FRANKFURT, Germany — A temporary authorization from the U.S. Treasury Department permitting India to purchase Russian crude oil for the next 30 days has provided an unexpected financial lifeline to Moscow amid the ongoing Middle East conflict, as energy revenues continue funding Russia’s military operations in Ukraine.
Treasury officials announced this week that India may continue importing crude oil and petroleum products from Russia through April 4.
The temporary authorization aims to reduce pressure on oil prices that impact American consumers at the gas pump. However, it also highlights how the escalating U.S.-Israeli confrontation with Iran is creating tighter global energy markets — benefiting Russian crude exports.
Following Russia’s comprehensive invasion of Ukraine in February 2022, China and India emerged as Moscow’s primary oil customers after the European Union — previously Russia’s largest buyer — implemented a comprehensive boycott.
President Donald Trump had imposed 25% tariffs on India for maintaining Russian oil purchases. Indian imports from Russia decreased after Trump removed the tariff on February 6, following what he described as India’s commitment to cease Russian oil purchases.
International benchmark Brent crude climbed to $89 per barrel on Friday, rising from approximately $73 one week earlier, just before the Middle East conflict intensified. Russia’s Urals export blend reached $70, jumping from below $40 as recently as December.
The expanding Iranian conflict and threats of Iranian drone or missile strikes have effectively halted tanker traffic through the Strait of Hormuz, the sole maritime route from the Persian Gulf that handles 20% of global oil transportation.
Vessels navigating the strait, which borders Iran to the north, transport energy supplies from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the United Arab Emirates and Iran. Currently, no shipments are passing through the waterway.
Rising oil prices following the practical closure of the Strait of Hormuz chokepoint have created at least a temporary financial recovery for Russia’s energy sector revenues.
These revenues had declined due to previously low global prices and intensifying Western sanctions targeting Russia’s “shadow fleet” of vessels with unclear ownership used to circumvent price limits established by the Group of Seven nations, along with sanctions against Russia’s largest oil companies, Rosneft and Lukoil.
In approving India’s month-long exemption, Treasury Secretary Scott Bessent stated the 30-day timeframe would “not provide significant financial benefit” to Moscow since it only covers Russian oil sitting on tankers without buyers.
Industry experts estimate approximately 125 million barrels of crude could be involved.
“This stop-gap measure will alleviate pressure caused by Iran’s attempt to take global energy hostage,” Bessent wrote on X.
Russian oil continues trading at a substantial discount compared to international benchmark Brent. Nevertheless, Russian crude now exceeds the $59 per barrel baseline included in the Russian Finance Ministry’s 2026 budget projections.
Energy tax revenues can represent 20% to 30% of Russia’s federal budget. Taxation is calculated on oil prices after Russian producers cover approximately $15 per barrel in costs, meaning price drops can significantly reduce government income.
Furthermore, the suspension of seaborne liquefied natural gas production by major supplier Qatar — halted following an Iranian drone attack on Qatar’s primary LNG facility early in the Iran conflict — will dramatically intensify global competition for available shipments, including Russian supplies.
European natural gas futures prices have skyrocketed, creating uncertainty about the EU’s strategy to eliminate remaining Russian gas imports by 2027.
The conflict’s duration will largely determine the outcome. During the first week, consequences from the confrontation that began with U.S. and Israeli strikes on Iran on February 28 are expanding to involve more than a dozen nations.
Energy market specialists suggest that if hostilities conclude within one to two weeks, oil prices could rapidly return to pre-conflict levels around $65 per barrel, providing minimal benefit to Russia.
However, an extended conflict — one causing lasting damage to oil infrastructure, pipelines and terminals in Saudi Arabia, Iraq, the UAE and Kuwait, driving oil prices above $100 per barrel — could generate substantial long-term profits for Russia.
Russia experienced state oil and gas revenue dropping to a four-year low of 393 billion rubles ($5 billion) in January, with the month’s budget deficit of 1.7 trillion rubles ($21.8 billion) marking the largest on record, according to Finance Ministry data.
Economic expansion has stalled as massive military expenditures have plateaued. With declining oil and gas revenues for the state budget, President Vladimir Putin has implemented tax increases and expanded borrowing from cooperative domestic banks to maintain fiscal stability in the war’s fifth year.
When questioned about the waiver, Kremlin spokesperson Dmitry Peskov acknowledged increased demand for Russian oil amid the Middle East war and stated that “India and China are guided by their national interests, and we do the same.”
“We continue our cooperation, including the energy field and energy trade, with India and China,” Peskov stated.
“We note a significant increase in demand for Russian energy resources in connection with the Iran war,” he continued. “Russia has been a reliable supplier of oil and gas. It can guarantee all contracted supplies.”
