Russia has increased the excise tax on alcohol by 15% from January 2025. This decision, aimed at boosting budget revenues, has already begun to show its effects on the production of alcoholic beverages. According to the Ukrainian Ministry of Defence’s Main Directorate of Intelligence (GUR MOU), vodka production fell by 22.7% and brandy production dropped by 25% during the first quarter of 2025.
The Russian government’s decision to raise alcohol excise taxes is part of its strategy to replenish dwindling financial resources, which have been severely impacted by the ongoing war and a decrease in oil and gas revenues. The Kremlin, facing mounting economic challenges, has resorted to tapping into the wallets of its population. Despite the price hikes, Ukrainian intelligence reports suggest that the consumption of alcohol is unlikely to drop significantly. However, the rise in retail prices is expected to fuel the growth of the shadow market, where cheap alternatives like “Mr. Cider” are increasingly popular.
The Russian economy, struggling under the weight of the war and economic sanctions, is showing signs of strain. The increase in excise taxes on alcohol is seen as one of the measures the Kremlin is using to keep its war efforts funded. However, it may also reflect broader economic issues, such as the depletion of resources and the continuing decline of oil and gas income.
