How Trump's Tariffs (Accidentally) Punched a $20 Billion Hole in Russian Oil Exports! - RFU News

Today, there is interesting news from the Russian Federation.

Here, global oil price changes have created a dangerous situation for Russia. Its budget has come under unprecedented risk to collapse, sabotaging not only Putin’s war plans but in the long term his whole government.

The recent plunge in global oil prices, triggered by President Donald Trump's new tariffs and escalating trade tensions, is placing a significant strain on Russia's economy. Although Trump didn’t place any tariffs on Russia directly, fears of a global recession, which means a major slowdown in economic activity, are already causing oil demand to drop. Increased oil production from countries like Saudi Arabia, Norway, and Brazil is contributing to an oversupply, further lowering prices. Notably, Saudi Arabia appears to be pursuing policies aimed at pushing prices even lower to resist competition from the United States and other suppliers.

The Russian economy is heavily reliant on energy exports, with oil and gas revenues constituting approximately 30 to 35% of Russia’s federal budget in 2024. Beyond the federal budget, the broader Russian economy is significantly dependent on oil exports, which generated 192 billion US dollars in 2024. Despite that the Russian government is aware of this vulnerability, and its intentions to reduce this dependency to about 23% by 2027, oil exports remain a cornerstone of Russia's economic structure.

Russia’s natural gas sector is also under pressure, with export revenues dropping over 65% in 2023 due to reduced pipeline flows to Europe. The end of the gas transit deal with Ukraine in late 2024 further cut exports. Although Russia is shifting toward Asian markets, discounted prices to attract buyers have failed to offset the losses and have squeezed profit margins.

The sharp decline in oil and gas revenues is already having a noticeable effect on the Russian economy. In February 2025, income from these key exports dropped by 18.5% compared to the same period last year. This downturn is largely driven by falling prices for Russian crude, with Urals oil trading at around $58 per barrel, well below the $70 benchmark used when planning the federal budget for this year. This was essential to keeping Russia’s projected budget deficit at 800 billion rubles. However, with oil prices collapsing, the actual deficit is now expected to surpass that target significantly, reaching approximately 2 trillion rubles, over double what Russia planned for.

In the long term, sustained low oil prices could have severe consequences. Russia’s National Wealth Fund, originally established as a financial safety net to stabilize the economy during periods of low oil revenue, has been heavily drawn on in recent years to cover soaring wartime expenses and shortages in the national budget. Analysts estimate that each $10 drop in oil per barrel costs Russia about $17 billion annually. To compensate, the Russian government is resorting to measures such as tapping into remaining reserves, increasing domestic borrowing, and introducing tax hikes on high-income individuals and corporations. However, these strategies may not be sustainable, combined with high military spending and volatile energy prices. Continued low oil prices could force deeper budget cuts, increased borrowing, or more aggressive taxation, potentially stifling economic growth.

In addition, each day of Russia’s war in Ukraine drives up costs. Sign-up bonuses and military salaries have steadily increased as enlistment drops, yet massive daily losses from 1,000 to 1,500 soldiers force ongoing recruitment to continue at any cost. At the same time, heavy equipment losses strain the defense industry budget additionally with Western sanctions making replacement parts and materials significantly more expensive.

Overall, while President Trump's tariffs are not directly aimed at Russia, their impact on global oil prices exacerbates Russia's economic challenges. As oil prices decline, Russia's budgetary constraints intensify, limiting its ability to sustain prolonged military engagements and potentially leading to internal economic and social tensions.