In one of his recent works, Charles Lichfield, the deputy director and C. Boyden Gray senior fellow of the Atlantic Council’s GeoEconomics Center, explored the current state of the Russian economy in the context of the ongoing war. 

According to the author, Russia will continue to operate a wartime economy, potentially resorting to breaking economic taboos to finance the war. 

Lichfield highlights the push for increased data transparency and the challenges posed by the deficit, lower income, and concerns about inflation.

According to Lichfield, observers of the Russian economy have access to a considerable amount of data, including information on the balance of payments and government revenue and spending.

However, a significant portion of government spending, around one-third, is classified and not disclosed to the public.

Russian Central Bank Governor Elvira Nabiullina and other financial elites have been advocating for increased data transparency to reassure investors and financial counterparts, promoting trust and stability.

In early March, there were indications that Nabiullina and her allies were making progress in their push for transparency. Lichfield notes that partial customs data and an up-to-date time series on the central bank's foreign currency reserves were released. 

By late March, the European Union contributed to this spirit of glasnost by requiring member states to report on immobilized Russian assets. A substantial amount of these assets, worth $300 billion, was believed to be held by the Belgium-based financial company Euroclear.

However, the Kremlin has halted these transparency efforts, suggesting a short-lived experiment.

Russia's budget deficit for the early months of the year has exceeded expectations, reaching over 3.4 trillion rubles ($42 billion) as of May 10, which is 17% above the planned deficit for the entire year.

Lichfield points out that the deficit is influenced by a decrease in oil and gas revenue, excessive spending, and a slow recovery from non-oil and gas sources.

The government has been careful in using the national welfare fund and borrowing within the country. This year, there has been less demand for new OFZ bonds in auctions, which indicates that creditors see potential risks.

According to Lichfield, to cover the deficit, the Russian treasury's current account, previously at 4.5 trillion rubles ($56 billion), has been utilized. The government expects fiscal returns to improve throughout the year.

Concerns remain about inflation, as the weaker ruble and loose fiscal stance could drive inflation above the 4% target, possibly leading to interest rate hikes.

The Russian government's ability to control the deficit is crucial, with Western policy aiming to ensure the levers for financing are ineffective.