A windfall for Putin: The consequences of the Iran war have plugged the huge financial gap in the Russian budget. Image: keystone
The war in the Gulf has caused oil and gas prices to explode, pouring billions into the Kremlin’s ailing coffers.
May 7, 2026, 7:32 p.mMay 7, 2026, 7:32 p.m
At the end of February, the gloomy outlook for the Russian economy was probably keeping the Kremlin’s economists awake: the boom that had set in after the switch to a war economy seemed to be coming to an end and the financial reserves were melting like snow in the spring sun due to the structural decline in world market prices for oil and gas since 2023. The horrendous costs of the war in Ukraine created a huge funding gap in the Russian budget. Moscow was expecting one this year Deficit of the equivalent of around 38 billion francs.
Because of its war of aggression, Russia had lost the West as a buyer for its oil, while India and China stepped into the breach as importers, but were unable or unwilling to fully compensate for the loss. China in particular also negotiated generous discounts on Russian energy supplies. In order to continue financing the war, Putin was forced to increase unpopular taxes on companies and the population at the beginning of the year.
Massive increase in oil and gas prices
This changed with the American-Israeli attacks on Iran, the Iranian counterattacks on the oil and gas infrastructure in the Gulf states and the Iranian blockade of the Strait of Hormuz, through which around a fifth of global oil shipments are shipped. At least with regard to the Russian financial situation, the Iran war may have provided the Kremlin with at least short-term relief: the international price of North Sea Brent oil, which had been around $70 per barrel before the outbreak of the war, rose by twelve percent within a few days; later he reached one Peaked at about $126 a barrel and thus the highest level in more than four years. The price increase for Russian oil was a remarkable 72 percent. And also gas became more expensive in Europe and Asia noticeable because Qatar, the world’s largest liquefied natural gas producer, failed.
Development of the oil price for the Brent variety from mid-2025 to April 2026.
In addition, US President Donald Trump’s decision to to temporarily lift sanctions on Russian oilcaused people to jump for joy in the Kremlin. In addition, the US Treasury Department gave temporary approval to buy Russian oil already on tankers, which allowed Moscow to sell the oil at market prices. And finally, the discounts that Moscow had to grant Beijing on Russian oil exports to China fell significantly. All of this increased the Kremlin’s revenue – but by how much exactly?
Doubled export revenue
According to estimates, Russia will already be in March Kiev University of Economics (KSE) have earned up to $760 million every day from the sale of raw materials, such as Business Insider Poland reported. Russian export income is said to have doubled from 12 to 24 billion US dollars in March. At the end of March, the KSE calculated three different scenarios – depending on the duration of the war and the state of the supply chains:
- Optimistic scenario:
With the active war phase lasting six weeks and energy supplies recovering within a month, Russia is expected to generate around $84 billion in additional export revenue this year, resulting in $45 billion in additional revenue for the state budget. This scenario is now outdated. - Moderate scenario:
If the war and the delivery bottlenecks last until the end of May, the additional income from export revenues will climb to $161 billion and the additional budget income will rise to $97 billion. - Pessimistic scenario:
If the war continues for six months and supply chains recover only slowly, the increase in export revenue could rise to $252 billion and additional budget revenue to $151 billion. This would give Moscow a budget surplus and allow high military spending for years to come.
Blessing of money in April
Information from the Russian Ministry of Finance is now available for April – the first month in which the price increases on the world markets as a result of the Iran war were fully noticeable. Accordingly, tax revenue from raw material extraction rose from 443 billion rubles (around 4.6 billion francs) in March to 917 billion rubles (around 9.6 billion francs) in April, i.e. more than twice as high. The majority of this (the equivalent of around 7.8 billion francs) came from income from the oil business. The increase could have been even higher if Ukraine had not carried out several successful attacks on the Russian oil industry.
However, the windfall does not fully reach the budget, because the government gave half of the oil revenue back to the Russian petroleum industry in order to curb the inflation of gasoline and diesel in the country. In addition, the companies should use the funds to repair and modernize their refineries.
Of course, the war in the Gulf is not only positive for Moscow: long-term Russian projects in Iran, such as the delivery of nuclear power plants, are likely to have become obsolete. The war also means that Irtan is no longer a hub for circumventing Western sanctions. There could also be a noticeable cooling in Russian-Iranian relations, as Moscow has so far provided little concrete help to its ally in the war. And the windfall could also prove to be a short-term interim high for the Russian economy – its structural problems have still not been solved. (dhr)
With material from the SDA news agency.
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