Russia’s oil and gas revenues are shrinking. Meduza explains what that means for the Kremlin’s war chest. — Meduza

Low oil prices, a global glut of crude, a strong ruble, and sanctions are all weighing on Russia’s oil and gas revenues. As a result, oil and gas accounted for a record-low share of the federal budget’s income in 2025, marking Russia’s weakest dependence on commodities in at least two decades. The authorities are trying to boost other sources of revenue to offset the shortfall, primarily through higher taxes on households and businesses. Without shoring up the budget this way, the state would struggle to find the resources needed to continue its war against Ukraine. Even so, the Kremlin shows no sign of moving toward peace — a choice that bodes poorly for the Russian economy in 2026.

Why are Russia’s oil and gas revenues falling?

A January report from Russia’s Finance Ministry on the execution of the 2025 federal budget showed a sharp drop in oil and gas revenues. Income from raw-material exports went down 23.8 percent, totaling 8.48 trillion rubles last year versus 11.13 trillion in 2024. ($111.2 billion versus $146 billion).

By the end of 2025, oil-and-gas revenues made up less than 23 percent of the federal budget, while other income accounted for just over 77 percent — something Russia hasn’t seen in at least two decades. The last time the share of commodity revenues fell below 30 percent was in 2020, when pandemic lockdowns crushed global demand and oil prices.

Prices remain depressed today, and that — alongside a strong ruble — is one of the main reasons Russia’s commodity revenues are shrinking. In December 2025, Russia’s Urals crude fell below $40 a barrel. The global market is awash in oil: increased production and rising inventories have outweighed the impact of potential export disruptions, according to analysts at the U.S. Energy Information Administration (EIA).

You’re currently reading Meduza, the world’s largest independent Russian news outlet. Every day, we bring you essential coverage from Russia and beyond. Explore our reporting here and follow us wherever you get your news.

Russian Finance Minister Anton Siluanov has already acknowledged that the share of oil and gas revenues in the budget is set to fall even further by the end of 2026. His deputy, Vladimir Kolychev, has warned that current trends, combined with the need to front-load spending at the start of the year, will lead to a sizable budget deficit.

That said, it’s too early to draw firm conclusions about what impact the deficit will have. Advance payments are meant to spread budget spending more evenly over the year. Additional revenues from raising the value-added tax to 22 percent will only begin to flow in beginning in the second quarter (taxes paid in the first three months cover the previous year’s fourth quarter). And the government still has tools to plug budget gaps, including higher domestic borrowing and the National Wealth Fund’s reserves (though those have shrunk by roughly half during the full-scale war).

The EIA forecasts an average Brent price of $56 a barrel in 2026, down from $69 in 2025. Urals crude trades at a discount to Brent under sanctions, yet the government’s 2026 budget assumes an average Urals price of $59 a barrel — one dollar higher than in 2025. That leaves the budget exposed to further shortfalls in oil and gas revenues. “Could oil and gas revenues end up much lower than our projections? Of course they could. That’s not something we control. We will compensate using the National Wealth Fund, as the [budget] rule provides for,” Kolychev said in January.

According to Kolychev, the Finance Ministry is counting on faster growth in non-oil-and-gas revenues this year. It was precisely to finance military spending that the authorities raised the main non-oil-and-gas tax — the VAT — to 22 percent.

What about the rest of the government’s revenues?

Amid ongoing increases in a wide range of taxes and fees on households and businesses, other revenues are in better shape than Russia’s income from oil and gas. By the end of 2025, non-commodity revenues were up 12.6 percent compared with 2024. Even so, the total haul from non-oil-and-gas sources — 28.8 trillion rubles ($377.2 billion) — still came in below what had been projected when the budget was approved back in 2024 (29.36 trillion, or $384.5 billion).

On the spending side, the federal budget overshot its targets by nearly 7 percent last year. The result was a 2025 budget deficit of 5.6 trillion rubles ($73.4 billion), or 2.6 percent of GDP — slightly below the fall estimate of 5.7 trillion ($74.7 billion).

Under the government’s plan for 2026, the budget will remain in the red, but the deficit is expected to narrow drastically, to 1.6 percent of GDP (down from 2.6 percent in 2025). Making that forecast a reality would require exceptionally strong tax collection across the economy, including flawless receipts from the higher VAT, pushing ahead with plans to ramp up domestic borrowing, and the absence of any unplanned, emergency spending, such as bailouts of state-owned companies or regional budgets.

What lies ahead for Russia’s budget?

The drop in oil and gas revenues is unfolding alongside a broader economic slowdown — one so pronounced that growth has essentially stalled. According to Russia’s Federal State Statistics Service (Rosstat), GDP growth fell to 0.6 percent in the third quarter of 2025, down from 1.1 percent the previous quarter. (Data for the fourth quarter have yet to be released.)

Other indicators point in the same direction. In January, the Central Bank’s Business Climate Index slipped to 1.7 from 2.6 a month earlier, while capacity utilization declined for a fourth consecutive quarter. The Central Bank now expects the economy to grow by just 0.5–1.5 percent this year; the Economic Development Ministry puts the ceiling even lower, at no more than 1.3 percent.

“It’s still too early to say that the current structure of the economy is forcing Russia to scale back the war,” says Alexandra Prokopenko, an expert at the Carnegie Russia Eurasia Center in Berlin. “More accurately, the current structure of the economy is screaming that the war should never have been started.” Russia’s civilian industries are in recession, Prokopenko says, and some sectors have already reached the stage of deindustrialization, since all industrial growth over the past three years has come solely from the military-industrial complex.

Civilian production is also being squeezed by prohibitively expensive credit, a result of the Central Bank’s high , which remains in the double digits. At its final board meeting of 2025, the regulator only managed to cut the rate to 16 percent. The next meeting is scheduled for February 13, but accelerating inflation driven by the VAT increase could force the Central Bank to pause further easing and keep the rate unchanged.

The structure of Russia’s 2026 budget makes clear that military spending remains an absolute priority for the Kremlin. The same can’t be said for investment in production or human capital. Between 2021 and 2025, the share of military expenditures — combining defense and national security — rose from 24 percent to 40.3 percent. Now, it is set at 38 percent for 2026. That expansion has coincided with sharp cuts to social spending, which fell from 38 percent in 2021 to 25 percent in 2026, and to outlays on the national economy, down from 17.6 percent in 2021 to 11 percent in 2025–2026.