Russian crude oil prices have fallen below US$60 a barrel, in a major blow for the Kremlin. Revenues from oil and gas are a major source of income for Putin’s regime, accounting for between a third and half of Russia’s federal budget over the last decade.
The money from these fossil fuels plays a vital role in helping Russia to finance its war in Ukraine. The war is costing Putin over £262million a day, according to a report published last year by a researcher from Germany’s Stiftung Wissenschaft und Politik(SWP). That figure seems only likely to increase, with the Kremlin having allocated £117billion for defence spending in 2025 – an increase of 25% on last year.
In order for Russia to be able to balance its budget, it needs to sell its crude oil for US$77 (£60) per barrel, say analysts at the Institute of International Finance.
However, current prices for Urals crude have dipped well below that figure, adding to the Kremlin’s ever-growing list of economic woes.
Kyrylo Shevchenko, a former head of Ukraine’s National bank, noted in a post to his X social media account: “Urals crude slides below G7’s $60 cap—a fragile line for Russia’s finances.
“The squeeze isn’t just on Moscow’s oil trade; it’s on its economic future.”
The price cap on Russian oil is part of a number of Western sanctions imposed on the Kremlin in the wake of its full-scale invasion on Ukraine in February 2022.
G7 finance ministers agreed to the measure at a summit at the beginning of September 2022, in a bid to disrupt the Kremlin’s ability to finance its war.
Since the introduction of sanctions, India and China have become the main buyers of Russian oil.
India spent over £25billion on Russian crude oil between 2022 and 2023, while China forked out £49billion.
However, shipping costs have surged over the past 12 months or so, with the price of transporting one million barrels of Russian oil to India jumping to US$7.9million (£6.1m), up from US$5.6million (£4.3m) in late 2023.
One of the main reasons for the hike in prices was the introduction in January of new sanctions targeting Russian oil exports.
These are specifically aimed at tankers that carry about 42% of Russia’s seaborne oil exports.
