Russian oil exports after 4 years of Western siege

In January, Russia’s budget revenue from oil and gas taxes decreased to 393 billion rubles (5.1 billion USD), while in the same period last year, the figure reached 1,120 billion rubles (14.5 billion USD). According to Janis Kluge, an expert on the Russian economy at the German Institute for International and Security Affairs, this is the lowest level since the pandemic.

Thus, nearly 4 years since the Ukraine conflict broke out, Russia’s oil and gas revenues are continuing to shrink, as the West tightens its sanctions regime over time.

The first round started in 2022, when the G7 imposed a price ceiling of 60 USD per barrel of Russian oil, to limit Moscow’s revenue but still allow third countries to import, due to concerns about rising energy prices.

This ceiling only helped reduce Russia’s oil revenue temporarily, especially after the EU banned most Russian oil from being transported by sea, forcing Moscow to shift sales to China and India. However, a “shadow fleet” of old oil tankers operating outside the control of the price ceiling gradually formed afterward, helping export output increase again.

To increase the effectiveness of the price ceiling when the crude oil market in general declines, last year, the EU and some G7 members including the UK and Japan decided to lower this ceiling to 44.1 USD per barrel. The US did not participate in this round of price ceiling imposition, but President Donald Trump chose to launch another blow.

Accordingly, in August 2025, he imposed an additional tax of 25% on Indian goods, on the grounds that this country buys oil from Russia, raising the total tax to 50%. Since the Ukraine conflict broke out, India has gradually emerged as the largest customer of Russian oil, with imports exceeding 2 million barrels per day in the middle of last year.

On November 2, 2025, President Trump imposed sanctions on Russia’s two largest oil and gas companies, Rosneft and Lukoil. This means anyone who buys or ships its oil risks being cut off from the US banking system, a serious problem for any multinational business.

Pressure from the US seems to be effective. On February 3, President Trump announced to lower India’s import tax from 25% to 18% because Prime Minister Narendra Modi agreed to stop importing Russian oil. On February 6, the US also lifted the 25% additional tax previously imposed on India.

Mr. Modi has not commented. Indian Foreign Ministry spokesman Randhir Jaiswal said the country’s strategy is to “diversify energy supplies in accordance with objective market conditions”. Kremlin spokesman Dmitry Peskov said Moscow was following the statements and remained committed to an “advanced strategic partnership” with New Delhi.

The amount of Russian oil exported to India has decreased in recent weeks, from 2 million barrels per day in October to 1.3 million barrels per day in December 2025, according to data from the Kyiv School of Economics and the US Energy Information Administration. Data company Kpler commented that “India is unlikely to completely withdraw” from cheap Russian energy sources in the short term.

At the same time, the EU on January 21 issued the 20th sanctions package on Moscow. The bloc bans fuels produced from Russian crude, meaning Russian oil can no longer be refined elsewhere and exported to Europe as gasoline or diesel.

According to Mark Esposito, senior analyst for marine crude oil at S&P Global Energy, the EU’s inclusion of both diesel and gasoline in sanctions creates “a very dynamic sanctions package, a double blow, impacting not only the flow of crude oil but also the refined products from those barrels. “To put it simply: if it comes from Russian crude, it’s out,” he said.

European Commission (EC) President Ursula von der Leyen on February 6 also proposed a complete ban on transportation services with Russian oil. She believes that sanctions are leverage to force Russia to end the fighting. “We need to look straight at reality: Russia only sits at the negotiating table with real goodwill when under enough pressure,” she said.

The EC also proposed adding 43 ships belonging to Russia’s “shadow fleet” to the sanctions list, bringing the total number to 640 ships in the US, UK and EU. US forces have seized ships related to sanctioned Venezuelan oil, including a Russian-flagged ship. France also temporarily blocked a ship suspected of belonging to the dark team.

Faced with increasingly dense Western sanctions, buyers are now demanding larger discounts on Russian oil to compensate for risks and handle the hassle of finding payment solutions. The discount widened to about $25 per barrel in December, pushing Russian Urals oil below $38 per barrel, compared with about $62.50 per barrel for Brent.

Because Russia’s oil exploitation tax is calculated based on oil prices, this directly reduces budget revenue. “This is a chain effect, or a domino effect,” said Mark Esposito at S&P Global Energy.

In addition, the reluctance of buyers to receive goods has caused about 125 million barrels of oil to be backlogged on offshore ships, pushing transportation costs up to $125,000 per day, according to Mr. Esposito.

Oil prices are being squeezed and output is limited while Russia’s economic growth is slowing down. In the third quarter of 2025, GDP will only increase by 0.1%. Russia’s 2025 growth forecast ranges from 0.6% to 0.9%, much lower than the level of over 4% in 2023 and 2024.

To fill the gap caused by declining oil revenues and slowing growth, the Kremlin chose to increase taxes and borrow. The Russian Parliament has raised the value added tax (VAT) on consumer transactions at payment counters from 20% to 22%, increased taxes on imported cars, cigarettes and alcoholic beverages.

The government also stepped up borrowing from domestic banks. In addition, the national wealth fund also has reserves to support the budget. So the Kremlin still has money left over in the short term. But raising taxes could slow growth. Meanwhile, borrowing has the potential to increase inflation, which has been pulled down to 5.6% thanks to the central bank’s 16% operating interest rate.

“If it lasts another six months to a year, this could also affect the way they (Moscow) thinks about the war,” Mr. Kluge said. He does not think a peace agreement will be reached soon, but he predicts that the intensity of fighting may decrease.