Skip to content
You can now search across every topic, entity and event.What's new
Iran Conflict 2026
25JUL

Russia's windfall month, and the cracks

3 min read
11:58UTC

Russia's oil and gas revenue jumped 32.4% year-on-year in May, yet at his St Petersburg forum Deputy PM Novak cut the 2026 growth forecast to 0.4% and bosses aired the strain.

ConflictDeveloping
Key takeaway

Russia's May oil revenue rose 32.4%, yet Novak cut 2026 growth to 0.4% as the windfall fades.

Russia's oil and gas revenue jumped 32.4% year-on-year in May, to 678.9bn rubles, a sharp reversal from the 38.3% Jan-April fall reported last week 1. The cause was the Hormuz disruption from the Iran war, which pushed Urals crude to nearly $97 a barrel on average; by 4 June Urals had already fallen back to $87.40, unwinding the windfall. The May total still leaves Russia below its full-year revenue pace, on top of a Q1 deficit that already overshot the whole-year target .

The candour came from Russia's own boardrooms. At the forum, Deputy Prime Minister Alexander Novak cut the 2026 GDP growth forecast to 0.4%, from 1.3%; Severstal chairman Alexei Mordashov disclosed a 24% cut to capital spending and negative cash flow; and Aeon founder Roman Trotsenko said "the old model has stopped working" 2.

Brussels moved to lock in the squeeze: the EU's 21st sanctions package, due this week, would freeze the oil price cap to stop Russia capturing exactly the kind of windfall May delivered. GL 134C, the US Treasury licence that lets Russian crude keep reaching global buyers, expires on 17 June with no successor in sight, leaving the decisive move to Washington, and at $87 a barrel the market-stability rationale Treasury used for past extensions is thinner than it was.

Deep Analysis

In plain English

Russia earns most of its war funding from selling oil and gas. May 2026 was a good revenue month because the Iran war had pushed oil prices up globally, and that lifted what Russia earns per barrel even while it sells fewer barrels due to Western sanctions and Ukrainian strikes. But that price boost is already fading: Urals crude (the Russian variety) dropped from around $97 in May back to $87.40 by early June. At SPIEF, Russia's annual St Petersburg investor conference, Severstal chairman Alexei Mordashov disclosed a 24% cut to capital spending and negative cash flow, and Aeon founder Roman Trotsenko said the old economic model has stopped working. GL 134C is a US Treasury waiver that lets global buyers purchase Russian crude; it expires on 17 June with no replacement announced, which would tighten the sanctions net further.

Deep Analysis
Root Causes

Russia's pre-war economic model relied on Western technology imports for capital goods, Western financial clearing for oil revenue, and domestic credit at moderate rates. All three channels have been disrupted since 2022.

The Mordashov 24% capex cut at Severstal reflects the broader freeze in industrial investment: at 16-21% Central Bank interest rates, borrowing to invest is prohibitive for any project with a payback period over two years. GL 134C's 17 June expiry is the third consecutive 30-day waiver; its non-renewal would remove the legal pathway for third-country Russian crude buyers.

What could happen next?
  • Risk

    GL 134C expiry on 17 June without a successor would remove the legal pathway for third-country Russian crude purchases, tightening the sanctions net and potentially driving another short-term price spike.

  • Consequence

    Novak's 0.4% GDP forecast represents the Russian government's own admission that wartime substitution spending is no longer generating growth, which removes the economic legitimacy argument Putin uses domestically.

First Reported In

Update #19 · Ukraine burns the Baltic Fleet at Kronstadt

Pravda USA (citing Russian Ministry of Finance)· 9 Jun 2026
Read original
Different Perspectives
Oil traders
Oil traders
Sent Brent down 2.29 per cent to $98.38 a barrel on reports that mediation was reviving, moving the price on CENTCOM's quiet night rather than on Trump's same-day promise of a bigger operation with no deadline attached.
Iran
Iran
An Iranian official called the same mediation account completely misleading, denying it received any US proposal via Baghdad on the same day Iraq denied delivering one, leaving neither denial able to settle what actually passed between the two capitals.
Iraq
Iraq
Called groundless the New York Times account that its prime minister carried a US ceasefire proposal to Tehran, a denial that also protects Baghdad's effort to avoid becoming a party to a war fought by aircraft it does not control.
OHCHR
OHCHR
Recorded 17 civilian seafarer deaths since the war began, a population neither the Pentagon nor Iran's Health Ministry counts in its own tally, and called for urgent action on 6,000 crew stranded across roughly 400 vessels in the Strait of Hormuz.
Houthis
Houthis
Enforced the blockade on Saudi-linked shipping it declared on 20 July by hitting the NCC Masa and then an Aramco facility at Jazan, moving from radio warnings to strikes on land after four days without a confirmed hit.
Saudi Arabia
Saudi Arabia
Struck Houthi military sites near Hodeidah the same day the NCC Masa was hit, while its coalition spokesman insisted Hodeidah, Ras Issa and Salif all remain open to navigation. The distinction protects the ports Yemen's population depends on for food and fuel even while punishing the group behind the tanker strike.