Russia has been at war with Ukraine for more than four years. During that time, it lost almost all of its allies in the world, its economy deteriorated rapidly, and yet Moscow fought and rejected any peace agreement. Why doesn’t a country that loses so much change course? The answer is simpler and scarier than it seems.
To understand Russia you have to start with its wallet. The country essentially lives by selling oil, and with that money it pays for its hospitals, pensions, schools and now its war. The problem is that the war destroyed that source of income.
Before invading Ukraine, Russia sold its oil at almost international prices. Today he sells it at a discount of $14 per barrel because Western countries prohibit purchases under normal conditions. Worse still, the costs of extracting that hydrocarbon have risen so much that about half of Russian oil companies are operating at a loss. Nothing like this had ever happened before.
At the same time, Russia spends almost 40% of its entire national budget on its military, the highest level since the Soviet Cold War. To finance that, the government raised taxes, reduced pensions and social services, and borrowed internally at high interest rates. The financial cushion that Russia built up in years of high oil prices has already been exhausted. There are no emergency reserves available.
The result is an economy that in 2025 grew just 1%, when two years before it grew at 4%. Independent economists describe it as a mountaineer trapped in the “death zone” at high altitude, that is, you are still standing, you are still breathing, but the body destroys itself with each passing hour.
The allies who fell
While the economy deteriorates internally, Russia’s map of allies in the world has emptied at an unprecedented speed.
In Syria, the government of Bashar al-Assad, sustained for years with Russian military support, fell at the end of 2024. In Venezuela, President Nicolás Maduro, who relied on Russian advisors and mercenaries to stay in power, was captured and sent to prison in the United States in a lightning operation in January 2026. In Bolivia, the pro-Moscow government lost power. Iran, which sold drones to Russia to attack Ukraine, is today under military attack from Israel and the United States and is fighting for its own survival. Syria, Venezuela, Bolivia, and Iran represent four chips fallen in less than two years.
Cuba and Nicaragua, which depended on Venezuelan oil and subsidies to function, are now in serious trouble. Russian analysts warn that if Cuba falls under US pressure, it will be definitive proof to the rest of the world that aligning with Russia is no protection. The promise of a “multipolar” world, that is, a world where the United States does not rule alone, was Moscow’s main argument to attract allies, is being emptied of credibility.
The most telling thing is how Russia reacted to all this, because it didn’t react. He did not defend Maduro when he asked for help, nor in Syria when Assad fell. It even knew in advance that the United States would operate in Venezuela, and did not notify China, its own strategic partner. That is the sign of a country that no longer has the resources to defend its periphery.
Why can’t it stop
Here is the central paradox. If Russia loses so much, why doesn’t it negotiate a way out? Why do you reject the proposed peace agreements?
The answer lies in the nature of Putin’s regime, because the war is not only a military operation, it is also the political support of the system. While there is war, there is justification for extraordinary spending that benefits the industrialists and generals who support Putin. With the conflict, any internal criticism can be treated as treason and Russia can sit down to negotiate with Washington as if it were a great power, which is what Putin seeks.
A peace on terms acceptable to Ukraine would require Russia to recognize that it invaded, that it lost, and to return territory. That would destroy the narrative that justified everything, including the deaths, the expense, and the impoverishment of the Russian population; For Putin that would be politically deadly.
That is why the peace negotiations that took place in Abu Dhabi and Geneva during the first months of 2026 went nowhere. Russia participated enough to appear reasonable to President Trump, who wants to appear to be seeking peace, but it systematically blocked any real progress on substantive issues such as territory, Ukrainian sovereignty and security guarantees.
Oil as oxygen
In this context of accelerated deterioration, the price of oil is literally what keeps the regime alive. When oil is cheap, as was the case during part of 2025, with the Russian barrel close to $50, state revenues plummet and the pressure on the system becomes unbearable.
But the war in the Middle East between Israel, the United States and Iran sent the international price of oil up to $109 per barrel. For Russia, that is an unexpected gift. Even with the forced discount, selling oil at that price allows him to continue paying for his army and his war for several more months.
That is why Chinese companies such as Sinopec and PetroChina are evaluating the purchase of Russian oil stranded on ships without a buyer due to sanctions. It is a business without political solidarity, because China gets oil at a discount and Russia gets a buyer it desperately needs. A window of opportunity that both take advantage of while it lasts.
Russia in 2026 is neither a winning power nor one that collapses. It is a political system that survives by destroying itself because it spends what it does not have, loses allies it cannot defend, negotiates peace it cannot accept, and hopes that the price of oil plays in its favor.
History does not know many examples of how this kind of balance ends, and those that exist are not optimistic.
Things as they are.
Mookie Tenembaum addresses international issues like this every week with Horacio Cabak on his podcast El Observador Internacional, available on Spotify, Apple, YouTube and all platforms.
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