Russia is utterly dependent on income from oil and natural gas, its largest source of revenue.

So the fact that that income fell to its lowest level in five years - two years before the invasion - suggests that Russia is increasingly desperate economically, which may force to become more aggressive while also possibly open to ceasefire or peace negotiations. This may also embolden Ukraine, conscious of the pressure the Kremlin is feeling. JL

John Moretti reports in the Kyiv Post:

Thanks to sanctions, sinking oil prices and a poorly timed rise in the value of the ruble, Moscow’s war machine saw revenues from its gas-and-oil industry fall 24% in 2025 to 8.48 trillion rubles, the lowest figure since 2020. That’s an important variable to consider as to whether Ukraine can hold off Russia’s four-year invasion. Oil and natural gas revenues comprise the largest single line item in the Kremlin’s annual budgeting. “The shortfall blew past official expectations. Even after the government downgraded its 2025 oil-and-gas forecast to 8.65 trillion rubles, down from an original 10.94 trillion, actual revenues still missed the mark. That’s structural exposure to price weakness.”

Thanks to sanctions, sinking oil prices and a poorly timed rise in the value of the ruble, Moscow’s war machine saw revenues from its gas-and-oil industry contract to their lowest levels in half a decade.

Income from Moscow’s sales in the sector fell 24 percent in 2025 to 8.48 trillion rubles, the lowest figure since 2020. That’s a pretty important variable to consider in bets on whether Ukraine can hold off Russia’s nearly four-year invasion, when you calculate that oil and natural gas revenues comprise the largest single line item in the black ink of the Kremlin’s annual budgeting.

The most media-magnified factor in that down-and-to-the-right trajectory is Europe’s decision to slowly turn off the taps of fossil fuels coming from Russia. Russian natural gas arriving via LNG tanks will be banned from the EU entirely starting this year, while gas imports through pipelines will end there by September 2027.

It should be noted here that, still, the EU spent €1.15 billion euros ($1.35 billion) on Russian fossil fuels in August 2025 alone. The biggest European spenders remained, and remain: Hungary, €416 million in August ($488 million); Slovakia, € 275 million ($323 million); and France, €157 million ($184 million).

But the more crushing blow to the Kremlin last year was dealt by oil prices. The cost of crude, overall, plummeted more than 18 percent in 2025, the sharpest annual drop since the Covid pandemic suffocated commerce, manufacturing and travel worldwide in 2020.

For example, on the week of Moscow’s full-scale invasion of Ukraine in February 2022, crude prices sat around $122 per barrel (the cost of West Texas Intermediate, WTI, or light sweet crude.) This week, that same price was around $59 per barrel.

And that’s just the price of “Texas tea.” In November, the price of Urals crude loading at the Black Sea port of Novorossiysk plunged to about $36 per barrel, the lowest in the nearly three years prior.

In terms of the supply side of that equation, the Kremlin hasn’t been overly worried about Ukrainian attacks on its tankers and facilities, and other countries’ requisitions of Russia’s “shadow fleet” of tankers, as fewer barrels on the market translates to higher prices, and therefore higher revenue.

Russia is the third-highest producer of oil by country, after the United States and Saudi Arabia, respectively.

Although Moscow is certainly unhappy when its shipments of oil are confiscated, more concerning for its autocrat Vladimir Putin is when other nations are flooding the market with their own crude and natural gas.

Through that lens, US President Donald Trump’s invasion of Venezuela earlier this month was less concerning for Putin (as the Kremlin laughably crowed about “respect for international legal norms”) in its implications for geopolitical or ideological influence as it is about the control of Venezuela’s oil, and the barrel numbers Trump will have under his thumb.

The Trump administration has already been courting Southern European allies such as Italy and Greece about receiving American-controlled oil and natural gas.

Thirdly, and maybe the most ironic factor in Moscow’s disappearing billions has been the value of the ruble itself.

Falling oil prices and a strong ruble forced the Russian Finance Ministry to revise its outlook in 2024, but even the Kremlin did not expect the numbers arriving in the first quarter of 2025.

The ruble gained about 45 percent against the US dollar in 2025, and when your currency is expensive, you will sell less product internationally.

As Julienne Geiger of Oilprice.com explained: “The shortfall blew past official expectations. Even after the government downgraded its 2025 oil-and-gas forecast to 8.65 trillion rubles, down from an original 10.94 trillion, actual revenues still missed the mark. That’s structural exposure to price weakness.”