Russia is heading into 2026 with a familiar problem wearing a sharper edge: the oil revenues that bankroll its budget — and its war — are shrinking fast.
According to Reuters calculations released Friday, Russia’s tax proceeds from crude oil production in January could fall to about 380 billion roubles ($4.7 billion), the lowest monthly take since late 2022. That would mark a 16% drop from December and a collapse of more than 50% compared with January last year. For a government that still leans heavily on oil income to fund military spending and social obligations, the timing is awkward.
Oil prices did most of the damage. Russia’s export blends were cheaper in December than in November, with average prices down about 12%, which mechanically reduced the mineral extraction tax tied to those prices. According to Argus, Russia’s main export grade Urals was selling below $35 per barrel on Friday, December 19th. The stronger rouble compounded the hit by shrinking the value of export earnings once converted into local currency. Refining margins also weakened, dragging down tax receipts from oil products alongside crude.
The mineral extraction tax is due at the end of each month and reflects the previous month’s production. For crude produced in December, the effective tax rate is estimated at about 14,266 roubles per tonne — nearly 20% lower than November and more than 50% below the level seen a year earlier. Those rates are back in territory last visited in December 2022, when the European Union’s embargo on Russian oil formally kicked in.
This slide is not an isolated data point. Reuters calculations earlier this month showed Russia’s combined oil and gas revenues nearly halved year on year in December, falling to levels last seen during the pandemic-era demand crash of 2020. Lower prices, a stronger currency, and widening discounts on Russia’s Urals crude (exacerbated by U.S. sanctions on Rosneft and Lukoil) have all squeezed cash flow.
The strain is beginning to show in policy debates. Moscow has already floated the idea of tax relief for Gazprom to cushion the collapse in pipeline gas exports to Europe. The thought being that there may be some offset by higher taxes elsewhere in the energy sector. That kind of fiscal reshuffling is very telling of the problem: oil and gas still supply roughly a quarter of Russia’s budget, but the cushion is thinning.
For now, Russia can possibly absorb the blow. But if oil prices stay soft and sanctions continue to bite, early 2026 is shaping up to be less forgiving than the Kremlin would like.
By Julianne Geiger for Oilprice.com
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