment." In 2024, Vladimir Putin doubled the sign up payment to 400,000 rubles (£3,693) and told regional authorities to at least match this figure. However, offering increasing financial incentives is unsustainable as Russia cannot afford to spend this money and it is unlikely to significantly increase troops numbers.

Russia may not be able to pay its troops. (Image: Getty)

Harward added: "The monetary rewards for signing up for military service are significantly higher in many Russian federal subjects than the average Russian salary.

"So ever greater financial incentives in the future are unlikely to dramatically increase recruitment, as a large portion of the pool of Russian citizens who are incentivised by money at levels the Russian state could afford to offer at scale have likely already volunteered to join the military."

This comes after Bloomberg reported that Russia has blown through 57% of its sovereign wealth fund since the onset of the Ukraine war, when it stood at 8.9 trillion rubles (£74 billion).

Last year, the fund's liquidity had decreased by 24%, reducing it from 3.8 trillion (£35 billon) rubles as of January 1, 2025.

Russia appears to be aware of its financial failings, Harward said, as it has begun to cut spending in regards to its military personnel.

She added: "The Kremlin has been trying in recent months to reduce state spending on benefits to military personnel, indicating that the Kremlin is aware that it cannot continue such high spending and must find ways to cut costs."

ISW's Russia team lead George Barros told the New York Post that Russia can only continue like this for 12 to 16 months, by which time it will succumb to "the laws of economics, scarce resources" and a lack of manpower.

Despite this, Moscow's defence spending is more than the entirety of Europe combined, according to the International Institute for Strategic Studies.

The think tank's report found that the country's military expenditure last year was 13.1 trillion rubles (£111 billion), which equated to 6.7% of its GDP and was more than 40% higher than in 2023.