Frankfurt, Germany — Frankfurt, Germany (AFP) – Iran war Interruption of oil and gas supplies in the Middle East High prices These factors enhance Russia’s ability to benefit from its energy exports, which constitute a mainstay of the Kremlin’s budget and a key to financing its war in Ukraine.
Russian oil export prices have risen from less than $40 a barrel last December to around $62 a barrel — first because of fears of war and then because tanker traffic through the country has almost completely stopped. Strait of HormuzIt is a channel for about 20% of the world’s oil consumption.
Russian oil is still trading at a significant discount to international benchmark Brent crude, which rose above $82 from a closing price of $72.87 on Friday, the eve of the US and Israel attack on Iran. However, Russian crude is now above the record level of $59 per barrel assumed in the Russian Finance Ministry’s budget plan for 2026. Oil and gas tax revenues make up as much as 30% of the Russian federal budget.
In addition, the cessation of production of ship-borne liquefied natural gas, or LNG, by major supplier Qatar, will lead to a sharp increase in global competition for available cargoes – including those from Russia.
Russia has witnessed State revenues from oil and gas The budget fell to a four-year low of 393 billion rubles ($5 billion) in January, and the budget deficit of 1.7 trillion rubles ($21.8 billion) for that month was the largest on record, according to Finance Ministry figures.
The decline in revenues is due to weak global prices and deep discounts fueled by the US and EU blocking Russia’s “shadow fleet” of tankers with ambiguous ownership used to sell oil to its biggest customers, China and India, in defiance of a price cap imposed by the West and sanctions on Russia’s two largest oil companies. Lukoil and Rosneft.
Economic growth has stagnated as massive military spending has stopped. President Vladimir Putin has resorted to raising taxes and increasing borrowing from compatible local banks to keep the state’s finances balanced in the fifth year of the war.
“Russia is the biggest winner from war-related energy disruptions,” said Simone Tagliapietra, an energy expert at the Bruegel Research Center in Brussels. “Higher oil prices mean more revenue for the government and thus a stronger ability to finance the war in Ukraine.”
“With Middle East barrels facing logistical disruption, both India and China face strong incentives to deepen reliance on Russian supplies,” wrote Amina Bakr, head of Middle East and OPEC+ insights at data and analytics firm Kpler.
In addition, prices for future natural gas delivery in Europe have risen, raising questions about EU plans to put an end to Russian LNG imports by 2027 – reviving bad memories of the energy crisis in 2022 after Moscow cut off most pipeline gas supplies due to the war.
Much depends on how long the Strait of Hormuz will remain closed to most ship traffic, said Alexandra Prokopenko, an expert on the Russian economy at the Carnegie Russia Eurasia Center in Berlin.
She added that a quick exit from the conflict would return Brent prices to about $65 a barrel and that “a short-term rise will not fundamentally change” the Russian budget picture. A middle scenario in which some shipping resumes and oil stabilizes at around $80 a barrel would give Russia “some financial relief,” depending on how long high prices last.
A long-term shutdown combined with Iranian strikes damaging refineries and pipelines could send the price of oil soaring to $108 a barrel, accelerating inflation and pushing Europe to the brink of recession. “This scenario would bring the biggest windfall to Russia,” she added.
Chris Weaver, CEO of consultancy Macro Advisory Ltd, said a multi-week LNG outage in the Gulf could lead to calls in Europe to suspend plans to block new Russian supply contracts after April 25.
He added: “The European Union is under greater pressure to work with the United States to find a solution to the conflict in Ukraine, and it is very likely that it will consider relaxing the plan to completely ban Russian oil and gas imports.” He added: “Countries such as Hungary, Slovakia, and those who were major buyers of Russian LNG will push for this review.”
However, “the Russian federal budget will do much better in March,” Weaver said, because of lower discounts on Russian oil and “because there are enthusiastic buyers of Russian oil and petroleum products.”
Russian Deputy Prime Minister Alexander Novak said on Wednesday that Russian oil is “in demand” and that Russia is ready to increase supplies to China and India, TASS news agency reported.
The head of Russia’s sovereign wealth fund, Kirill Dmitriev, criticized European Commission President Ursula von der Leyen and EU foreign policy chief Kaja Kallas, writing on X that “surely the wise Ursula and Kaja have a backup plan for LNG. Or maybe not.”
Tagliapietra said that Belgium, France, the Netherlands and Spain continued to import about two billion cubic meters of Russian liquefied natural gas per month. In addition, Hungary imports two billion cubic meters per month via the TurkStream pipeline across the Black Sea. This will reach 45 billion cubic meters in 2026, or 15% of the total gas demand for this year.
“It is not easy to replace that if the LNG market tightens as lockdowns continue in Qatar,” he said.