Russia’s oil revenue, the lifeblood of its war machine, is plummeting
Sign up now: Get ST's newsletters delivered to your inbox
Russian President Vladimir Putin chairing a meeting in Moscow on Jan 30.
PHOTO: REUTERS
Ivan Nechepurenko
- Russia's oil revenues, a key war fuel, face strain due to declining prices and Western sanctions, with 2025 revenues down almost 25%.
- To compensate, the Kremlin is increasing taxes and deficit spending, shifting the war's US$170 billion yearly cost burden onto the Russian people.
- Despite economic strains, reflected in stagnant economy and "uncomfortable" situation (Yevgeny Nadorshin), Putin's war calculations remain unchanged amid peace talks.
AI generated
NEW YORK - As Russia holds direct peace talks with Ukraine for the first time in months, the Kremlin’s most potent fuel for the war, oil revenue, is under mounting strain.
The price of Russian oil, the country’s primary export, has declined under the weight of surging global supplies and Western sanctions related to the war. In 2025, Russia’s oil and gas revenue fell by almost a quarter, according to the Finance Ministry. The Kremlin is resorting to tax increases and deficit spending to bridge the gap.
So far, there is little sign that the economic strains, and any discontent they generate among business leaders and the public, will be enough to change President Vladimir Putin’s calculations on the war. Trilateral negotiations involving Russia, Ukraine and the United States are set to continue on Feb 1
But with the economy stagnating and the Kremlin reaching the limit of what it can squeeze from it, the Russian people will have to bear more of the burden of a war whose costs exceed about US$170 billion (S$215 billion) a year.
“This situation is manageable,” said Mr Yevgeny Nadorshin, an economist in Moscow who advises companies and banks. “But no one is comfortable with that.”
Throughout his decades-long rule, Mr Putin has taken pride in the stability he has brought to a Russian economy that was in free fall after the demise of the Soviet Union – slashing debt, streamlining taxes and taming inflation.
A strong oil economy allowed the Russian state to deliver an improved standard of living. That, the Kremlin hoped, would keep the public content even as the government eroded personal freedoms.
Now, the carefully cultivated economic stability is fracturing. The steep drop in oil revenue has sent Russia into a new era defined by sustained budget deficits, higher taxes and stubborn inflation.
Russia’s oil trade has been battered by two forces. Oil prices have declined since April, after the Organisation of Petroleum Exporting Countries decided to gradually increase production after years of cuts. The Russian oil industry has also been hit in recent months by new Western sanctions and the heavier enforcement of existing ones.
In October, President Donald Trump imposed sanctions on Russia’s two largest oil companies,
