Russia’s Oil Revenue Plummets as U.S., EU Sanctions Cut Through Shadow Tankers; Budget Pressures Rise

Russian oil and gas revenues, once a critical funding source for the war in Ukraine, have sharply declined as U.S. and European Union sanctions target major exporters and shadow tankers. Since Nov. 21, Rosneft and Lukoyl face banking system exclusion, while the EU began banning refined products from Russian crude and is considering a ban on seaborne oil shipping. Sanctions have driven discounts on Urals crude to about $38 per barrel, a $25-per-barrel wider than Brent, and build-up of about 125 million barrels at sea has inflated tanker rates to $125,000 per day. January state oil and gas taxes fell to $5.1 billion, the lowest since the pandemic. Slowing growth (Q3 GDP +0.1%, 0.6%–0.9% forecast for 2026) and persistently high inflation (5.6%) are squeezing the budget. Moscow has raised VAT to 22% and increased borrowing to offset revenue shortfalls, signaling potential for a reduction in war intensity as costs escalate.