# How Russian Oil Pays for the War Oil and gas taxes pay for about **a fifth of Russia's federal budget**, and that budget pays for the war in Ukraine. By one think tank's estimate, military-related spending took 43.8% of federal spending in the first half of 2026. Every sanction on Russian energy is an attempt to shrink that money; every waiver leaves more of it in place. This page explains how the money moves, what the pressure tools do, who is still buying, and what the 2026 U.S. waivers changed. ## The short version - **Oil and gas brought in 5.47 trillion rubles** in January–September 2026, about 18.5% of federal revenue and **17% less than a year earlier**, even though the [[Iran War 2026]] pushed oil prices sharply higher. - **The war is the budget's largest item.** The 2026 plan set "national defense" at 12.6 trillion rubles; a German government-funded think tank estimates all military-related spending in the first half of 2026 at **43.8% of federal spending**. - **The deficit is growing.** Russia ran a 5.2 trillion-ruble deficit through September and raised its full-year target to 7.3 trillion rubles, almost double the original plan. - **China and India are the biggest buyers.** In September 2026 Russia earned about **€625 million a day** from fossil-fuel exports; China paid €9.1 billion that month and India €4.1 billion. The EU still paid €1.7 billion, mostly for gas. - **Washington is the outlier among the G7.** The EU and UK cut their price cap on Russian crude to $44.10 a barrel; the United States kept $60. In 2026 the U.S. waived its own oil sanctions in March, licensed Russian diesel in October, and on October 16 waived the new law aimed at the countries buying Russian oil. ## How the money flows Russia does not sell most of its oil through the state; it taxes the companies that do. The two big levies are a **tax on extraction**, charged on every barrel pumped, and a **profit-based tax** paid quarterly, which is why revenue jumps in January, April, July and October. Both are calculated from a reference price for Russia's export blend, Urals, so higher world prices and narrower discounts mean more money for the treasury. The 2026 budget assumed **8.9 trillion rubles** of oil and gas revenue out of 40.3 trillion total, about 22%, at a Urals price of $59 a barrel. Oil and gas brought in **8.5 trillion rubles in 2025**, the lowest since 2020. ## Why the 2026 price spike didn't fill the treasury When the U.S. and Israel attacked Iran on February 28, 2026 and shipping through the [[Strait of Hormuz]] stopped, Urals rose from around $40 a barrel in late February to above $70 by mid-March, and was above $90 in September. Yet revenue fell. Three things absorbed the gain: - **A stronger ruble.** Taxes are paid in rubles, so a stronger ruble shrinks the ruble value of every dollar of oil sold. - **Subsidies to refiners.** Russia pays its refineries a "damper" to keep domestic fuel cheap. In September 2026 those payments jumped and, in The Bell's analysis of Finance Ministry data, absorbed the entire rise in extraction-tax revenue. September oil and gas revenue was **down 22%** from September 2025. - **A lagging tax price.** The price the tax is calculated on rose far less than market prices. This is the argument the administration makes. Treasury Secretary [[Scott Bessent]] said in March that the Kremlin "derives the majority of its energy revenue from taxes assessed at the point of extraction," so letting buyers take oil already at sea would bring Russia little financial benefit. The counter-argument is that relief works by **narrowing the discount** Russia must offer buyers. Vasily Astrov, an economist at the Vienna Institute for International Economic Studies, told Al Jazeera in October 2026 that the Russian government would likely be the greatest beneficiary of the easing, because Russian oil would no longer have to be discounted as steeply. He estimated that about 60 cents of every extra dollar in the price of a barrel of Russian oil would end up with the state. > [!warning] Unresolved — what the 2026 waivers are worth > No published analysis puts a dollar figure on what the March oil waiver, the October diesel license or the October 16 waiver of the Graham Act add to Russia's budget. The figures on this page show the size of the money the waivers act on, not the size of the gift. ## What the war costs | Measure | Figure | Source and note | |---|---|---| | "National defense" line, 2026 plan | 12.6 trillion rubles (13.6 trillion planned for 2027) | Draft budget; security and law enforcement add about 4–4.5 trillion a year | | All military-related spending, H1 2026 | 10.7 trillion rubles (about $123 billion), **43.8% of federal spending**, about 10.5% of GDP | SWP Berlin estimate from Finance Ministry data, using a broader definition than the budget line | | Federal deficit, Jan–Sep 2026 | 5.2 trillion rubles (2.2% of GDP) | Up from 3.5 trillion a year earlier | | Full-year deficit target | 7.3 trillion rubles (3.2% of GDP) | Raised from an original 3.8 trillion | | National Wealth Fund liquid assets, Oct. 1, 2026 | 3.8 trillion rubles (about $44 billion) | Finance Ministry data via TASS; the cushion that covers deficits | ## The pressure tools **The price cap.** Since December 2022 the [[G7]] has barred its shippers and insurers from carrying Russian crude sold above a cap, first set at $60 a barrel. The EU and UK lowered it to **$47.60 in September 2025**, then to **$44.10 from February 1, 2026**; in July 2026 the EU froze its cap at that level until July 2027. **The United States declined to follow and kept $60.** In September 2026 Urals averaged about $90, roughly twice the European cap, with a discount to Brent crude of about $23 a barrel. **The dark fleet.** Russia gets around the cap by shipping on its own aging, often falsely flagged tankers, the [[Dark Fleet]]. In September 2026 sanctioned dark-fleet tankers carried **67% of Russia's seaborne crude**, according to the Centre for Research on Energy and Clean Air (CREA). By late July 2026 Western governments had jointly sanctioned 681 tankers; the EU had listed 625, the United States 267. **Sanctioning the producers.** On October 22, 2025 the Treasury sanctioned [[Rosneft]] and [[Lukoil]], Russia's two largest oil companies. Treasury said the move was "dampening Russian revenues by lowering the price of Russian oil"; by Reuters' count, Urals at the Black Sea port of Novorossiysk fell to $45.35 on November 12, 2025, its lowest since March 2023. Lukoil's forced sale of its foreign assets has stalled: a deal with the [[Carlyle Group]] lapsed at the end of July 2026 without U.S. approval. **Ukraine's drones.** Ukrainian strikes on Russian refineries and ports have cut throughput. Estimates of how much refining capacity is offline range from about a third (Novaya Gazeta Europe's count in May 2026) to more than 45% (Ukraine's own claim); the Kyiv School of Economics recorded crude runs of 3.8 million barrels a day in June 2026, 1.6 million lower than a year earlier. Russia has banned diesel exports by all producers since July 2026, extended through October. ## Who is still buying CREA's estimates for September 2026, in euros: | Buyer | Paid Russia | Mainly for | |---|---|---| | [[China]] | €9.1 billion | Crude (€6.0 billion), plus LNG, pipeline gas and coal | | [[India]] | €4.1 billion | Crude (€3.6 billion) | | [[European Union]] | €1.7 billion | Pipeline gas (€817 million), LNG (€615 million), crude via pipeline to [[Hungary]] and Slovakia (€290 million) | | [[Turkey]] | €1.0 billion | Oil products and pipeline gas | | [[Saudi Arabia]] | €534 million | Oil products | The EU has adopted a phased ban: Russian LNG imports end on January 1, 2027, and pipeline gas from autumn 2027. ## What the 2026 U.S. relief did 1. **March–June 2026 — oil at sea.** With Hormuz closed, the Treasury first let India take delivery of Russian oil already at sea (March 5), then on March 12 widened the license to all buyers of oil loaded by that date, roughly 120 to 124 million barrels by different estimates, and suspended the U.S. price cap. Extensions in April and May kept it going until June 17. Analysts at Kpler said most of the oil was already sold to China and India, limiting the immediate windfall. See [[Russia and Iran Oil Sanctions Waivers 2026]]. 2. **October 9 — diesel.** After a call with [[Vladimir Putin]], the Treasury issued General License 135, authorizing sales of Russian diesel, including into the United States, through April 7, 2027. The license does not authorize debits from accounts that Russia's central bank, National Wealth Fund or Finance Ministry hold at U.S. financial institutions. It covers fuel that Russia itself has been restricting for export since July. See [[US-Russia Diesel Deal 2026]]. 3. **October 16 — the buyers' law.** [[Donald Trump]] waived nearly all of the [[Lindsey O. Graham Sanctioning Russia and Iran Act of 2026]], two days before its tariffs took effect. The law could have imposed tariffs of up to 100% on goods from the biggest buyers of Russian oil and gas, including China and India, the two countries that pay for most of it. It was the broadest tool aimed at the demand side; the narrower precedent, a 2025 tariff on India over its Russian oil purchases, was lifted in February 2026 after India agreed to stop buying. The waiver has no end date. ## Why it matters The arithmetic of the war is a race between Russia's revenue and its spending. In 2026 revenue was falling, the deficit was nearly double plan, and the price cap, the dark-fleet listings, the Rosneft–Lukoil sanctions and Ukraine's drones were all pushing in the same direction. The U.S. waivers pushed the other way while that squeeze was under way, and the Graham Act waiver removed the main pressure Congress had aimed at the countries whose purchases keep the war funded. How much money the waivers are worth is disputed; that they ease the squeeze rather than tighten it is what each one was designed to do, in the name of lower fuel prices. ## See Also - [[Russia Sanctions Relief Ledger]] — every Trump-era easing of pressure on Russia, dated - [[US-Russia Diesel Deal 2026]] · [[Russia and Iran Oil Sanctions Waivers 2026]] · [[Lindsey O. Graham Sanctioning Russia and Iran Act of 2026]] - [[Dark Fleet]] · [[Secondary Sanctions]] · [[Sanctions Designation Pipeline]] - [[Rosneft]] · [[Lukoil]] · [[Gazprom]] - [[Deportation of Ukrainian Children]] — what else the budget pays for - [[Russo-Ukrainian War]] · [[Russia]] · [[Ukraine]]