Blow for Putin's war machine. Russia's oil and gas revenues collapsed in January. What does this mean?
Declining oil and gas revenues are bad news for Russia's economy. These revenues are the main source of liquidity for the Kremlin, representing almost a quarter of the federal budget's revenues, writes Reuters.
Russia's oil and gas revenues halved in January from the same month last year, hitting the lowest level since July 2020, according to finance ministry data cited by Reuters.
The decline was driven by lower oil prices and a stronger ruble. Oil and gas revenues are crucial to Russia's state budget, which has seen a deficit of 5.6 trillion rubles, or 2.6 percent of gross domestic product, in 2025.
January's revenue figure of 393.3 billion rubles ($5.10 billion) also fell from December's 447.8 billion rubles.
Oil and gas revenues are the main source of cash for the Kremlin, accounting for nearly a quarter of federal budget revenues, which have been depleted by high defense and security spending since Russia began its invasion of Ukraine in February 2022, Reuters writes.
The budget is expected to collect 8.92 trillion rubles from oil and gas sales this year. Total budget revenues for 2026 are estimated at about 40 trillion rubles.
Last year, Russia's federal budget revenues from oil and gas fell 24 percent to 8.48 trillion rubles, the lowest level since 2020.
Why have hydrocarbon revenues decreased?
The fact that Russia is making less and less money from the sale of fossil fuels is not surprising in itself – a global glut of crude has sent oil prices down everywhere. In addition, a strong ruble meant Moscow was earning less in its own currency.
But years of Western sanctions, including US President Donald Trump's decision in October to target Rosneft and Lukoil — Russia's biggest oil exporters — appear to be increasingly eroding much-needed oil revenue for Moscow.
Since the October sanctions, the discount at which Russia is forced to sell its oil to tempt its trading partners to risk purchases has doubled.
In December, the price of Russia's Urals oil fell below $40 a barrel – the lowest level since global oil prices collapsed in the early days of the Covid-19 pandemic.
Including the former Biden administration's decision to sanction the country's third and fourth oil exporters, that means four-fifths of Russia's oil production is now under US sanctions.
And unlike previous sanctions, these latest measures don't just affect the companies mentioned, but anyone who does business with them.
A campaign against Russia's “ghost fleet”.
To sell its oil at higher prices, Russia has become increasingly dependent on what some have called a “ghost fleet,” made up of aging commercial tankers with unknown owners.
In early January, the French navy stopped an oil tanker in the Mediterranean Sea and forced it to dock in Marseille. The captain, who like all the crew members is an Indian national, was detained.
French President Emmanuel Macron accused the oil company of helping to “finance Russia's war of aggression against Ukraine.”
“We are witnessing an increasingly intense campaign against Russia's ghost fleet – it seems that both the Americans and the Europeans are ready to raise the stakes and start confiscating these ships, which increases the cost of transport,” Alexander Koliandr, a financial analyst and senior researcher at the Center for European Policy Analysis, told France 24.
“All of this leads to the buyer trying to undercut prices. That's where the undercutting comes from,” he said.
The economy is slowing down
To make up for the shortfall, the Russian government has already started raising a number of domestic taxes, including VAT to 22%, as well as the threshold below which small businesses are exempt from paying it.
Although Russia's war economy has driven up wages in some of the country's poorest regions, the overall economic picture is less rosy.
Economic growth has slowed as the central bank fights inflation with high interest rates and social spending has already been cut from 38% in 2021 to 25% this year.
