Russia’s Oil and Gas Revenues Set to Halve in December, Hitting Lowest Level Since August 2020

Gerik

Summary:

Russia's oil and gas revenues are projected to fall by nearly 50% year-over-year in December 2025 to just 410 billion roubles ($5.17 billion)...

December Decline Reflects Dual Price and Currency Headwinds

According to Reuters calculations based on industry and official data, Russia’s hydrocarbon revenues are expected to fall sharply in December to 410 billion roubles nearly halving from the same month a year earlier. This would bring monthly earnings down to levels not seen since August 2020, when pandemic-related demand collapse drove oil prices to historic lows.

This slump is primarily attributed to two converging factors: weakening global crude prices and a strengthening rouble. The price of Russian oil, converted into roubles for tax purposes, dropped 17.1% from October to 3,605 roubles per barrel in November, sharply compressing government revenue.

Full-Year Shortfall Undermines Fiscal Planning Amid Rising War Costs

The sharp monthly decline adds to a broader trend of fiscal underperformance. Total oil and gas revenues for 2025 are now expected to fall to 8.44 trillion roubles below both the Finance Ministry’s October revision of 8.65 trillion and far short of the original projection of 10.94 trillion roubles. The shortfall underscores the fragility of Russia’s energy-dependent budget at a time when military and security spending continues to rise due to its ongoing conflict in Ukraine.

Hydrocarbon revenues account for roughly a quarter of Russia’s federal budget, meaning the drop will significantly constrain fiscal maneuverability. With Western sanctions limiting financing options and restricting technology imports, the narrowing budget surplus places added pressure on the Kremlin to either curb spending or tap into reserves.

Geopolitical Implications: Economic Leverage as a Tool of Pressure

The deteriorating revenue picture highlights the success of Western strategies aimed at weakening the Russian economy to undermine its war effort. The U.S. and EU have repeatedly stated their goal of cutting off Moscow’s primary revenue streams in order to force de-escalation in Ukraine. The latest figures suggest that sanctions, price caps, and shifts in global oil demand are beginning to bite.

Still, Russia remains the world’s second-largest oil exporter and has found alternative buyers in Asia, particularly China and India, although often at discounted rates. Nonetheless, declining margins from these deals combined with falling global benchmarks are constricting Russia’s fiscal space more than in previous years.

2026 Outlook Clouded by Energy Market Volatility and War Spending

With the Finance Ministry set to publish its final December revenue estimate on January 14, all eyes will be on whether the current revenue slump stabilizes or worsens. Given that crude markets remain under pressure from fears of oversupply and weakening demand, and with the rouble likely to remain firm under limited capital outflows, Russia’s near-term fiscal prospects appear bleak.

Unless energy prices rebound or Russia secures higher-priced contracts outside the Western-dominated financial system, its ability to finance prolonged military operations or sustain domestic spending commitments will face increasing constraints heading into 2026. The Kremlin’s economic resilience is once again being tested not just by sanctions, but by the global market forces reshaping energy economics.

Source: Reuters

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