Russians are increasingly relying on cash rather than card payments, as mobile internet blackouts caused by Ukrainian drone strikes disrupt digital transactions and rising taxes push more businesses towards off-the-books dealing. This matters because it is squeezing the Kremlin's ability to raise revenue through taxation just as Russia's wartime economy slows and its budget deficit widens, over four years into the war with Ukraine.

Central Bank figures show 1.56 trillion roubles (£14.8bn; $20bn) have been added to cash circulation since the start of the year, the largest such rise outside the Covid-19 pandemic. Businesses including pharmacies, restaurants and market stalls are steering customers towards cash to stay under VAT thresholds after the rate rose from 20% to 22% in January, while Sberbank's finance chief has warned of a growing trend of employers paying wages "in envelopes" to dodge payroll tax. Russia's economy ministry has cut its 2026 growth forecast to just 0.4%, its weakest since 2022, even as oil and gas revenues have had a temporary boost from higher prices following the Iran war.