Russia could earn as much as $252bn in windfall export revenues from escalating conflict in the Middle East, as higher energy prices driven by tensions in the Persian Gulf bolster the Kremlin’s finances, according to analysis by the Kyiv School of Economics (KSE) Institute.

As of March 23, the benchmark Brent blend was trading at $112 per barrel, up 84% YTD. However, the Russian Urals blend has closed almost all of the $20 discount gap to Brent it was trading at before the war to reach $110, up 120% YTD – back to the $2 discount it traditionally offered before the invasion of Ukraine in 2022. At the end of February Brent was trading at around $65 per barrel and increasingly effective US sanctions on Russian oil had blown the discounts the Kremlin was forced out significantly.

Prior to Operation Epic Fury, the government was under increasing strain after oil and gas revenues tumbled in 2025 and now only make up 20% of revenues, down from 40-50% in the boom years in the noughties, according to Russian Finance Minister Anton Siluanov.

The budget ended 2025 with a budget deficit of 2.6% of GDP and was on track to run an even larger deficit of between 3-4% this year, said economists. While a lot of the pressure is likely to be lifted this year from windfall oil and gas budget revenues, the Ministry of Finance (MinFin) is still planning for the worst and prudently intends to cut 10% off budget spending this year in case the gains are short-lived.

In the last energy crisis in 2022 when Russia ended gas exports to Europe, the Kremlin earned an all-time record current account surplus that year of $225bn – twice as much as the previous all-time record set in 2021.

The KSE study outlines three scenarios depending on the duration and intensity of the conflict. Even a short disruption is expected to generate significant gains for Moscow.

In the optimistic scenario, where active fighting lasts six weeks and supply is restored within a month, Russia could see an additional $84bn in export revenues and $45bn in budget income in 2026 compared with a no-war baseline.

In the baseline scenario, with hostilities continuing until the end of May and prices rising further, KSE expects export revenues could increase by $161bn, with $97bn flowing into the state budget.

In the pessimistic scenario involving six months of conflict and a slower recovery in oil supplies, Russia’s export revenues could rise by $252bn, while budget revenues could increase by $151bn. KSE analysts said such an outcome would likely produce a fiscal surplus, allowing Moscow to sustain elevated military spending for longer.

Early data suggests the trend is already under way. According to the Centre for Research on Energy and Clean Air (CREA), Russia generated €7.7bn ($8.4bn) from fossil fuel exports in the first two weeks of the Iran-related conflict. Between March 1 and 15, daily revenues from oil, gas and coal exports averaged €513mn ($559mn), up from €472mn ($514mn) in February.

Oil revenues alone reached €372mn ($405mn) per day during the period, representing a 14% increase month-on-month.

The surge reflects the sensitivity of global energy markets to disruptions in the Gulf that accounts for a fifth of the global oil supply.

The chaos on the energy markets has also weakened the ruble which also improves budget revenue receipts as oil revenues are denominated in dollars, but spending is denominated in rubles. The weakening of the ruble exchange rate is explained by two factors - low oil prices in January-February and the suspension of the fiscal rule.

"The [ruble's] latest depreciation that we have seen is in our opinion due to a combination of two factors. I wouldn't call them fundamental. First, the oil price was very low in January-February, and in our view, the lag in transmission between the oil price and the receipt of foreign exchange earnings is about two months. We are now seeing the consequences of that relatively low oil price in January. And this is combined with the second factor, the suspension of the fiscal rule, because ordinarily if the price falls below the base price, then foreign currency is sold from the National Wealth Fund, which partially offsets these effects. This did not happen. Now the price of export oil is already higher, so we will see what happens next with the resumption or non-resumption of operations under the fiscal rule," CBR governor Elvia Nabiullina said at a Central Bank of Russia (CBR) monetary policy meeting last week where she cut rates by 50bp to 15%.

The KSE analysis highlights how geopolitical shocks outside Ukraine can have a material impact on Russia’s war economy, even as sanctions remain in place.