Will cheaper oil hit the Russian budget and ordinary Russians?
11 April 16:34
ANALYSIS
Oil prices have been falling for the second week in a row due to fears that the protracted trade war between the United States and China will lead to a reduction in economic growth and lower consumption of raw materials.
Brentis expected to fall by 3.2% and WTI by 2.9% this week. Last week, both benchmarks fell by 11%.
Russia is already feeling the effects
It is well known that Russia is critically dependent on its energy exports. First of all, on oil exports. In 2024, the federal budget revenues from oil sales amounted to 9.19 trillion rubles (approximately $89.4 billion). Total budget revenues for this period amounted to 36.71 trillion rubles. Thus, the share of oil revenues in the total structure of Russian budget revenues in 2024 was approximately 25%
This indicates that, despite international sanctions and attempts to diversify revenue sources, oil remains a key source of financing for the Russian budget.
Russian Urals oil is traditionally sold at a lower price than Brent and WTI, and it is also subject to additional factors that raw materials from other countries do not experience, namely Western sanctions. However, during all three years of the full-scale war with Ukraine, Russia has been successfully selling its oil – its main buyers today are China and India.
The federal budget of the Russian Federation for 2025 included an oil price of $70. Meanwhile, due to the collapse in the global oil market caused by Donald Trump ‘s trade war and OPEC’s decision to further increase production, the price of Russian Urals oil, according to the Ministry of Finance, was $57 per barrel on April 10.
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Ordinary Russians are doing well for now
[Kommersant asked energy expert Vladimir Omelchenko how significant these price changes could be for Russia. Obviously, the Russian Federation still has a sufficient reserve to cover the budget gaps created by the discrepancy between real prices and projected prices. However, the respective procedures for covering the budget deficit also have their macroeconomic consequences. So, are there any chances that such a reduction in the price of Russia’s main export product will be felt by ordinary Russians?
According to the expert, a hypothetical “worsening” of life for Russians would be a rise in prices for goods and services. However, this will not happen as a result of cheaper oil, he believes.
“This will affect, first of all, the Russian budget. As for consumers, they also have a certain pricing policy in Russia, and they make sure that prices do not rise sharply. And they limit the prices of oil companies and companies selling oil products. Therefore, I would not expect prices for petroleum products to rise sharply in Russia. I don’t think prices will rise. Budget revenues will decrease, but prices will not rise.”
– he told
As for the budget, market analysts’ forecasts do not promise Russia any serious problems related to the oil price, as it still has a very large backlash for sales. According to economic expert Oleg Pendzin, even a price of $50 per barrel is still acceptable for Russia.
“Currently, the direct cost of Russian oil production is about $37-38 per barrel. This is the direct cost. The critical figure for Russia is the sales price of $45,”
– explained the economist exclusively for
Therefore, the more likely way to hurt Russia over oil is still to tighten sanctions, including secondary sanctions against its buyers. The point of this step is to make it physically impossible for Russia to sell large volumes of oil and get the funds to continue its aggressive war of aggression.
But the movement is in the right direction
However, back during his election campaign, after making statements about ending the war in 24 hours or 100 days, the current US President Donald Trump made a very realistic statement. He said that in order for Russia to lose the ability to fight, it would be enough to simply collapse oil prices. And he seems to be going to do that if Russia does not make concessions. Whether Trump realizes it or not, this is exactly what is happening now.
The Russian economy is already slowing down significantly at $57 per barrel of oil, the industry is stagnating, and recession looks like a very real prospect.
And if the current downward trend in prices continues, the figure of $45 per barrel does not look so fantastic.
