Ural gold: higher oil prices will not cover the budget deficit
The escalation of the conflict between the United States and Iran and rising oil prices may increase Russian budget revenues, but this will not completely eliminate the deficit, experts interviewed by Izvestia believe. According to their estimates, if the average cost of Urals stays at $60-70, the treasury may receive an additional 1.5–2 trillion rubles, but this will reduce the deficit from only 1.6% to 1.5% of GDP. Real incomes may be lower: exporters often sell oil at large discounts. Against this background, the government is not abandoning plans to reduce the cut-off price in the budget rule and has already suspended operations within its framework. How an increase in oil prices can affect federal and regional spending is described in the Izvestia article.
How much money can the budget get from rising oil prices
The escalation of the conflict between the United States and Iran and the risks of supply disruptions through the Strait of Hormuz have pushed oil prices up. As of March 5, Brent is trading at about $84 per barrel, while Russian Urals is trading at about $70. At the same time, the federal budget for this year was designed based on a price of about $59.
More expensive raw materials can bring additional revenue to the treasury. If the average Urals price exceeds $60-62 per barrel in 2026, the budget will be able to receive at least 1-1.5 trillion rubles in additional oil and gas revenues, said Natalia Milchakova, a leading analyst at Freedom Finance Global. This will increase the revenue side by about 7-8% and reduce the deficit to 1.5% of GDP.
If the average Urals price remains at about $70, additional revenues may amount to 1.8–2.2 trillion rubles by the end of the year, says Igor Isaev, head of the Mind Money analytical center. For comparison, by the end of 2025, oil and gas budget revenues amounted to 8.5 trillion.
However, much will depend on the duration of the price increase. If the current quotes hold for at least three to six months, the budget will indeed receive more than 1 trillion rubles of additional funds, according to the financial adviser and founder of Rodin.Capital Alexey Rodin. Earlier, Politico newspaper, citing an internal Pentagon document, wrote that the United States was considering a scenario in which a military operation against Iran could last at least 100 days. At the same time, it is possible that the conflict will drag on until September.
At the same time, market quotations do not always reflect the real income from exports. Public data on the Urals price often differ from the actual terms of supply, said Dmitry Gusev, Deputy Chairman of the Supervisory Board of the Reliable Partner Association. According to him, because of the sanctions, Russian exporters often provide additional discounts that are not visible to the market. As a result, some oil shipments may be sold for less than $60 per barrel, depending on supply conditions. In this case, the increase in quotations may not have a significant impact on the budget deficit, which is currently projected at 1.6% of GDP.
The specifics of the tax system also affect revenue. When calculating the mineral extraction tax (MET) and the tax on additional income from hydrocarbon production (NDT), the larger of two values is used: either the actual price of Urals for the tax period, or the estimated cost of Brent minus the established discount, explained Valery Andrianov, associate professor at the Financial University under the Government of the Russian Federation. This discount is gradually decreasing: in 2024 it was $15 per barrel, in 2025 - $10, and in 2026 — $6.
In practice, this leads to the fact that the tax base may exceed the real incomes of companies. Thus, the average price of Brent in February was about $70.4 per barrel, while the actual discount on Russian oil in ports reached $27-28. This means that the real value of Urals could be at the level of $42-43 per barrel. However, taxes are calculated based on the value of Brent less the established discount of approximately $64. In other words, oil companies are paying more than they could based on the actual selling price, the expert noted.
Against the background of these imbalances, the Ministry of Finance is discussing the adjustment of the budget rule.
The budget rule is a mechanism that restricts the use of oil and gas revenues. The base price of oil is included in the budget (the "cut—off price") — revenues from the sale of raw materials within its limits go to current expenses, and excess profits go to reserves, primarily to the National Welfare Fund (NWF). If prices fall and there is not enough income, funds from the fund can be used to cover the deficit.
Currently, the base price of oil in the budget rule is $59 per barrel. Initially, it was supposed to gradually reduce it by $1 per year to $55 by 2030. However, Finance Minister Anton Siluanov said in late February that the government was considering speeding up the process.
The actions of the Ministry of Finance in the first month of spring were also an indirect signal. On March 4, the agency refused to publish data on oil and gas revenues for February and announced that it would not sell the currency on the market. This may mean a temporary pause in the operation of a part of the budget rule and preparation for a review of the cut-off price. According to experts, the new benchmark could be $45-55 per barrel.
At the beginning of the year, the export price of Russian raw materials had already dropped to $40-44 per barrel, which is why oil and gas budget revenues reached minimum values, said Mikhail Nikitin, head of International Business and Finance Practice, partner at 5D Consulting. In his opinion, the Ministry of Finance assumes that the current price increase may be temporary.
In the long term, oil is unlikely to maintain high prices, according to independent expert Andrey Barkhota. Therefore, investment agreements with the United States may be of key importance, which will increase export revenue by expanding sales markets, and not only due to favorable pricing conditions.
Izvestia sent inquiries to the Ministry of Finance and the government.
What will happen to the budget deficit
The budget for 2026 will be adjusted based on the average Urals price of $59 per barrel and the exchange rate of $92.2 per dollar. However, in the first two months it became clear that oil and gas revenues are generated in less favorable conditions, said Olga Belenkaya, Head of the Macroeconomic Analysis Department at Finam.
According to her, the calculations for January used the average Urals oil price for December — $39 per barrel, and for February — the January figure of $ 41, follows from the data of the Ministry of Economic Development. The decrease in the cost of Russian oil at the turn of 2025-2026 was associated with an increase in the price discount due to new sanctions.
An additional factor was the strong national currency: the dollar remains below 80 rubles. All this, according to Olga Belenka, led to a statement by Finance Minister Anton Siluanov about a possible tightening of the budget rule by lowering the base price of oil. Such a measure, as noted by the head of the Ministry of Finance, will save NWF funds and reduce pressure on the foreign exchange market.
If the cut—off price is lowered, for example, to $50 per barrel, the rate of accumulation of reserves - primarily yuan and gold — can reach 1.5% of GDP. This will make it possible to quickly restore the "safety cushion", which at the beginning of the year decreased to about 3% of GDP, according to Igor Isaev from Mind Money.
Kirill Tremasov, adviser to the head of the Central Bank, previously noted that a short-term increase in oil prices due to the conflict in the Middle East should not determine the parameters of the budget rule. In his opinion, when calculating the cut-off price, one should focus on the long-term balanced cost of oil. This can be considered as an argument in favor of reducing it, Olga Belenkaya noted.
If the base price is reduced, the amount of oil and gas revenues that can be used for current budget expenditures will decrease, she stressed. All receipts above this level should be sent to the NWF as insurance in case of falling prices for raw materials. In such a situation, the government will either have to cut costs or compensate for the shortfall from non-oil and gas revenues. At the same time, it is possible that in the near future the deficit will be covered by additional borrowings from the Ministry of Finance.
According to the plan, the federal budget deficit in 2026 should amount to 3.8 trillion, or 1.6% of GDP. Already in January, it reached 1.7 trillion, which is 252 billion more than a year earlier.
The current rise in oil prices may be temporary, said Alexey Rodin from Rodin.Capital . Over the past week, quotes have increased by almost 20% and approached the level of 2025. However, last summer, after a sharp jump in prices — by about 37% in a few days — there was an equally rapid pullback after the announcement of the truce.
It is also not worth overestimating the fiscal effect of the current growth, says Alexander Abramov, head of the Laboratory for the Analysis of Institutions and financial markets at the Presidential Academy. In the medium term, there is a possibility of normalization of relations between Iran and the United States. If sanctions are eased, Tehran will be able to increase oil exports, which will increase supply on the world market and put pressure on prices.
How the authorities are cutting costs
Since the beginning of the year, federal agencies have begun receiving instructions from the government to prepare proposals for cost optimization, a source familiar with the situation told Izvestia. In particular, the office of Deputy Prime Minister Dmitry Grigorenko is considering a 10% reduction in funding for individual government programs. Reducing the cost of administrative staff of government agencies is also being discussed, the source said.
Izvestia sent a request to the office of the Deputy Prime Minister.
The need for such a measure is associated with a gradual reduction in budget momentum — the injection of funds into the economy. As economic relations are being rebuilt and business activity is restored, it is planned to reach the structural primary budget balance, according to the Main Directions of budget, tax, customs and Tariff policy for 2026-2028.
President Vladimir Putin also spoke about possible cost cuts earlier. In June, he said that Russia could reduce defense spending, the growth of which has become one of the factors accelerating inflation.
Against the background of the budget deficit, the government may also suspend a number of major projects funded by the National Welfare Fund, the media reported earlier, citing a source close to the cabinet. This may include, in particular, programs for the modernization of the railway network and the development of transport corridors, as well as projects in microelectronics, the aviation industry and large investment programs of state-owned companies.
Cost optimization is also underway at the regional level. It is planned to reduce the staff of officials in Moscow. According to Mayor Sergei Sobyanin, city budget revenues increased by only 2% in January–February, compared with the planned figure of 6.5%. To balance finances, the number of civil servants of Moscow's executive authorities will be reduced by 15% by the summer. The cuts will also affect individual subordinate institutions with managerial functions.
At the same time, rising oil prices can partially support both federal and regional budgets, according to Natalia Milchakova from Freedom Finance Global. According to her, with high quotations, oil and gas companies make more profit, which means that income tax revenues in the regions increase. In addition, production growth is stimulating orders from oilfield service organizations, equipment manufacturers, and logistics operators. Additional opportunities may arise for shipping companies, port infrastructure, and projects on the Northern Sea Route.
However, the effect of expensive raw materials reaches the regions with a delay, said Igor Rastorguev from AMarkets. According to him, the largest oil—producing regions — Khanty-Mansi Autonomous Okrug and Yamalo-Nenets Autonomous District - began 2026 with budget deficits. This is due not only to a decrease in income tax revenues, but also to the structure of the industry: a significant part of the income is concentrated in vertically integrated companies and in the federal treasury. Therefore, the center's revenues increase first, and only then the funds reach the regions through transfers and investment programs.
How will the conflict in the Middle East affect Russia
The main challenge for Russia now is not so much the price of oil as the ability of the financial system to adapt to fragmented markets and maintain a balance between export earnings and inflation, says Igor Rastorguev of AMarkets.
At the same time, one of the long-term effects of the conflict may be a logistical shift. The blocking of the Strait of Hormuz and attacks on ports in the region turn routes through the Persian Gulf and the Arabian Sea into a high–risk area, where insurance premiums for freight can increase five to seven times, said Igor Isaev from Mind Money. Under these conditions, Russia can gain an advantage through alternative routes — the ESPO pipeline and the Northern Sea Route. However, our trading partners may be afraid to buy domestic oil without a discount due to the risk of secondary sanctions.
At the same time, pressure is increasing on the dollar as a reserve currency, said Mikhail Nikitin of 5D Consulting. According to IMF forecasts, the US national debt may approach 110% of GDP by 2031, and geopolitical crises are forcing investors to exit American bonds. This is pushing Russia and its partners to actively switch to settlements in national currencies.
Rising energy prices generally play into the hands of exporters outside the Middle East, says Olga Belenkaya from Finam. According to her, India and China can increase purchases of Russian oil. At the same time, the protracted conflict poses risks to the global economy: trade disruptions, a new wave of inflation and a slowdown in global growth are possible. Therefore, according to her, the sooner the escalation ends, the better for the global economy — and for the Russian Federation in the long run.
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