The Kremlin is closely monitoring the turbulence in global oil markets as prices for its key export grade, Urals crude, have plummeted towards the $50 mark. On April 7, 2025, Kremlin spokesperson Dmitry Peskov stated, "We are very closely monitoring the situation, which is currently characterized as extremely turbulent, tense, and emotionally overloaded," attributing the price decline to "the US decision to introduce tariffs for most countries in the world." According to Argus Media data cited by Bloomberg, Urals crude fell to $52.76 per barrel at the Baltic port of Primorsk, significantly below the $70 per barrel benchmark used for Russia's 2025 budget planning.
This decline in oil prices poses significant fiscal challenges for Russia, where oil and gas revenues accounted for nearly 30% of budget proceeds in January and February of 2025. With military expenditures for the ongoing conflict in Ukraine driving government spending sharply upward, a price collapse could destabilize the federal budget. If prices were to fall below the $50 mark, it would push Russia's key oil export to its weakest level in nearly two years.
In late March, global oil prices were actually rising, propelled by U.S. sanctions on Iran and ongoing discussions regarding a potential ceasefire in the Ukraine conflict. Brent crude reached $72.52 a barrel, while U.S. West Texas Intermediate crude increased to $68.68. However, despite these initial gains, Russian oil and gas revenue fell by 17% year-on-year in March, totaling 1.08 trillion rubles (approximately $12.8 billion). The Finance Ministry reported that the government lost roughly 230 billion rubles ($2.7 billion) in tax income compared to March 2024, with oil and gas revenues making up a third of total state income.
Elvira Nabiullina, Russia’s central bank governor, expressed concerns about the impact of falling oil prices on the economy, stating that the decline poses a risk to public finances. On the same day, she noted that the central bank is analyzing the situation, with a technical budget rule expected to mitigate some of the budgetary consequences. The central bank reported that as of April 7, Brent and WTI crude prices had fallen by 14% and 15%, respectively, following U.S. President Donald Trump’s announcement of reciprocal tariffs on all imports.
Nabiullina emphasized the connection between tariff wars and declining demand for energy resources, stating, "If such tariff wars... continue, it usually leads to a decline in global trade, the global economy, and possibly even the demand for our energy resources." The central bank projects that oil prices will average $65 per barrel in 2025 and $60 per barrel in 2026, although these forecasts may be updated during the next board meeting set for April 25.
Despite the sanctions and price cap imposed by the G7 on Russian oil exports, which aims to limit Moscow's earnings from oil sales, the Kremlin has managed to navigate around these restrictions through various loopholes. The $60 cap, introduced when oil was trading above $100 a barrel, has become less relevant as global prices have fallen below that threshold. Experts estimate that the cap cost the Kremlin around €34 billion in export revenues during its first year, but the recent price drop has rendered it effectively meaningless.
Clayton Seigle, a senior fellow at the Center for Strategic and International Studies, suggested that the G7 may consider tightening the screws on Moscow by reducing the price cap further, stating, "There may be an appetite within the G7 to do so as a way to punish Moscow—especially now that concerns about market undersupply have eased." Meanwhile, the threat of a global recession looms large, with analysts predicting that if the U.S. economy falters, oil prices could slump to $50 by December 2026.
Goldman Sachs has already revised its oil price forecasts, slashing its predictions for Brent crude prices by $9 for December 2025 and $10 for December 2026. The investment bank now expects Brent crude to finish the year at $62 before declining to $55 by the end of next year. In a worst-case scenario, if both a global GDP slowdown and a full unwind of OPEC+ cuts occur, prices could fall under $40 per barrel by late 2026.
As for the Russian economy, the implications of falling oil prices are dire. Every $1 change in oil price equates to approximately $2.7 billion in annual export revenues for Russia. Current estimates suggest that the latest drop could cost President Vladimir Putin between $25 billion and $30 billion in lost oil export revenues. If oil prices were to fall to $50, the losses could reach around $67 billion.
Despite these challenges, the Russian rouble has shown some resilience, weakening slightly against the U.S. dollar but remaining stable overall. As of April 9, the rouble was down 0.4% at 86.15 against the dollar, though it has appreciated about 24% against the dollar this year. Analysts suggest that low demand for imports and increased demand for rouble-denominated assets have supported the currency, even as net forex sales by exporting companies fell by 18% due to lower oil prices.
As the economic storm brews, Kremlin spokesman Dmitry Peskov assured that authorities are closely watching the situation to minimize its consequences. However, with inflation surpassing 10% and hitting a two-year high in February 2025, the pressure on the Russian economy is palpable. Despite the central bank's efforts to raise interest rates to a record high of 21%, inflation continues to rise, suggesting that the headline rate may be under-reported.
Overall, the combination of falling oil prices, geopolitical tensions, and economic uncertainty poses a significant threat to Russia's financial stability and its ability to sustain military operations in Ukraine. As the situation develops, the Kremlin's response to these challenges will be closely scrutinized both domestically and internationally.
