A Huge Windfall for Putin

The spike in oil prices looks like it will deliver another massive windfall to Russia

In my post over the weekend, I flagged that Russia is by far the biggest winner from fighting in the Gulf. That’s because the closure of the Strait of Hormuz is flipping the global oil market from surplus to deficit in a very short period. As a result, Russian oil has gone from global pariah to now being extremely sought after, with the discount on Urals crude versus the global Brent benchmark almost disappearing. If this is allowed to persist, Russia will reap another 2022-style windfall. That windfall was so big that it - in one year - made up for all of Russia’s official FX reserves frozen by the West.

The chart above shows Russia’s tax revenues from oil (blue bars) and the Urals oil price (black line). The last datapoint for the Urals oil price is for yesterday, while the last observation for tax revenues from oil is for the month of February 2026. You don’t need much imagination to see that tax revenues will rise very sharply in March and likely rival the windfall of 2022. In recent posts, I’ve been talking about winners and losers from hostilities in the Gulf. The sad truth is that Russia is by far the biggest winner. It blows every one else out of the water (no pun intended).

The good news for Russia - unfortunately - doesn’t end there. The rise in oil prices means the maritime services ban won’t be included in the 20th sanctions package the EU plans to finally roll out next week. Greece’s shipping oligarchs are the winners in the stand-off over the services ban, even as they now make even more money in a high global oil price environment. That’s a scandal and indicative of a governance crisis in the EU. Russia’s wins don’t end there. There’s also mounting pressure in the US to cut back on Russia sanctions, with the US recently issuing a waiver to India for purchases of Russian oil. If oil prices spike again, perhaps because Iran steps up its attacks on oil tankers in the Strait of Hormuz, pressure to lift Russia sanctions will build further. Putin is winning across many fronts at the moment.