The price of the single most important commodity needed by the Kremlin to balance the Russian Federation’s state budget – Russian Urals crude oil – fell below $40 per barrel for the first time in five years, the Moscow Times newspaper reported on Wednesday.
The average price in December 2025 dropped to $39.18 per barrel, down 13% from November and 41% from January earlier in the year. As a result, Russian oil exported in January 2026 was priced at its lowest level since May 2020, during the peak of the COVID-driven economic contraction, the article states.
The report attributed the price decline to the imposition of US sanctions against Rosneft and Lukoil, which pushed Urals crude discounts to Brent crude in the Black and Baltic Seas to a record-low $26-28 per barrel.
Most analysts estimate that about one-quarter of the Russian federal budget is directly dependent on overseas energy sales. Low oil export prices directly threaten Russian state funding with potentially crippling deficits and inflation. The Russian state in 2026 projected the national government would finish out the year at a small deficit, with an assumed $59/bbl (barrel) price baked into the plan: more than twice the price Russian oil is currently selling for.
Western sanctions, tightened enforcement, and recent US measures targeting major Russian producers like Rosneft and Lukoil in late 2025 and early 2026 cut into Russian export earnings by increasing shipping risks, forcing Russian exporters to use expensive “shadow tankers” with false flags to bypass sanctions and to offer steep discounts to buyers.
Worldwide, the prevailing price for similar non-Russian (light/sweet) benchmark crude like Brent is around $63-$65 per barrel, but major buyers like India and China have increasingly become hesitant to buy Russian oil in quantity for fear of being sanctioned by the US and EU themselves.
An intensifying international campaign directly targeting the operations of Russia-associated “shadow fleet” tankers has likewise undermined Russian capacity to bring product to market reliably, pushing sellers to offer even deeper discounts. Some interdictions, like the Tuesday drone strikes against four flag-of-convenience tankers thought to be moving product near the Black Sea port of Novorossiysk for Russian oil companies, have taken the form of conventional military strikes by Ukraine seeking to sink or destroy enemy vessels.
Others, like a US-led chase lasting two weeks and covering 2,000 nautical miles of a Russia-flagged tanker and ending with Coast Guard boarding teams taking over the vessel, have been complex law enforcement operations aiming to take a sanction-evading ship into custody.
Since October 2025, tankers probably controlled by Russia have been stopped, boarded, attacked, and in rare cases sunk in waters around the Straits, off Libya’s shores, in the eastern Mediterranean, and in the southeast Atlantic, while the EU in December alone declared another 41 tankers used largely by Russia under sanction.
The UK government – critical to sanction enforcement because of the concentration of shipping insurance corporations in London and overseas UK territories – is considering new law that would allow the cargos of Russian oil aboard sanctioned and captured tankers to be sold to help finance arms and military material deliveries to Ukraine, the Times newspaper reported on Wednesday.
Senior Kremlin officials led by President Vladimir Putin have claimed international sanctions and even outright boarding and capture of Russian tankers carrying Russian oil to Russian customers won’t affect the Russian economy, which, according to them, is basically sound.
Putin, in Oct. 23, 2025 comments reported by the TASS news agency, in response to new US sanctions targeting major Russian oil companies like Rosneft and Lukoil, said Russia’s adversaries were weak, and the Russian economy is resilient to energy industry shocks: “Regarding the new sanctions, first of all, there is nothing new about it. Yes, they are serious for us and may have certain consequences, but they will not significantly impact our economic health.”
The Russian leader, in Dec. 19 remarks during a nationally televised program featuring telephone calls and questions from “average” citizens doubled down on the narrative that the Russian economy is solid despite near stagnant growth: “The slowdown in economic growth this year to around 1% [from higher previous rates] is a conscious decision by the authorities and the Central Bank to bring down inflation....The economy is stable, macroeconomic stability is ensured, unemployment is at historic lows, international reserves are growing...and we can now gradually increase economic momentum while keeping inflation moderate.”
Yet, per Russia’s own Finance Ministry statistics, as of late 2025, 56 out of 89 regions under Russian Federation authority were operating with an aggregate deficit of 169.2 billion rubles ($2.2 billion) – with the regions’ industrial and energy-dependent regions Kemerovo, Irkutsk, Yamalo-Nenets, Tyumen, and Nizhny Novgorod among the most in the red.
In the remote central Siberian Republic of Khakassia, reportedly, a 65-70% gap between tax revenues and government service costs forced, as of January, the “temporary” curtailment of salary payments to most workers in the public education and health care sectors, regional news platforms report.
According to unconfirmed independent Russian media reports first surfacing on Jan. 11, the oil-rich and energy-producing Saratov region – one of the most frequent targets of Ukrainian drone raids on local refineries for the past eight months – is in effective default due to tax revenue shortfalls. Local media profiled regional parliament deputy Aleksandr Anidolov stating in a financial planning meeting that Saratov region “is effectively in default” and that its leadership had formally requested the federal government to write off about 12.5 billion rubles ($159 million) in debt to prevent the collapse of local government services. Mainstream Russian media have not confirmed Anidolov’s claims.