For now, Vladimir Putin has staved off additional U.S. sanctions, as he bought more time to prosecute his war on Ukraine by meeting with President Donald Trump in Alaska last week, sparking a flurry of diplomatic activity as European allies try to forge security guarantees for Kyiv.

But time may not be Russia’s ally.

While Trump didn’t follow through on his threats to penalize Moscow for failing to reach a ceasefire agreement, there’s also been no sign of talks to remove existing sanctions and revive economic cooperation.

“So it’s too early to adopt a more optimistic view on the Russian economy, which we think is teetering on the brink of a recession,” Tatiana Orlova, lead economist for emerging markets at Oxford Economics, said in a note on Monday.

Since the Alaska meeting produced nothing that would move the needle, she reaffirmed her forecast for Russian GDP growth to slow sharply this year to just 1.2% from 4.3% in 2024.

And after that, the economy will stagnate even further, coming to a near standstill with growth dropping below 1% in 2026 and 2027.

“We also think there’s a significant probability of Russia’s economy slipping into a technical recession in the coming quarters,” Orlova added.

Similar alarms have been piling up this year. In June, Economy Minister Maxim Reshetnikov warned that Russia was “on the brink” of a recession. Russian banks have also raised red flags on a potential debt crisis as high interest rates weigh on borrowers’ ability to service loans.

Last month, the central bank slashed interest rates by 200 basis points to revive stalling growth, after hiking them to sky-high levels to fight inflation that’s been stoked by Russia’s war on Ukraine.

Harvest season and Russia’s economy

Meanwhile, Russia is having a disastrous harvest despite being an agricultural powerhouse, putting further pressure on the economy and the Kremlin’s finances.

The country’s grain and fertilizer exports haven’t been sanctioned owing to concerns about food shortages and have been a source of economic strength for Russia.

But July saw the lowest grain exports for that month since 2008, according to Peter Frankopan, associate fellow on Russia and Eurasia at the International Institute for Strategic Studies, who attributed it to intensifying climate volatility.

This year, crops have been damaged by unseasonable frost in the spring as well as record heat and drought conditions in the summer, he explained in a recent post. Total grain production is now expected to fall to 130 million metric tons, down 18% from a 2022 peak.

“Russia’s bad 2025 harvest is more than a weather event: It reveals the structural fragility of Russia’s war economy and the growing risks to a system built on fiscal buffers and fossil fuels,” Frankopan wrote.

In fact, Russia’s fiscal buffer is disappearing as cash from energy dwindles. The Kremlin’s oil and gas revenue, which is its main source of funds, tumbled 27% in July from a year ago to 787.3 billion rubles, or about $9.8 billion. 

As war spending soars, the result has been widening budget deficits. Russia has had to tap reserves in its National Wealth Fund, which has shrunk from $135 billion in January 2022 to just $35 billion this past May.

“Russia’s economy is fast approaching a fiscal crunch that will encumber its war effort,” economist and Russia expert Anders Åslund wrote in a Project Syndicate op-ed earlier this month. “Though that may not be enough to compel Putin to seek peace, it does suggest that the walls are closing in on him.”