Transcription
Since Russia's invasion of Ukraine, the Russian economy has repeatedly appeared to outperform expectations, continuing to generate substantial profits from oil and gas exports despite sweeping sanctions. However, early in the year, we predicted on the TLDDR EU channel that Russia's energy revenues would fall sharply, and that prediction has since borne out. Moscow's fossil fuel revenues in 2025 are almost half of the previous year's total, dropping to pandemic era lows. Looking ahead though, 2026 is likely to be even worse as falling global oil prices, deep discounts on Russian crude, and tough new US sanctions on major energy firms continues to squeeze revenue. So, in this video, we're going to explain why despite the fact that Russia's war machine is still running, 2026 is likely to be a really bad year for the Russian economy.
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Let's start with some context. As one of the world's largest oil exporters alongside Saudi Arabia and the US, Russia has financed much of its military spending through oil revenues. When Putin launched the full-scale invasion in early 2022, Brent Rouge, the global benchmark, was trading at roughly $100 per barrel. And in the months that followed, geopolitical turmoil pushed prices even higher, reaching a sustained peak of around $123 by midJune 2022. Even though Russia was selling its oil at a discount, these high oil and gas prices were still great news for the Kremlin's budget. Analysis by the Center for Research on Energy and Clean Air found that Russia's hydrocarbon export revenues were about 20% higher than average, running at nearly€1 billion per day. These enormous revenues allowed Russia to massively increase spending, giving Putin the fiscal space to continue and expand his invasion of Ukraine.
However, since its peak in 2022, global oil prices have been gradually falling partly as markets weighed signs of momentum in Russia Ukraine peace talks. And at the end of the year, prices fell to below $60 per barrel. And in Russia, crude oil prices have fallen to their lowest level since the start of the war. According to Bloomberg, in mid December, two months after the US slaps actions on Russia's two largest oil companies as part of efforts to pressure Moscow into a peace deal, Russian crude oil prices dropped to just over $40 per barrel. Meanwhile, Russian oil has been trading at a deep discount to global benchmarks. In November, that discount widened to roughly 23% below Brent, the largest for more than a year. Some reported loadings fell into the mid $30 per barrel, the lowest since the depths of the 2022 price collapse.
This, of course, isn't good news for the Kremlin, whose oil revenues had already taken a hit following Ukrainian drone strikes on oil refineries throughout the year. In September, oil and gas revenues were down 32% yearonear. In October, they were down 26.6% and in November, the drop reached 33.87%. In fact, it's been estimated that Moscow's fossil fuel revenues in 2025 are almost half of last year's value, plummeting to pandemic level lows, marking the lowest monthly revenue since 2020.
Unfortunately, the Kremlin, things in 2026 are looking even worse. Benchmark oil prices are heading for their biggest annual loss since the pandemic. And Trafigura, one of the world's top commodity traders, says the oil could hit $50 per barrel towards the start and middle of the year. This is largely a result of increasing overupp of oil on the global market. According to the International Energy Agency, the world is on course for a record-breaking surplus of almost 4 million barrels a day next year. And a record 1.3 billion barrels of crude are floating on the world's oceans. The biggest flatiller of oil on the water since 2020 when a price war between Saudi Arabia and Russia flooded the market during the co9 pandemic.
This over supply is in large part due to the accelerated unwinding of voluntary production cuts agreed in 2023 by eight OPEC plus countries which were supposed to increase global prices but haven't really worked. Oil producers are also ramping up output as sanctioned barrels from Russia search for buyers. Additional barrels from new oil producers and nonop countries like the US, Canada and Guyana are also adding pressure. The US Energy Information Administration forecasts that in 2026, oil production will grow more in nonOPC countries, most of which will come from the US, Canada, Brazil, Guyana, and Mexico, than in OPEC plus countries. For instance, Guyana, a small southern American country bordering Venezuela, which only a few years ago didn't pump a single barrel of oil, now exports nearly a million barrels a day, even overtaking its larger Venezuelan neighbor.
Of course, this isn't good news for Russia's oil revenues. And these economic woes will likely be exacerbated by the fact that the ruble has been strengthening, reaching up to 20% against the dollar this year, which has made Russia's energy exports less competitive on the international market. While it's a bit difficult to pinpoint exactly why the ruble is strengthening, especially amid a dwindling economy and falling energy reserves. Most point to the country's super high interest rates currently set at 16% among other macroeconomic capital controls such as forcing exporters to convert forex earnings and limiting foreign currency purchases. There's also the fact that while energy revenues are low, Russia has continued to export, redirecting most of its oil to China and India. And in keeping this positive balance of trade, the rubles continue to strengthen.
Now, while a strong ruble looks good on paper, like we've said, it doesn't bear well for international competition, especially now when so many nonopc oil producers like Guyana and of course the US are capturing an ever larger share of the global oil supply. So, all in all, oil prices are expected to come under pressure in 2026 as the global market heads into a period of over supply. But with that being said, it is still possible that global supply could fall. For instance, sanctioned oil producing countries like Iran and Venezuela may find it difficult to continue pumping out oil. In the last few days, the US has tightened its naval blockage of Venezuela as it tries to seize the country's oil tankers as part of a broader campaign to disrupt sanctioned oil shipments tied to the Maduro government, which has caused global oil prices to jump last week, compounded by recent Ukrainian strikes on Russian oil infrastructure, namely in the village of Wulna. Geopolitical conflicts and risks that carry sustained disruption in exports, particularly as major buyers such as China, could add price volatility if buyers are forced to source barrels elsewhere.
We're taking a break from regularly posting over the festive period, but if you did want more TLDDR, then check out our magazine Too Long, which is also available as a digital edition if you want to start reading instantly. Obviously, the cover story is called the new Middle East, but there's much more than that inside with full sections dedicated to UK EU and global news. The EU section, for instance, includes our interview with fellow creator money and macro, where we discuss how to fix the European economy, as well as articles on Macron's fall from grace and how Albania has implemented an AI minister. The global section discusses why Trump's mandate isn't quite what it seems. How politicians have conquered social media as well as our rundown of the biggest elections that happened in 2025. And our UK section runs through the rise of the new left. While next year's elections are critical at all levels, as well as the strategies that Star ought to take to maintain power and Farage to gain power.
Digital and physical editions are available right now with physical issues shipping in the new year and digital copies going straight to your inbox. Subscribers for too long automatically get 20% off every copy as long as they stay subscribed. But as a special end of year offer, you can get an additional 30% off your first issue if you use code December25 at checkout. Find out more by heading toong.news or by clicking the link in the description.