Russia's energy revenues last year fell by about one-fifth compared to 2024, as rising discounts coincided with weak global prices, increasing the strain on the Kremlin's wartime economy, the Financial Times reports, writes UNN.
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In November, the gap between Brent — the international oil benchmark, now trading at its lowest level since 2021 — and Russia's main Urals blend roughly doubled compared to the month after the US imposed sanctions on oil giants Rosneft and Lukoil.
The discount increased to over $24 per barrel from approximately $15 in the previous two years, according to FT calculations based on Argus data. Combined with low prices, this cut Russia's energy revenues in 2025 by about one-fifth compared to last year.
This shift underscores how sanctions imposed by the Trump administration are undermining Russia's oil revenues, a pillar of Vladimir Putin's rule, and suggests that the West can still inflict material damage on the economy nearly four years after the start of Russia's invasion, the publication writes.
"While budgetary pressure is unlikely to change Putin's war aims, it is starting to have an impact," the publication notes. "The budget deficit is certainly an important topic for Putin right now," said Janis Kluge, a Russia expert at the German Institute for International and Security Affairs (SWP).
Oil has long accounted for a larger share of Russia's energy revenues than gas, and this gap has widened due to the loss of the European gas market in 2022, making revenues more vulnerable to oil price fluctuations.
The inclusion of Lukoil and Rosneft under US sanctions increased the risk for potential foreign buyers. The impact on export volumes is still uncertain, but the impact on pricing has already been striking, the publication writes.
In December, the Russian government reported a Urals oil price of $39.2 per barrel, the lowest level since the Covid-19 pandemic.
For some recent deliveries to India, the price even dropped to $22-25 per barrel on a free-on-board basis, which barely covers Russia's break-even price, a former senior energy executive told the FT. "If they [the US] tighten sanctions further, the only way to sell oil is by pipeline," he added.
Rising military spending combined with declining energy revenues, as indicated, led to a budget deficit of 2.6% of GDP in 2025, five times the planned level and a record in absolute terms. This is the fourth consecutive year in the red, one of the longest during Putin's time.
In early 2026, Russia could face an "optically large deficit" due to anticipated government spending at the beginning of the year and energy revenues "even lower than last year," Deputy Finance Minister Vladimir Kolychev admitted earlier in January, as quoted by Russian media.
The pressure is exacerbated by a strong ruble, which is 17% above the budgeted exchange rate of 92 rubles per dollar, meaning Russia receives fewer rubles for every dollar earned from exports.
A $10 deviation in the average Urals oil price from the budget assumption would wipe out 1.5-1.8 trillion rubles in revenue, write analysts at Alfa-Bank, Russia's largest private lender. If low oil prices and a strong ruble persist, the deficit could reach about 3 trillion rubles by the end of the year, representing approximately 7.5% of the revenues Moscow expects in 2026.
Sanctions have forced Russia to agree to significant discounts to maintain export volumes. "Market participants had to increase the gap between the price of Russian oil and the benchmark to maintain their share in global trade," said David Martirosyan, an analyst at Moscow's Price Benchmark Centre.
He estimated that by the end of January, seaborne oil exports would amount to up to 410 tons per day, an 11% decrease from a year earlier.
The composition of exports has also changed. In December, seaborne oil imports from Russia to China increased by 23% compared to the previous month, while deliveries to India decreased by 29%, according to CREA, a Helsinki-based think tank.
In January, the share of deliveries to undisclosed buyers sharply increased, indicating a growing volume of oil stored at sea. "As of mid-January, many tankers remain near the west coast of India or China, looking for a buyer among refineries to finally unload it," said Boris Dodonov, head of the Center for Energy Transformation and Sustainable Development at the Kyiv School of Economics.
The share of vessels indicating destinations such as Egypt or Singapore in their AIS systems has also increased, said Martirosyan of PBC. These locations are typically intermediate destinations for cargo.
Sanctions have reduced the share of energy revenues in the country's total budget from 50% at their peak to approximately 24% — the lowest level in at least a decade. To compensate for the deficit, the Kremlin has had to increase VAT and taxes for small businesses.
Sanctions lead to a "slow, cumulative squeeze" that makes it difficult to maintain fiscal stability, undermines long-term growth and resilience, and increases the risk of macroeconomic imbalances, said Vakhtang Partsvania, a professor at Caucasus University in Tbilisi.
At the same time, Alexandra Prokopenko, a research fellow at the Carnegie Russia Eurasia Centre, warned that the sustainability of the trend would depend on oil prices.
"Russia has not ceased to be an oil state because it has diversified its economy," she said. "Rather, its export markets have been restricted, and oil prices have become uncomfortable."