By Dmitry Antonov, Vladimir Soldatkin and Guy Faulconbridge
MOSCOW (Reuters) – The Kremlin said on Monday that Russia would do everything necessary to insulate the world’s second largest crude exporter from a global “economic storm” which has sown extreme turbulence in oil markets and raised concerns of a recession.
Brent futures fell $1.61, or 2.5%, to $63.97 per barrel, and have fallen 15% over four trading sessions due to fears about the global economy after U.S. President Donald Trump unveiled sweeping tariffs and a surprise output hike by OPEC+.
The plunge in oil prices poses a direct threat to Russia, which is spending hundreds of billions of dollars on its military campaign in Ukraine, Russia’s most expensive military operation since the Soviet-Afghan war of 1979-1989.
Kremlin spokesman Dmitry Peskov said that the oil price was being monitored very closely as it was key for funding the Russian budget.
“We are very closely monitoring the situation, which is currently characterised by extreme turbulence, is tense and emotionally overloaded,” Peskov told reporters.
“Our economic authorities are monitoring this situation very closely and, of course, are doing and will do everything necessary to minimise the consequences of this international economic storm for our economy.”
The price for Russia’s Urals blend for cargoes loading from Primorsk, Ust-Luga and Novorossiisk ports fell to around $53 per barrel, below the $69.7 per barrel average Urals price Russia has based its 2025 budget on.
Oil and natural gas sales account for a third of Russia’s federal budget revenues – which are funding a 25% rise in defence spending this year to the highest levels since the Cold War.
It was not immediately clear what impact, if any, the oil price fall would have on negotiations about a ceasefire in Ukraine. The Kremlin said on Monday President Vladimir Putin still supports the idea of a ceasefire in Ukraine, but Russia had yet to receive any answers to the questions it has asked about a truce proposed by Trump’s administration.
Imports of oil, gas and refined products were exempted from Trump’s new tariffs.
OIL RISK
For Russia, oil and gas have been its strength and weakness since the Soviets discovered vast fields in the world’s largest hydrocarbon basin in Western Siberia in the decades after World War Two.
When prices are high, Siberia’s wealth cushions the economy, bolsters state spending. But when prices are low, the economy can hit the rocks – with spectacular geopolitical consequences such as in 1991 when the Soviet Union crumbled.
Reuters reported last month that the central bank had warned of the dangers of a prolonged price collapse similar to the 1980s.
“Lower oil prices due to slowing global demand growth and the strengthening of the rouble may pose risks to the revenue side of the budget,” the central bank said on April 2.
“This may make it difficult to implement the plan for a zero structural primary deficit this year.”
Russia’s 2025 oil price assumption in the budget assumes a rouble rate of 96.5 roubles per U.S. dollar, though the rouble has strengthened this year. The rouble was trading at 86.30 against the dollar in the over-the-counter market.
Russia uses a basket of Urals and more expensive ESPO Blend crudes when calculating the average price of Russia’s oil blend for taxation.
According to Reuters calculations, the Russian oil price has declined to around 4,476 roubles per barrel, the lowest since June 2023, and down from the 6,726.05 roubles projected in the federal budget.
For the oil market, and for the world’s top two exporters – Saudi Arabia and Russia – the intensity of the “storm” will depend on three different variables: perceptions of global growth due to the trade war, future OPEC+ decisions, and the possibility of a U.S. military strike on Iran.
(Reporting by Dmitry Antonov; writing by Vladimir Soldatkin; Editing by Andrew Osborn and Emelia Sithole-Matarise)
