Russian finances get shakier despite short-term bonus from Iran war
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Russia has found it increasingly hard to finance its ballooning spending, driven largely by military expenses and the war against Ukraine.
PHOTO: NANNA HEITMANN/NYTIMES
Ivan Nechepurenko
- Russia briefly benefited from high oil prices due to the US-Israeli war against Iran, but this boost was short-lived and prices have since fallen back.
- Russia faces a growing budget crisis with a US$75 billion (S$96.9 billion) deficit in the first half of 2026, driven by high military spending and war costs.
- Oil and gas revenues dropped over 22 per cent compared to 2025, and experts warn the temporary revenue rise in Q2 will not prevent further financial challenges ahead.
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MOSCOW – As a major producer of oil and gas, Russia has been one of the few countries to benefit from the US-Israeli war against Iran, which constricted global fuel supplies and sent prices to peaks unseen in years.
But that windfall has proved limited and short-lived.
In late June, after prices receded amid easing tensions in the Persian Gulf, it became clear that the oil and gas bonus had failed to reverse Russia’s deepening budget crisis, according to the latest prices for Moscow’s crude and budgetary figures released by its Finance Ministry on July 9.
In recent months, Russia has found it increasingly hard to finance its ballooning spending, driven largely by military expenses and the war against Ukraine.
During the first six months of 2026, the government spent US$320 billion (S$414 billion), or 55 per cent of the amount it had budgeted for the entire year, the Finance Ministry said.
Aided by the surge in the price of fossil fuels that began in early March, the federal budget deficit decreased somewhat in June. But it still stood at US$75 billion for the first half of the year – far more than anticipated when the budget was adopted, and more than US$30 billion higher than in the first half of 2025.
Russian oil revenues rose sharply in the second quarter, but that trend is set to reverse unless the conflict in the Middle East reignites fully.
According to Argus Media, a price reporting agency used by the Russian government to calculate its oil extraction taxes, by the end of June the price of Russian crude oil had retreated from the peaks reached in May to its prewar levels.
In addition, the second-quarter windfall failed to make up for poor revenue in the first quarter, when prices were low. Overall, Russia’s oil and gas revenues for the first six months of 2026 were more than 22 per cent lower than the same period in 2025.
“The second quarter of 2026 will likely serve as a ‘breather’ before a new drop in oil and gas revenues, which will complicate the budget deficit problem,” Kirill Rodionov, a Russian economist, said in a post on messaging app Telegram. NYTIMES
This article originally appeared in The New York Times.
