Russia is getting an unexpected windfall from the war in the Middle East. The Kremlin’s oil revenues this month hit a four-year high as oil prices jumped to $100 per barrel amid the Iran war and the de facto closed Strait of Hormuz.
Moscow expects so much additional revenues from the oil price spike that authorities are unlikely to downgrade Russia’s economic prospects, hold off on planned budget cuts, and even boost military spending on the war in Ukraine, Bloomberg reports, citing sources with knowledge of the matter.
A month ago, Russia was considering lowering the oil price level above which it sends the proceeds to its wealth fund as oil and gas revenues were plummeting with widening discounts and key Russian buyers like India pulling out of the spot market.
But the Middle East war and the worst disruption in the history of the global oil market pushed oil prices above $100 per barrel and prompted the United States to give buyers a free pass on Russian oil purchases.
As a result, the price of Urals, Russia’s flagship crude, has now nearly doubled to about $100 per barrel as demand for Russian oil in India is soaring again.
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The oil price spike has already given Russia a reason to postpone the planned budget tightening.
Moscow has now scrapped plans to make a substantial downgrade to its economic growth forecast for 2026, according to Bloomberg’s sources.
Russian oil revenues have steadily increased in March, thanks to higher shipments and soaring oil prices, according to tanker-tracking data monitored by Bloomberg. In two of the weeks this month, Russia was estimated to cash in the highest amounts of oil revenues since 2022, just after its invasion of Ukraine drove prices above $100 per barrel.
Russia is cashing in on the Iran war even as it cannot take full advantage of the oil price spike as Ukraine targets its key Baltic Sea ports in an attempt to undermine Moscow’s oil export capabilities.
By Charles Kennedy for Oilprice.com
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