Virendra Pandit
New Delhi: When the US-Israel launched airstrikes against Iran on February 28, nobody—President Donald Trump included—had any idea that the escalating West Asian conflict would be a ‘windfall’ for Russia’s oil industry.
That’s what has happened.
Earlier, the US had tried to broker peace between Russia and Ukraine; now Russia has offered to broker peace between the US and Iran! Both the wars continue unabated without any signs of an end, not even a ceasefire.
Even the US has helped Russia turn a crisis into opportunity.
On Thursday, the US issued a so-called 30-day “waiver”—as it did for India earlier—for countries to buy sanctioned Russian oil and petroleum products currently stranded at sea, in what Treasury Secretary Scott Bessent said was a step to stabilize global energy markets roiled by the war.
Oil prices eased on Friday morning in Asia after the US waiver announcement, which, according to Russia’s presidential envoy Kirill Dmitriev, would affect 100 million barrels of Russian crude, equal to almost a day’s worth of global output, the media reported.
With Iran threatening to strike oil tankers passing through the Strait of Hormuz—it has actually bombed some of them—sparking oil and gas crisis worldwide, the ongoing conflict has suddenly boosted Russia’s oil industry. By the 13th day of the relentless war, Iran’s control on the Strait has practically disrupted nearly 25 percent flow of oil and gas.
The turmoil has created an opportunity for Russia, which has been severely sanctioned since it invaded Ukraine in February 2022. Moscow now finds new demand for its crude as countries scramble for alternative supplies.
Because of higher prices and stronger demand for its crude, Russia is now earning up to USD 150 million per day in additional budget revenues from oil sales during the West Asian crisis, according to the Financial Times.
In the first 12 days of the conflict alone, Russia may have earned up to USD 1.9 billion in additional tax revenue from oil exports. If the current price levels of around USD 100 per barrel hold, it could make up to USD 5 billion in additional revenues by the end of March 2026.
This improvement is tied to rising prices for Russia’s Urals crude, which could average USD 70– USD 80 a barrel, compared with about USD 52 a barrel in the previous two months.
Opportunity in a crisis
Since February 28, oil tanker traffic through the Strait sharply declined, disrupting exports from major Gulf energy producers. The International Energy Agency (IEA) estimated that global oil supply in March could fall by around eight million barrels per day, potentially the largest disruption on record. The result has been a sharp rise in oil prices, with Brent crude moving back towards USD 100 a barrel.
In this unusual situation, major Asian economies are turning to Russia, one of the world’s largest oil exporters, to secure alternative supplies.
Before the West Asian conflict escalated, Russian oil was trading at heavy discounts because of sanctions and pressure from the US and its allies.
Now that discount has narrowed sharply and Russian crude is trading USD 20–USD 30 per barrel above its average over the previous three months. In some Indian transactions, Russian oil is reportedly selling about USD 5 a barrel above Brent, reversing the earlier discount.
This price hike has had a direct fiscal effect on Russia’s finances. Every USD 10 rise in the average monthly oil price adds about USD 2.8 billion to Russia’s export revenues, of which USD 1.63 billion goes to the government through taxes.
China, India
The disruption in Gulf exports has pushed large Asian importers to look elsewhere for supplies. India and China, the biggest buyers of Russian crude after Western sanctions were imposed in 2022, have increased purchases further during the crisis. Imports from Russia by both these countries rose about 22 percent in the week after the strikes on Iran, compared with February averages.
India’s purchases alone are now running at roughly 1.5 million barrels per day, about 50 percent higher than early last month. Large volumes of Russian crude are currently moving across the Indian Ocean towards Indian ports, shipping analytics firm Kpler noted.
Windfall
This unexpected price surge came at a crucial moment for Russia whose tax revenue on oil exports had fallen nearly 50 percent year on year, pushing the budget deficit close to the full-year target.
Russian crude and oil product shipments dropped 11.4 percent in February to 6.6 million barrels a day, their lowest level since February 2022.
The current price rally could help Russia meet its budget targets for the current quarter, if not more.
Russia may also increase oil supply if the crisis continues. It is currently producing about 300,000 barrels per day below its Opec+ quota, meaning it could raise output if market conditions remain favourable.