There are some annual rituals in Russia about which people have a very strong conviction. One of these is to prepare for something of significance, almost always bad, to occur in the month of August. Whether concerning the economy, politics, accidents or the environment, the belief is that if something major is to happen in any year, it is more likely to happen this month. And although events of significance have been taking place on an almost monthly basis since February 2022, historically the focus on August is justified.

This time last year we noted that while there was no sign of any let up in the fighting and talks about talks were continuing both sides of the Atlantic, there was no reason to assume anything major in August 2024. But, of course, we forgot the golden rule: the “August surprise” is rarely about what is the news at the start of the month (the known unknowns) but about what we do not yet know (the unknown unknowns). That complacency lasted until August 6^th when Ukraine launched a major invasion of Russia and took control of a big chunk of the Kursk region. The fallout from that event is still being felt, e.g. the recent suicide of the former Transport Minister who was facing charges related to the disappearance of money allocated to bolster defences on the Kursk-Ukraine border. He was Governor of Kursk Oblast between 2019 and 2024 when the defences should have been built.

As we head into August 2025 there is a plethora of “known unknowns”, any one of which could result in another pivotal event. The most important is the threat from President Donald Trump to impose severe sanctions on Russia if there is no significant move from the Kremlin towards a ceasefire and peace process by August 8^th. Recall the deadline for this threat was originally September 2^nd, the day after U.S. Labor Day (traditionally the end of summer and the start of the new business year) but shortened after Trump’s meeting with the European Commission President Ursula von der Leyen.

President Trump has not applied any sanctions on Russia since his inauguration in late January but says he is now considering a range of options. Speculation about what that may mean, or whether he may delay the deadline again, is a superfluous exercise. Last night, while referring to the latest Russian attack on Kyiv as “disgusting” he also again stressed “this is Biden’s war” and he wants to force a ceasefire. It has been confirmed that Trump’s Special Envoy, Steve Witkoff will meet with Russian President Vladimir Putin  in Moscow tomorrow (August 2^nd) where the Russian side will offer some amendments to their ceasefire proposals.

How quickly rhetoric and events have changed over the past 24 hours is an indication of how seriously the latest Trump threat is being taken.  It is not so much that anybody expects Trump to deliver the most serious threats, e.g. the 100% tariff countries buying Russian oil, but the fact that any action he takes will break his no sanctions position (none in his current presidency) and others could follow quickly and randomly.

The other issue focusing attention is the more difficult position regarding the Russian federal budget. The deficit at the half year was significantly above the plan for the year and raises questions about sustainability. Reports of Russian oil traders having to again adapt export logistics has again led to numerous opinion pieces in various international forums confidently predicting the imminent demise of Russia’s economy. Such confident predictions have been a regular occurrence since mid-2022 and often contain the immortal phrase “this time it’s different” or “one more ratcheting of sanctions” will do it. Maybe, but a more complete review of the economy and financial position suggests that day of reckoning is not yet close at hand.

Looking at the longer historical context, August has been a month when significant military and geopolitical events have taken place. The Molotov-Ribbentrop Pact was signed in August 1939, and construction of the Berlin Wall started in August 1961. Soviet troops entered Prague in August 1968, and, in August 2008 the Russia-Georgia war provided the backdrop to the Beijing Olympics. This year the news from eastern Ukraine suggests there is some validity in the speculation of a major offensive about to start, or is underway, and this, presumably, was part of the discussion between Trump and Ursula von der Leyen on July 28^th and the reason for the reduced deadline.

The current budget concern reminds there has almost always been a concern about the economy or the currency in August. This is because of the default (on domestic debt – foreign debt payments were delayed but not defaulted) and the start of a steep ruble devaluation which occurred in August 1998. This marked a turning point for Russia, both economically and politically. A steady devaluation of the ruble does appear to be now underway, albeit there is no reason to assume a steep drop without worse-case Trump sanctions. The Finance and Economy Ministries are expecting the ruble to average RUB95 versus the US dollar in the second half of this year (today it is closer to RUB80) as that will provide one mechanism for better budget management. There is also no need for the Central Bank to stick with a strong ruble policy as it has achieved the objective (along with the record high interest rate) of reversing the inflation trend.

Nature has also regularly been very unkind to Russia in August. In 2002 widespread fires raged in the peatlands around Moscow and blanketed the city in a toxic haze. August 2013 brought very destructive flooding to much of Russia’s Far East, which led to both expensive economic disruption and loss of life. The worst weather-related disruption came in August 2010, when large swathes of the country were hit with high temperatures and forest fires. That combination contributed to drought conditions across much of the farming belt and led to a big drop in the year’s harvest. In fact, it was this combination that persuaded Putin that the country’s reliance on imported food (55% of consumption that year) and medicines was not only bad economics but a national security issue. The origin of what we now refer to as the ‘localisation’ policy was in August 2010, although it was boosted from August 2014 when Western sanctions escalated.

August can be an accident-prone month, such as in August 2000 when there were several serious accidents including the sinking of the Kursk submarine and a fatal fire in Moscow’s landmark Ostankino TV tower – the tallest structure in Europe. In August 2006, 170 people died in an aeroplane crash on a flight from the Black Sea resort of Anapa to St Petersburg. In August 2005, the first case of avian flu was reported and while thankfully that did not develop as had been feared, it did add to the folklore of concern for the month. In August 2009 one of the country’s largest hydropower stations suffered a catastrophic explosion in which 75 people died.

Coming into August 2025, and despite the heightened concerns about new U.S. sanctions and budget pressures, there remains a generally positive mood in Russia, especially in Moscow. Mayor Sobyanin has again created what he says is the world’s biggest city festival, lasting 100 days up to late September. This year it is bigger. That inevitably allows comparisons with the last days of Rome when the emperor ordered circuses and other elaborate entertainments to distract people from the growing problems. Maybe, but there are not many cities where one can take outdoor dance lessons or listen to open-air theatre at 11 o’clock in the evening seven nights each week. Of course everything is a balance in Moscow. The city is undergoing the biggest renovation of roads, pavements and other public spaces ever undertaken, so traffic and dust are much worse than usual.

Doomsayers are citing the magnitude 8.8 earthquake which occurred just off Russia’s Kamchatka coast on July 30^th as a harbinger of worse to come, i.e. a transformative August. But despite that big quake, the concern this year is not so much about the events  on the floor of the Pacific but about the actions of the force of nature sitting in the Oval Office.