High oil prices: How Putin benefits from the Iran war

Russia is the only one so far winner of the War in the Middle Eastn. This is how the President of the EU Council sees it Antonio Costa: “It is gaining new resources to finance its war against Ukraine as energy prices rise,” Costa said in a speech to EU ambassadors in Brussels on Tuesday. In addition, the Middle East conflict is moving into focus and reducing attention to the Ukrainian front. Costa called for de-escalation and a return to the negotiating table. EU foreign policy chief Kaja Kallas also warned that the Iran conflict would play into the hands of Vladimir Putin.

Moscow had just reported a record budget deficit, now it is hoping for billions in additional revenue from an oil price of more than 100 US dollars (86.54 euros) per barrel (159 liters).

What the gift means for Kremlin ruler Putin – here are the most important questions and answers.

How does the current high oil price benefit Russia?

At a meeting on the effects of the war in the Middle East on oil prices, Putin emphasized that he expected only a temporary increase. But he also ordered that Russian exporters should take advantage of the current high demand in order to establish themselves in reliable markets.

Russia itself continues to supply loyal partners in Eastern Europe – Hungary and Slovakia – and in Asia, Putin said. However, he is only willing to make deliveries to other European countries if the political situation is ignored and reliable and stable cooperation is secured.

Putin’s special representative in the Kremlin for economic cooperation with foreign countries, Kirill Dmitriev, previously warned that the “Eurobureaucrats” would otherwise have to pay a high price for their mistakes and Russophobic policies. They should rather use Russia as a supplier again.

How dependent is Russia on the price of oil?

Traditionally, income from oil and gas sales makes a significant contribution to financing the Russian budget. Last year that was around 23 percent; However, the number has been falling for years – most recently mainly due to the decline in exports as a result of the sanctions. In its budget for this year, Russia estimates that a barrel will cost an average of $59. But because prices fell below this value at the beginning of the year, the budget gap that had already been planned for increased again.

But now prices are rising and with them the hope of easing the budget. Because of the situation in the Middle East, the USA is also considering easing sanctions. This would allow Russia to sell significantly more energy again – at significantly higher prices. But it is also clear that the country generally sells at large discounts – for example to its main customers China and India, because many other countries have been eliminated due to the sanctions.

What additional revenue can Russia expect?

“Oil over $100 – and Russia’s voice in the global economy and geopolitics is becoming even louder,” Kremlin official Kirill Dmitriev cheered on social networks. “Russia is a systemically important energy supplier, without which neither global stability nor a sustainable model for global growth are possible,” he enthused. Dmitriyev is already dreaming of a possible price of $200 per oil barrel. “With oil and gas infrastructure in the Middle East under attack and production limited, the energy crisis will unfortunately be much deeper and longer than many expect,” he says.

Strong price fluctuations are to be expected for the time being. US President Donald Trump’s recent statement that the Iran war could soon be over caused the price of oil to fall significantly – to below $100. If the war actually ends quickly, it is likely to decline further.

Experts estimate that with an average price for Urals oil of $70 per barrel, the state could earn an additional 2 trillion rubles (22.3 billion euros), writes the Kremlin-affiliated newspaper Izvestia. For comparison: in 2025, 8.5 trillion rubles flowed into the budget from the sale of oil and gas. But it is also clear that sanctions such as the price cap in the West on Russian oil and the action against Moscow’s shadow fleet continue to have an impact.

What does all this mean for Moscow’s expensive war against Ukraine?

If the price of oil remains high for a longer period of time, then Russia will have greater scope for armaments projects and its war of aggression against Ukraine, which has been going on for a good four years. There is also great glee in Moscow because energy costs in the EU, which are also important for the Western arms industry, are rising massively. Russia demands that the EU stop supplying weapons to Ukraine – and that the war ends like this.

With its sanctions against Russian oil and gas, the EU wanted to cut off the money supply to the energy superpower for the war against Ukraine. That was once also US President Donald Trump’s goal. But now Kremlin leader Putin is even threatening to forestall the EU’s total embargo on Russian gas – and redirect its raw materials to other, “more reliable markets.” This threatens to cause a new price increase.

Will all of Russia’s financial problems be solved now?

No. The expected additional revenue cannot completely cover the budget deficit, as “Izvestia” writes, citing energy market and financial experts. Accordingly, in order to actually have a positive effect on the budget, oil prices would have to remain as high as they are now for at least three to six months.

Most recently, the Russian Ministry of Finance published the consolidated deficit for the past fiscal year of an unprecedented 8.3 trillion rubles. A high deficit is also expected this year. However, there was already a budget gap of 1.7 trillion rubles in January, 252 billion rubles more than in the same month last year.

The comparatively strong ruble is also a problem for Russia’s budget. An average exchange rate of 92.2 rubles per US dollar is set for dollar income in the budget. In fact, the exchange rate is less than 80 rubles per US dollar, which puts less money into the state coffers. Because government spending is increasing at the same time, the authorities are now putting forward more and more savings proposals, for example in infrastructure projects. In the capital Moscow, Mayor Sergei Sobyanin even ordered staff cuts of 15 percent.