In November 2025, the price of Russian Urals oil fell to $44.7 per barrel, reaching its lowest level since November 2020. Since the start of the year, the price has dropped by 33%, losing nearly $23 per barrel. This decline is the result of a combination of Western sanctions, Russia’s structural economic issues, geopolitical pressures, and shifts in the global oil market.
The impact of sanctions was significant, especially those imposed in October 2025 by the Trump administration against oil giants Rosneft and Lukoil. The restrictions affected not only the main companies but also 34 subsidiaries, covering the entire oil business chain—production, refining, logistics, and tanker fleet. The sanctions blocked transactions in US dollars and cooperation with American banks. Secondary sanctions were also implemented, extending to global financial organizations interacting with Russia’s energy sector.
Due to falling prices, the Russian government revised its budget plans: the original expectation was based on a $70-per-barrel oil price, but that proved unrealistic. The budget deficit grew, and oil revenue fell to just 12% of the planned amount by late November. Military spending increased to a record 13.5 trillion rubles in 2025, worsening the situation. To finance the deficit, authorities used the National Welfare Fund and raised the VAT rate from 20 to 22%, which is expected to trigger further inflation.
Russian oil companies are trying to circumvent sanctions using grey tanker fleets and asset sales, but these efforts have largely been blocked by US and partner actions. Additional pressure comes from Ukrainian strikes on Russian oil infrastructure, reducing export capacities by up to 17% in some directions.
The international oil market remains unfavorable for Russia: oversupply and reduced tensions in the Middle East are pushing prices down. The Urals oil discount to Brent reached 23% in November. Coming months will be critical, as a further drop in export revenues may result in further ruble depreciation, leaving the government to choose between raising taxes, cutting military spending, or increasing debt.
The situation is not yet catastrophic, but the signs of major structural issues are clear. Continued sanctions and external pressure are likely to worsen negative trends for the Russian economy.
