Oil Rally Due To Iran War Will Not Save Russian Budget

3.03.2026, 20:21
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The Russian budget is too bloated with the costs of the war in Ukraine.

Because of the war in Iran, Brent oil prices have reached $83 per barrel, but this will not help Russia balance its budget, which has been inflated by spending on the war in Ukraine, reports The Moscow Times.

For its deficit to amount to the planned 3.8 trillion rubles, the average annual export price of Russian Urals oil should be $59 per barrel, which is the basis for the budget. And for the budget revenues to equal the expenditures, $97 is required, analysts of Alfa Bank estimated.

In January, the average price of Urals amounted to $41, the results of February the Ministry of Economic Development of the Russian Federation has not yet summarized. At the same time, the price of benchmark Brent spent most of the month in the corridor of $60-70. Due to sanctions, discounts on Russian oil jumped at the end of last year and have not decreased since then: in February they amounted to $27-28.

The oil rally had almost no effect on Urals. On March 2, it cost $46.4, notes Andrey Melashchenko, chief economist at Renaissance Capital. Such Urals quotes "imply that the discount widened additionally in early March," he states.

In addition to the huge discounts that Russia is forced to give oil buyers, budget revenues are reduced by the strong ruble. The budget is based on the average annual exchange rate of 92.2 rubles/$, but so far the dollar is cheaper than 80 rubles. As a result, the ruble price of a barrel, which forms the oil and gas budget revenues, was less than 3500 rubles in February. - one third less than the planned 5440 average for the year. The preliminary estimated ruble tax price of Urals on March 2 was 3,582 rubles (Urals - $46.4 per barrel; dollar exchange rate - 77.3 rubles), Melashchenko estimates.

This is about 7% more than Russian oil cost on Friday. The growth of Urals quotations reduces the shortfall in oil and gas revenues: compensating for it sales of currency and gold from the National Wealth Fund, according to Melashchenko's estimation, will decrease from 227 billion rubles in February to about 150 billion in March. But this does not change the situation with the Russian budget dramatically.

Experts are in no hurry to revise their forecasts of the average annual oil price. BCS expects stabilization of quotations and keeps the forecast of Brent price for 2026 $63/barrel, writes analyst Kirill Bakhtin: At the same time ruble prices remain extremely low, he notes: "The problem is still the same: a high discount, which has held since the end of last year, and a strong exchange rate of the national currency."

Russian authorities are also not deceived about the long-term growth of global oil prices. Kirill Tremasov, adviser to Central Bank Chairman Kirill Tremasov, urged not to pay attention to short-term price fluctuations, but to focus on the forecast of a long-term balanced oil price. "Supply disruptions... will be temporary in any case," he said confidently.

Minfin, due to the fact that oil prices are much lower than budgeted in the budget, is urgently preparing changes in the budget rule in order to save the balances of the National Oil Fund. The so-called cut-off price will be lowered, which will automatically entail a reduction in the basic oil and gas revenues of the budget. This will reduce sales of foreign currency from the National Wealth Fund and weaken the ruble. If the cut-off price is reduced to $50 per barrel, it may add 2-3 rubles to the average annual dollar exchange rate, which is favorable to the budget, according to Alexander Potavin, a leading analyst at Finam.

This is much less than the budget needs. At current Urals prices, the dollar should rise to 117.5 rubles to balance the budget, according to Reuters.

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Oil Rally Due To Iran War Will Not Save Russian Budget

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