The price of Russia’s benchmark Urals crude oil has fallen to levels last seen before the recent escalation in the Middle East, intensifying pressure on Kremlin finances already strained by the war in Ukraine. According to data from Argus Media, Urals averaged $41.66 per barrel at Russia’s western ports during the first three days of July — less than half its peak level recorded in April during the height of oil market turmoil linked to regional tensions.
Revenue Reversal
Russia’s Ministry of Finance uses these figures to calculate oil-related tax revenues. Early data signal growing fiscal strain for Moscow, which had been enjoying windfall earnings amid Middle East instability. When the Strait of Hormuz — a critical maritime chokepoint — saw near-total disruption, global supply tightened, and U.S. sanctions waivers further boosted demand for Russian oil.
Budgetary Impact
From March onward, Urals’ average monthly price exceeded the $59-per-barrel assumption embedded in Russia’s 2024 budget — reaching $60.92 in June. That surge coincided with the resumption of traffic through the Strait of Hormuz after a provisional agreement between Washington and Tehran restored operations on this vital sea lane.
The resulting revenue spike allowed Russia — which relies on oil and gas for roughly one-fifth of its federal budget — to resume replenishing its National Wealth Fund for the first time in nearly a year and delay cuts to non-priority spending.
Fiscal Risks Mount
Now, if Urals prices remain below the budgeted threshold for an extended period, it will further complicate the Kremlin’s ability to manage a widening fiscal deficit. The costly war against Ukraine has entered its fifth year, and Russia’s budget shortfall ballooned to 6 trillion rubles ($77 billion) — or 2.6% of GDP — in the first five months of 2024, already exceeding the full-year 2024 target by about 60%.