The appointment ofAlexander Shokhin as Russia's new business ombudsman is more significant than the title suggests. Shokhin is not merely another bureaucrat; he has spent almost two decades as president of the Russian Union of Industrialists and Entrepreneurs (RSPP), Russia's most influential business lobby group, representing many of the country's largest companies and oligarch-controlled industrial groups.

The position of business ombudsman was created to defend entrepreneurs against arbitrary actions by the state, particularly law-enforcement agencies, prosecutors and regulators. In practice, the office serves as an intermediary between the Kremlin and the private sector. At a time when the Russian state is exerting increasing control over the economy, the role has become more politically sensitive than at any point since the position was established.

Shokhin takes office as Russian business faces several major challenges:

• A growing wave of nationalisations and asset seizures.
• Increasing state intervention in strategic industries.
• High interest rates that are squeezing investment.
• Labour shortages caused by mobilisation and demographic decline.
• Rising tax burdens linked to wartime spending.
• Pressure on companies involved in sanctions circumvention and foreign trade.

His appointment suggests the Kremlin wants a heavyweight insider capable of preventing tensions between the state and big business from escalating. Unlike previous ombudsmen, champaign producer and friend of Putin’s, Boris Titov, as a former member of government, Shokhin has direct access to senior government officials, ministers and major corporate leaders.

Shokhin brings extensive government experience to the role. Before moving to the RSPP, he served as Russia’s labour minister from 1991 to 1994 during the turbulent early years of post-Soviet economic reform, briefly held the post of economy minister in 1994, and went on to serve as deputy prime minister under Viktor Chernomyrdin between 1994 and 1996. He later represented business interests in the State Duma from 1999 to 2003 and has sat on numerous government economic councils and advisory bodies over the past three decades, making him one of the most experienced intermediaries between the Kremlin and Russia’s corporate sector.

The key question is whether the role will remain focused on protecting business rights or evolve into a mechanism for managing business compliance with the state's wartime priorities. Many large companies are increasingly concerned not only about regulation but also about property rights after several high-profile asset confiscations and transfers into state control.

Over the last four years, the RSPP has played a key role in talks between the Ministry of Finance (MinFin) and the largest private and state-owned enterprises in negotiation on things like voluntary tax contributions to fund the war. rather than force tax hikes on big business, the Kremlin has preferred to squeeze extra money out of business on a voluntary basis and Shokhin has played a key role in these talks. As the economy continues to slow and spending rises, the Kremlin appears to be strengthening the mechanism it has for these negotiations. The members of the RSPP are keen to avoid permentent or formal tax rises and have been willing to contribute hundreds of millions of as one-off tax payments. The MinFin is preparing the ground for more requests should the situation demand.

For investors, the appointment is a signal that Moscow recognises growing concern within the corporate sector. However, Shokhin's influence will depend on whether he can persuade the Kremlin to moderate pressure on private business at a time when fiscal and military demands are taking precedence over economic liberalisation, according to The Bell.

In the short-term the pressure on the budget has eased somewhat thanks to anticipated windfall revenues due to elevated oil prices as a result of the Iran war.

Russia's government has quietly abandoning plans to cut federal spending by 10% in 2026 after the surge in oil prices caused by the Iran conflict improved fiscal conditions. Finance Minister Anton Siluanov signalled that budget priorities will remain focused on defence, security and social spending, while any serious fiscal tightening is now being pushed into 2027. The Bell argues that the Kremlin is using the temporary oil windfall to postpone difficult decisions over a budget deficit that remains structurally unsustainable.

Against that, the Financial Times reports that military spending is likely to increase by more than was anticipated in the current budget.

Russia’s federal budget deficit may be significantly larger than officially reported, raising fresh questions about the long-term sustainability of the Kremlin’s wartime economic model.

According to a document from Russia’s finance ministry obtained by the Financial Times and reviewed by The Bell, officials have warned that planned spending levels will be insufficient to meet the country’s growing military and security commitments this year. The document suggests that additional expenditure of between RUB2 trillion and RUB4 trillion ($25bn-$50bn) a year could be required, even as the government faces mounting pressure on revenues.