FRANKFURT, Germany — Military conflict in the Middle East involving Iran has created major disruptions to regional oil and natural gas distribution, with the resulting price spikes providing Russia with enhanced revenue from energy sales that serve as a cornerstone of the Kremlin’s budget and crucial funding source for its military campaign in Ukraine.
Russian crude export prices have climbed from below $40 per barrel in December to approximately $62 per barrel — initially driven by conflict concerns and subsequently by the near-complete shutdown of tanker operations through the Strait of Hormuz, which handles roughly 20% of global oil consumption.
While Russian petroleum continues selling at a significant markdown compared to international Brent crude benchmark — which has jumped above $82 from Friday’s closing of $72.87 before the U.S. and Israeli strike on Iran — Russian crude now exceeds the $59 per barrel threshold the Russian Finance Ministry projected in its 2026 budget calculations. Energy tax collections comprise as much as 30% of Russia’s federal budget.
The suspension of ship-transported liquefied natural gas production by Qatar, a major global supplier, will dramatically intensify worldwide competition for available shipments — benefiting Russian exports as well.
Moscow had experienced state energy revenues drop to a four-year minimum of 393 billion rubles ($5 billion) in January, with that month’s budget deficit of 1.7 trillion rubles ($21.8 billion) marking a record high, Finance Ministry data shows.
The reduced income resulted from weakened international prices and steep discounts caused by U.S. and European Union interference with Russia’s “shadow fleet” of vessels with unclear ownership used to transport oil to major customers China and India, circumventing Western price limits and sanctions targeting Russia’s largest oil corporations, Lukoil and Rosneft.
Economic expansion has stalled as enormous defense expenditures have plateaued. President Vladimir Putin has turned to tax hikes and increased borrowing from cooperative domestic financial institutions to maintain government fiscal stability in the conflict’s fifth year.
“Russia is a big winner from the war-related energy turmoil,” said Simone Tagliapietra, energy expert at the Bruegel think tank in Brussels. “Higher oil prices mean higher revenues for the government and therefore stronger capability to finance the war in Ukraine.”
Amena Bakr, head of Middle East and OPEC+ insights at data and analytics firm Kpler, writes: “With Middle East barrels facing logistical disruption, both India and China face strong incentives to deepen reliance on Russian supply.”
Furthermore, European natural gas futures prices have soared dramatically, creating doubts about EU objectives to eliminate Russian LNG imports by 2027 — bringing back unpleasant memories of 2022’s energy crisis when Moscow severed most pipeline gas deliveries due to the conflict.
The duration of Strait of Hormuz shipping restrictions will be critical, according to Alexandra Prokopenko, a Russian economy specialist at the Carnegie Russia Eurasia Center in Berlin.
Rapid conflict resolution would bring Brent prices back to roughly $65 per barrel, and “a short-lived spike would not fundamentally change” Russia’s budget situation, she explained. A moderate scenario with partial shipping resumption and oil stabilizing around $80 per barrel would provide Russia “some fiscal relief,” depending on price duration.
Extended closure with Iranian attacks damaging refineries and pipelines could push oil to $108 per barrel, accelerating inflation and bringing Europe near recession. “This scenario would bring the largest windfall to Russia,” she noted.
Even weeks of Gulf LNG disruption could prompt European calls to postpone plans banning new Russian supply agreements after April 25, said Chris Weafer, CEO of Macro-Advisory Ltd consultancy.
“The EU is under even more pressure to work with the U.S. to find a solution to the Ukraine conflict and, very likely, to consider easing the plan for a total block for Russian oil and gas imports,” he said. “Countries such as Hungary and Slovakia and those who have been big buyers of Russian LNG, will press for that review.”
Regardless, “the Russian federal budget will have a much better result in March,” Weafer said, citing reduced Russian oil discounts and “because there are eager buyers of Russian oil and oil products.”
Deputy Prime Minister Alexander Novak stated Wednesday that Russian petroleum was “in demand” and that Russia stood prepared to expand deliveries to China and India, Tass news agency reported.
Kirill Dmitriev, head of Russia’s sovereign wealth fund, mocked European Commission President Ursula von der Leyen and EU foreign policy chief Kaja Kallas, posting on X that “surely the wise Ursula and Kaja have a backup LNG plan. Or maybe not.”
Belgium, France, the Netherlands and Spain have maintained imports of approximately 2 billion cubic meters of Russian LNG monthly, while Hungary additionally imports 2 billion cubic meters monthly via the Turkstream pipeline crossing the Black Sea, Tagliapietra noted. This would total 45 billion cubic meters in 2026, representing 15% of this year’s total gas demand.
It’s “not easy to replace this in case the LNG market gets tighter with continued shutdowns in Qatar,” he said.
