According to newly released data from Russia’s Finance Ministry, the country’s essential oil and gas earnings suffered a steep 27% contraction in October compared with the same month the previous year. This substantial shortfall represents a major setback for the Kremlin’s already stretched wartime budget, coming at a moment when the United States has intensified sanctions designed to constrict Moscow’s capacity to profit from its energy exports. The implications are particularly severe given that oil and gas taxes remain core pillars of Russia’s public finances and serve as critical funding sources for its ongoing military operations.
The Ministry’s official report showed that Moscow collected approximately 888.6 billion rubles in oil and gas-related tax revenue during the month—equivalent to about $10.9 billion. That sum contrasts sharply with the nearly 1.2 trillion rubles recorded in October 2024, underscoring the scope of the downturn. Economic analysts attribute this decline to a combination of factors: persistently subdued global crude oil prices, a strengthening of the ruble that reduces export earnings when converted from foreign currencies, and increasingly restrictive Western sanctions imposed in response to Russia’s continued invasion of Ukraine. Collectively, these pressures have dampened fiscal inflows and complicated the government’s broader economic strategy.
Over the first ten months of 2025, Russia’s cumulative oil and gas revenues reached roughly 7.5 trillion rubles, down from 9.5 trillion rubles in the comparable period of the previous year. This reduction of more than 2 trillion rubles, amounting to about 21%, reflects the deepening strain on government finances and highlights a significant erosion of Moscow’s capacity to sustain present levels of public spending. The situation appears poised to worsen as international financial measures grow more targeted and sophisticated.
In late October, for instance, the U.S. Treasury Department unveiled new sanctions directed specifically at the financial subsidiaries of Rosneft and Lukoil—Russia’s two largest oil corporations. Together, these firms account for nearly 3 million barrels of production each day, representing close to half of the country’s oil exports transported by sea. Analysts had initially feared that such restrictions could constrict global supply, thereby forcing prices higher, but after a brief upward spike, markets largely stabilized. Traders came to view the sanctions as unlikely to remove substantial volumes of oil from circulation.
As of early November, U.S. West Texas Intermediate crude futures were trading near $60 per barrel, while the international benchmark Brent hovered close to $64. Both prices have fallen roughly 15% since the start of the year. This downward trend reflects a combination of plentiful global supply and weaker-than-expected demand, factors that together have blunted the inflationary potential of the latest sanctions. In light of these developments, Russia appears increasingly pressured to offer further price concessions to maintain its customer base.
Warren Patterson, head of commodities strategy at ING, noted in a commentary published Friday that the minimal reaction in oil prices suggests markets do not anticipate major disruptions in global supply. His observation reinforces the view that Russia’s challenge will be more financial than logistical: sustaining export volumes may remain possible, but likely at the cost of reduced profitability. Russia has diverted much of its crude exports into alternative channels—utilizing a so-called “shadow fleet” of vessels, non-Western insurers, and financial payment systems outside the U.S. dollar network—to bypass Western restrictions. Yet even these arrangements entail escalating risks, as buyers become more exposed to potential compliance violations under the newest set of American sanctions.
Bridget Payne, head of energy forecasting at Oxford Economics, argued in a detailed report published in late October that the primary consequence of recent penalties will be felt through pricing mechanisms rather than outright supply shortages. She expects Russia to widen the discounts offered on its crude in order to compensate purchasers for the mounting legal uncertainties and higher logistical expenses involved in handling sanctioned commodities. Payne further described these supplementary insurance and financing costs as a form of “sanctions premium,” a burden that effectively increases the discount on Russian oil grades relative to internationally traded varieties. Over time, this dynamic will erode Moscow’s net energy earnings, tightening fiscal space even further.
Meanwhile, the macroeconomic outlook has also begun to darken. Data from the Economic Development Ministry indicate that Russia’s gross domestic product expanded by just 0.6% year over year in the third quarter—a marked slowdown from growth of 1.1% in the second quarter and 1.4% in the first. The deceleration signals the fading momentum of a wartime boom that had earlier been propelled by extraordinary levels of defense expenditure and extensive government subsidies designed to offset the shock of sanctions.
As President Vladimir Putin’s government grapples with mounting fiscal pressure, the United States has sought to calibrate its policy response carefully. Washington appears intent on sustaining low global energy prices and moderating inflationary concerns while methodically tightening sanctions that could deplete Russia’s financial reserves—the very capital underpinning its capacity to maintain the conflict in Ukraine. Yet domestic political impatience is emerging in the U.S. President Donald Trump, frustrated by the slow pace of diplomatic progress, recently remarked that although his conversations with Vladimir Putin remain cordial, they consistently fail to produce tangible results—a statement revealing the growing tension between rhetoric and reality in Washington’s efforts to influence the course of the war.
Sourse: https://www.businessinsider.com/russia-economy-oil-gas-revenue-sanctions-price-discount-lukoil-rosneft-2025-11
